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Trickle Up Economics?
Survey: VC investment posts Q4 rally; software leads way
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Business New Haven
2/17/2003
By: BNH
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STAMFORD - Venture-backed companies in Connecticut caught a much-needed break during the fourth quarter of 2002 compared to the previous three-month period, with venture investment returning to levels last reached in the first quarter of 1997.
According to the PricewaterhouseCoopers/Venture Economics/National Venture Capital Association MoneyTree Survey, 13 Connecticut companies received $58.2 million in venture capital funds between October 1 and December 31, comparable to the funds invested in the first quarter of 1997. Fourth quarter 2002 results were up from $34.7 million invested in 11 companies in the third quarter of 2002.
According to Owen Davis, who co-chair PWC's' venture capital/private equity practice in Connecticut and Westchester County, N.Y.: "Fourth-quarter investments in Connecticut companies exceeded third quarter investments by more than $23 million - a sign that investors are more confident in the local marketplace in numerous market sectors. While an undisclosed medical device and equipment company received the most funding, $15.9 million, this quarter in Connecticut, Metaserver Inc., a New Haven developer of Web server software products, received $10 million."
According to Davis, other notable VC investments in the state included ISOPur Fluid Technologies, a Cheshire-based provider of fluid purification systems, which received $8 million. Also, Enamics Inc., a Stamford provider of software platforms for business technology management, received $6.3 million.
Nationally, venture capital investing has continued to decline since the unprecedented run-up that peaked in 2000. For full year 2002, venture investing totaled $21.2 billion, approximately half of 2001's $41.3 billion. Investment levels in 2002 were similar to 1998, the last pre-bubble year, when $21.6 billion went to entrepreneurs.
According to Tracy Lefteroff, global managing partner of PricewaterhouseCoopers' venture capital practice: "We may finally be near the bottom. This level of investing is more realistic and more sustainable. By historical standards, the current run rate is healthy for venture capitalists and entrepreneurs alike.
"If the public markets and liquidity opportunities improve in 2003," added Lefteroff, "we could see the return to a more stable venture capital market."
For the fourth quarter, the New England area (which includes Connecticut exclusive of Fairfield County) placed second nationally in number of deals and dollars invested among major regions. California's Silicon Valley was tops in terms of deals and dollars invested, while New York Metro (including Fairfield County) placed fourth in number of deals and sixth in dollars invested, behind Texas and the D.C/Metroplex area.
In Connecticut, the software industry attracted the largest share of VC funds for the fourth quarter - a total investment of $18.8 million in four companies. The medical devices and equipment industry ranked second, with $16.4 million invested in two companies. Biotechnology ranked third, with four companies receiving a total of $9.8 million.
Also for the quarter, five early-stage companies received $32.8 million of Connecticut's total in-bound funding, or 56 percent of the total dollars invested in the state. Six expansion-stage companies generated financing totaling $24.5 million, while two startup/seed stage companies received $1 million.
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