VC Investment in New England Declines in Second Quarter (Two Out of Three Surveys Say); Top 10 Deals Dominated by Biotech

Xconomy Boston — 

It’s always dangerous to read too much into one quarter’s venture capital stats. But the national and regional VC numbers released over the weekend suggest that venture investment in New England is leveling off to a new set point—significantly higher than a year ago, but down compared to its recent quarter-to-quarter growth.

That’s according to a trio of VC reports that my colleague Bruce summarized in national form earlier this morning. The national message is that venture deals were up for the three-month period ending June 30, both over last year and last quarter. While it’s a little too early to say New England is bucking the trend, here are the facts:

In Massachusetts, there were the same number of venture financing deals as compared to the previous quarter (86), but the amount invested was down 25 percent—$558 million as compared to $745 million in the first quarter of this year, according to the MoneyTree report, prepared by PricewaterhouseCoopers and the National Venture Capital Association using data from Thomson Reuters. The numbers for New England as a whole were similar to those for Massachusetts—$582 million invested in 95 deals, as compared to $796 million in 96 deals in the first quarter (a 27 percent decline in dollars).

The report from New York-based private company intelligence firm CB Insights corroborates these numbers for New England; it cites a 23 percent decline in dollars from $898 million in 87 deals in the first quarter to $689 million in 84 deals in the most recent quarter. However, the report from Dow Jones VentureSource contradicts these findings, saying there was a 38 percent increase in dollars invested in the second quarter—$792 million in 81 deals as compared to $494 million in 61 first-quarter deals. The discrepancy between the reports could be caused by differences in exactly when particular tranches of funding are counted; a few large deals could swing the results one way or the other.

In any case, for now we’re going with the majority (two out of three ain’t bad). And one overarching trend seems to be unanimous among all the reports: that the amount invested in the most recent quarter is up significantly over the same period last year. For example, CB Insights reported a 45 percent increase in dollars invested compared to the second quarter of 2009 ($689 million versus $473 million). The increase is even greater, 56 percent, according to Dow Jones VentureSource.

Here were the top 10 venture deals in the Boston metro area from the second quarter of 2010, according to the MoneyTree report. Interestingly, all but one (Joule, in alternative fuels) were in the biotech or healthcare sectors:

1. Tetraphase Pharmaceuticals, $45 million

2. Joule Unlimited, $30 million

3. Constellation Pharmaceuticals, $22.3 million

4. Link Medicine, $20 million

5. Tesaro, $20 million

6. Inotek Pharmaceuticals, $18 million

7. NormOxys, $17.5 million

8. BioScale, $15.7 million

9. T2 Biosystems, $14.8 million

10. Logical Therapeutics, $13.4 million

Caveat: This list doesn’t include some other notable companies we know of that have raised large funding rounds lately, including Boston-Power ($60 million Series E round), Catabasis Pharmaceuticals ($40 million, of which apparently $7.7 million is in the bank), and FoldRx Pharmaceuticals ($29 million). The reasons probably have to do with the bookkeeping for this particular report.