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Second to Silicon Valley
New England a growing market for venture-capital investment (though not necessarily Connecticut)
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Business New Haven
11/29/1999
By: Michael C. Bingham
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New England businesses attracted almost a billion dollars in venture-capital financing over the summer, with Internet start-ups and high-speed communications firms accounting for about two-thirds of the $926.7 million bonanza.
Between July and September, 113 companies received venture funding, according to a Boston Globe/PricewaterhouseCoopers/Money Tree survey. The investment total fell short of the record $1.07 billion invested during the second quarter of this year, but was almost 70 percent higher than the $550.8 million figure of the 1998 third quarter.
The new numbers made New England second only to Silicon Valley, which reported $3.324 billion invested in 298 companies, in venture-capital financing during the period.
That's good news for the region - but not necessarily for Connecticut. Only five Nutmeg State firms made the third-quarter list, which was dominated by Massachusetts companies.
One of the Connecticut winners was FreshNex, LLC of Hamden, an Internet distributor of seafood and meat in the business-to-business market. FreshNex was the beneficiary of $7.85 million in second-stage financing from Connecticut Innovations Inc. (CII), the state's high-technology venture-capital investment arm, as well as two private firms.
Also in the money was New Haven's Metaserver Inc., which makes a business-to-business software integration router for Internet/intranet applications. CII invested $374,000 in first-round financing for the company.
In Oxford, CDC Technologies, which makes a blood-analysis device for human and veterinary applications, was the recipient of $500,000 in second-round financing from Capital Southwest Corp. and New England Partners.
A new low-cost regional airline, Shuttle America Corp. of Windsor Locks, also received $1.45 million in second-round capital from Allegra Partners and others.
Regionwide, communications firms - especially makers of high-speed switching equipment - were the biggest winners, attracting $329 million in capital for the quarter. Close behind were software and information-technology firms, which lured about $325 million in new financing during the period. Business services ($70.5 million) and biotechnology ($59.7 million) rounded out the list. No Connecticut biotech firms attracted venture-capital financing during the third quarter, according to the survey.
The PricewaterhouseCoopers survey was based on a package of questionnaires, with a follow-up fax and telephone survey, in which 504 venture capitalists participated, representing a 62-percent final response rate.
M.C.B.
Taking the Temperature of Business
DECD begins tracking business confidence in state
State economic-development officials have begun regularly to monitor Connecticut's business climate in hopes of gaining a more accurate assessment of future expectations of the private sector.
To do so, the state's Department of Economic & Community Development (DECD) has retained the Center for Survey Research & Analysis (CSRA) at the University of Connecticut in Storrs. Results are based on 400 quarterly telephone interviews conducted with business executives across the state.
Begun at the beginning of 1999, the Connecticut Business Climate Index has five components:
• Future expectations for the job market;
• Confidence in the respondents' own business prospects;
• Future expectations for the economy;
• Present satisfaction with the economy: and
• Current assessment of the economy of a prosperity-to-depression scale.
DECD officials explain that the new index is intended to measure the overall strength of the state's economic climate, as well as to provide important information on individual sectors of the economy.
What sectors are those? Two-thirds of the businesses surveyed - about 11 percent of the total each - represent financial, health care, high technology, manufacturing, telecommunications and tourism/entertainment. The remaining 33 percent belong to different industries.
The surveyed group is also skewed toward small businesses. Fifty-eight percent have between one and four employees, 33 percent have between five and 50 workers and just nine percent have more than 50 employees.
So, what do they have to say? On a 100-point index scale, the index for the first quarter was 71.9, a result which compared favorably to all previous indices regarding the economy conducted by DECD. That number floated a bit higher for the second quarter, to 72.9. Respondents in June reflected a lower third-quarter index of 67.7 of 100. However, the fourth-quarter figure, released October 1, rebounded to 70.1
DECD officials see in those numbers a positive assessment on the part of the state's business community of Connecticut's and nation's economy. Seventy-nine percent of responding businesses said they were confident about their own prospects over the next few years. And two-thirds (67 percent) rated general business conditions in their area as good or excellent.
“This survey is about listening to our customers,” says DECD spokesman James Watson. “It is an effective tool for gauging businesses' expectations about the future, and helps us monitor Connecticut's business climate in general.”
- M.C.B.
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