Happy 2010: Bay State Startups Ring in the New Year with $355M in January Venture Funding

Xconomy Boston — 

Apparently, Massachusetts venture investors aren’t like most American consumers in January, when purse strings tighten and spending comes to a halt following the previous month’s holiday shopping excesses. By contrast, they significantly upped their investments in the state’s tech and life sciences startups, investing $355.2 million across 28 equity deals, according to information provided by private company intelligence platform CB Insights.  That’s at least $130 million more than the $224 million in venture funding that 36 startups wrapped up in December.

January’s dollar figures make it the best month in venture investing that we’ve tracked so far (we started in June), thanks to huge deals in software, healthcare, and energy. In fact, January’s dollar totals toppled the previous best month to date, September, by more than 50 percent, when startups raised $228 million across 25 deals.

The largest January equity deal came in at a whopping $120 million for Southborough, Ma-based IkaSytems, providers of process automation and intelligence management software for the healthcare payer market. Essex Woodlands Health Ventures and Providence Equity Partners led the growth equity round. This put it $85 million ahead of the next biggest venture deal of the month, the $35 million Series B round that went to Alnara Pharmaceuticals, a Boston-based company that plans to seek FDA approval for its enzyme-replacement drug for patients with cystic fibrosis. The spread between the top two deals was much bigger than the $4 million difference between the first and second place deals in December, when venture financings were all grouped more closely in value. The Alnara financing was also way ahead of the January third-place deal, $23.8 million for Lowell-based energy company Konarka Technologies. The remaining January venture deals followed more closely at each other’s heels, as you can see in the list at the end of this story.

January Venture Investing

Software companies took home the biggest share of venture funds at $167.7 million, and knocked the healthcare sector off of its throne, largely thanks to the IkaSystems deal (healthcare had previously led all other sectors in venture dollars every month that we tracked). The five remaining software startup venture financings accounted for $47.7 million. Even without the IkaSystems financing, software companies still pulled in more than they did in December ($30.5 million across five deals), when the sector ranked fourth in dollars raised.

The previous sector champ, healthcare, came in second in terms of venture dollars amassed at $121.1 million, but still had the highest number of deals at nine (and still almost doubled its December dollar total of $66.5 million). The biggest venture healthcare deal went to the aforementioned Alnara. Bedford-based MicroCHIPS, a developer of wireless medical implants containing chemical sensors or drug reservoirs, also landed in the top five overall with a $16.5 million equity round.

A few other trends we spotted, as well as the complete list of January venture finance deals follows:

— Funding for energy companies continued to heat up in January, when the sector pulled in $31.2 million across three deals (taking third place for dollar totals and tying for third in number of deals). That’s more than three times the venture dollars the sector raised in December, and more than 10 times its November dollar numbers. An energy company even took the third-highest deal spot, thanks to the $23.8 million in a combination of equity and warrants raised by Konarka Technologies, a developer of polymer photovoltaic products that convert light to energy.

— While the healthcare, software, and energy sectors rose sharply in venture financing in January, the equity attracted by companies in the electronics, Internet, and mobile and telecommunication sectors all fell from their December numbers. In January, two electronics startups raised $4.2 million, a mere fraction of the $40.9 million that five electronics companies pulled in the month before. Venture investing in the mobile and telecommunications sector also shrunk in January, with the $1.2 million raised by Cambridge-based Thinking Phone Networks representing the sole equity deal for the sector last month. As a result, it took last place in both dollars and deals. (We have a hunch things will pick up in March, which has been named Mobile Month in Massachusetts!)

— Funding is continuing to prove turbulent for Internet startups. In January, the sector raised a total of $7.1 million across three deals, putting it in fifth place for the month. By contrast, Internet startups took in $40.7 million in December across nine deals. We thought at the time that December marked a comeback for Internet startups after they raised just $11.25 million across three deals in November, but last month indicates that the sector might be on more of a roller coaster than a steady incline.

January Venture Deals by Company