North Carolina Tech Investments Outpaced Life Science Deals in 2014

Xconomy Raleigh-Durham — 

At a North Carolina conference full of life science professionals, technology companies made the loudest investment noise.

Investments in tech companies last year outpaced life science dealflow, both in total dollars raised and the number of deals—the first time in a long time that tech deals overshadowed life science deals. A total of 83 tech companies landed $277 million in investment deals in 2014. In life sciences, 35 companies raised $252 million in funding. The figures, from the Council for Entrepreneurial Development’s Innovator’s Report, were released Tuesday during the group’s annual Life Science Conference in Raleigh, NC. The organization compiles the report as a way of quantifying entrepreneurial activity in the state. This is the third year CED has compiled the report.

The CED report evaluates investments in four sectors: tech, life sciences, cleantech, and advanced manufacturing and materials. The findings bear out trends outlined in CED’s mid-year report, which showed tech dealflow in the first half of the year surpassing life science investments by a wide margin. Overall, North Carolina companies attracted $622 million in investment in 2014, up nearly 35 percent compared to 2013.

Investments rose year over year in each sector except for life sciences, which saw investment dollars decrease about 8 percent. But Joan Siefert Rose, CED’s president (and an Xconomist), acknowledged that looking at the figures for one year can be misleading, because as a single large deal in any one sector can skew the comparisons.

North Carolina companies attracted investment from 132 separate institutional funders, up from 108 in 2013. The geographic representation of those investors is also becoming more diverse. Dhruv Patel, CED’s director of investor relations, noted that 20 institutional investors are based in California, which he says indicates a growing connection between Silicon Valley and North Carolina.

The biggest overall North Carolina deal of 2014 was the $100 million that private equity firm Warbug Pincus invested in Dude Solutions, a Cary, NC, facilities management software company. In life sciences, the $60 million Series D round for Durham, NC-based Viamet Pharmaceuticals was the top deal. The $44 million raised by Durham semiconductor heating and cooling technology company Phononic was the largest deal made in advanced manufacturing and materials. No single deal on cleantech was cited. Companies in that sector raised just over $10 million in 2014. But Phononic, whose semiconductor technology enables production of energy-efficient cooling systems, is considered by some observers to be a cleantech company.

Rose attributes the increase in investments to the growth needs of “scale-up companies,” which she describes as companies that are beyond the startup stage and are now growing rapidly by adding customers and employees. Both Dude Solutions and Phononic are scaling as they ramp up operations to bring their respective offerings to a broader set of customers. Viamet is still a clinical-stage drug development company. Viamet withdrew its planned IPO last summer and opted instead to turn to its institutional investors to finance mid-stage clinical trials of its lead antifungal drug candidate.

CED compiles its report using information from the National Venture Capital Association, the North Carolina Biotechnology Center, Ernst & Young, and PricewaterhouseCoopers, as well as from information about awards of Small Business Innovation Research grants. The group also does its own research, speaking with companies and individual investors in order to gather information on deals whose financial details were not disclosed.