CED Report: NC Companies Raised $427M in First Half of 2015

Xconomy Raleigh-Durham — 

Sprout Pharmaceuticals made recent headlines by securing the first FDA approval for a sexual-desire drug, then landing a deal days later to be acquired by Valeant Pharmaceuticals for $1 billion. But the Raleigh, NC-based company is also notable for the $50 million it raised from investors in June—the largest investment for any North Carolina company in the first half of 2015.

Including the Sprout deal, North Carolina companies raised nearly $427 million in equity funding in the first six months of 2015, up 70 percent compared to the same period in 2014 and more than double what companies raised in the first half of 2013, according to a report from the Durham, NC-based Council for Entrepreneurial Development.

For some context, the MoneyTree report released by the National Venture Capital Association shows that North Carolina companies raised $233.3 million in venture funding in the first half of 2015. A total of 85 companies in technology, life sciences, cleantech, and advanced manufacturing raised money in 90 investment deals showing a rise in the total number of deals and the total number of companies raising money, according to CED.

“There is money here for North Carolina startups,” says Joan Siefert Rose, CED’s president and CEO. “We believe North Carolina can become a top-five entrepreneurial hub in the? nation.”

CED released the findings of its mid-year report today, just prior to the start of the CED Tech Venture Conference in Raleigh, the group’s annual technology and investment event. It’s the fourth year that CED has compiled its Innovator’s Report, which incorporates data from the National Venture Capital Association, Ernst & Young, PricewaterhouseCoopers, Small Business Innovation Research grants, and the North Carolina Biotechnology Center. The totals in the report also include deals that were not publicly disclosed. Dhruv Patel, CED’s director of investor relations, says the group gets that information through its connections with investors and entrepreneurs.

North Carolina’s Research Triangle continues to outpace the rest of the state in landing investments, accounting for 74 of the 90 deals counted by CED. The 26 life science deals led all sectors in dollars raised, totaling $268 million, compared to the $114 million raised by tech companies. But the 48 tech investments led all sectors in total deals. CED counted 10 advanced manufacturing deals and six in cleantech.

The balance of deals reverses last year’s findings, when technology surpassed life sciences in dollars raised. Rose attributes this year’s results so far to the cyclical nature of North Carolina’s entrepreneurial economy, which has historically seen life science investments rise when tech investments lag, and vice versa. She adds that life science companies also typically require more money to take experimental drugs through expensive clinical trials, which is reflected in the dollar amounts in the life sciences deals.

The Sprout investment and the $39 million raised by Durham-based Novan Therapeutics were the state’s two biggest life science deals in the first half of 2015. The biggest technology deal was the $29 million raised by Wilmington, NC-based banking software startup nCino. Rose says that those deals also stand out because most of the investors in those companies are high net-worth individuals, not institutional investors.

Most of the investors participating in funding for North Carolina companies are from the Tar Heel State. But Patel notes that North Carolina companies are also drawing interest from out-of-state investors. California was the second-leading source for funding for North Carolina companies, accounting for 15 of the 74 total institutional investors counted in the CED report. New York and Massachusetts tied for third with eight institutional investors each funding North Carolina companies. CED also tallied six international investors participating in deals.

The CED conference, which will showcase more than 100 companies, continues through Wednesday. CED says the 1,000 registered attendees include more than 70 institutional investors.