According to the PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report based on data from Thomson Financial, six Connecticut companies received $26.8 million in venture capital funds during the third quarter of 2007, a 52% decrease from $56.4 million invested in ten companies in the third quarter of 2006.

In Q3 2007, the largest investment in Connecticut went to Optherion, Inc., a Branford developer of diagnostic and therapeutic solutions for macular degeneration that received $10.0 million in investment dollars in their first round of financing. HistoRx, Inc. a New Haven company that provides quantitative biomarker assays, received $6.6 million in their second round of financing. Rounding out the top three deals for the quarter, Danbury based Odyssey Logistics & Technology Corporation, a provider of outsourced logistics and transportation management services, received $5.0 million in their third round of financing.

Nationally, venture capitalists invested $7.1 billion in 887 deals in the third quarter of 2007. Quarterly investment activity was down slightly from the second quarter of 2007 when $7.2 billion was invested in 1,000 deals, suggesting ongoing stability within the venture capital arena. The quarter saw notable increases in both the CleanTech and Internet specific sectors as well as ongoing strength in first rounds of venture capital financing. 

“While Software and Biotechnology upheld their historical placements as the top funded industries, venture capitalists seemed to diversify across various industries this quarter,” said Tracy Lefteroff, global managing partner of the venture capital practice, PricewaterhouseCoopers. “In some cases, investment trends reflected top issues facing the nation. Clean Tech, for example, demonstrated its viability as an emerging sector by producing three of the top five deals this quarter, with one deal reaching the $100 million plateau, marking it as one of the largest deals ever for the sector. Overall there was strong deal activity this quarter keeping us on pace for the largest investment year since 2001.” 

“The stability of the overall venture capital investment levels, coupled with an increased focus on the most innovative new industry sectors such as alternative energy suggests that the venture capital industry is continuing to support our country’s most promising start-up companies in a rational and deliberate manner,” said Mark Heesen, president of the National Venture Capital Association. “We were particularly pleased to see the sustainability of first time financings levels. Many new companies are seeking and winning venture capital investment which equates to growth for the US economy as a whole.” 

In the third quarter, the Silicon Valley region placed first among major regions in terms of deals and dollars invested, followed by the New England region (which includes portions of CT).  The New York Metro region (which includes Fairfield county) placed fifth in terms of dollars invested and third in terms of deals.

Connecticut Results, Most Recent Quarters

Connecticut Results, Most Recent Six Years

Industry Sectors – Life Sciences Leads Third Quarter 

In Connecticut, the Life Sciences sector (Biotechnology and Medical Devices combined) obtained the largest share of venture capital funds for the third quarter of 2007 – a total investment of $17.6 million in three companies, or 65% of total investment dollars.  Software followed with $8.0 million invested in two companies and the Industrial/Energy industry ranked third with $1.3 million invested in one company.   

Nationally, the Software sector narrowly edged out Biotechnology as the number one industry sector for the quarter with $1.11 billion going into187 deals. This investment level was down from the previous quarter when Software hit a six year high with $1.5 billion going into 253 deals. 

The Life Sciences sector (Biotechnology and Medical Devices combined) had another strong quarter with $1.9 billion going into 175 deals compared to the previous quarter when $2.2 billion went into 233 deals. Both Biotech and Medical Device investing slowed in Q3 with fewer deals completed and dollars invested. Biotechnology had $1.1 billion going into 99 deals; Medical Devices had $825 million going into 76 deals in the quarter. 

The Clean Tech sector, which crosses traditional MoneyTree sectors and comprises alternative energy, pollution and recycling, power supplies and conservation, saw record investment levels with $844 million going into 62 deals in the third quarter. This represented 80 percent increase in the dollar level and 35 percent increase in the number of deals in the Clean Tech sector in the second quarter of the year. 

Internet-specific companies garnered $1.1 billion into 195 deals in the third quarter, a 17 percent increase in dollars over the second quarter when $903 million went into 160 deals. Four of the last five quarters have seen Internet-specific investment of more than $1 billion. ‘Internet-Specific’ is a discrete classification assigned to a company with a business model that is fundamentally dependent on the Internet, regardless of the company’s primary industry category. 

Media and Entertainment had a positive quarter with $509 million going into 96 deals, an increase in both deals and dollars from the second quarter when $464 million went into 77 deals. Other industry sectors which saw increases in both dollars and deals include Financial Services, Healthcare Services, and IT Services. Both Telecommunications and Semiconductors saw more dollars but fewer deals in the third quarter.

Stage of Company Development – Startup/Seed Stage Leads Third Quarter in Connecticut 

For the third quarter of 2007 in Connecticut, three Startup/Seed Stage companies received $12.3 million of the state’s total in-bound funding or 46% of the total dollars invested in Connecticut.  Also in Q3 2007, two Expansion Stage companies received $9.6 million of funding, and one Later Stage company received $5.0 million. 

Nationally, Seed and Early stage investing dollars in the third quarter fell 15 percent to $1.4 billion into 305 deals. This level compares to an extremely strong second quarter when venture capitalists invested $1.7 billion into 395 deals. Seed/Early stage deals accounted for 34 percent of total deal volume in the third quarter compared to 40 percent in the second quarter of the year. The average Seed deal in the third quarter was $2.4 million, up from $2.0 million in the second quarter; the average Early stage deal was $5.6 million, also up from $5.0 in the second quarter. 

Expansion stage dollars increased by 16 percent in the third quarter to $2.7 billion from $2.3 billion in the second quarter. The number of deals however, declined slightly from 302 deals in the second quarter to 294 deals in the third quarter. Overall, Expansion stage deals accounted for 33 percent of venture deals in the quarter. The average Expansion stage deal was $9.2 million, up significantly from $7.8 million in the second quarter. 

Later stage deals fell slightly dollar value with $3.0 billion going into 288 deals and accounting for 33 percent of total volume. In the second quarter of this year $3.2 billion went into 303 deals. The average Later stage deal in the third quarter was $10.3 million which was also slightly lower than the second quarter when the average Later stage deal size was $10.6 million.