The Boston area paced a steep decline in venture capital funding nationwide in the third quarter, as financing for companies in the New England capital slid 34% from the heady totals of the second quarter.
But the medical industry in Boston remained fertile ground for VC investors, accounting for six of the region's top 10 funding deals last quarter.
Venture capital investors pumped a total of $682 million into Boston-area firms in the quarter, down from $1.03 billion in the second quarter, according to data firm CB Insights. The number of companies getting funding also tumbled, down 35% to 65 from 100 in the second quarter.
Nationwide, venture funding slumped 30% last quarter from the second quarter, when dollar totals had reached the highest levels since 2001. But the amounts invested in Boston and nationwide in the third quarter still were up compared with the third quarter of 2013.
"New England activity cooled a bit, similar to Northern California, from a very robust Q2," said Bill Sweeney, East Coast regional director for City National’s Technology Group. "Company valuations have increased in many sectors and geographies. I think the slowdown in Q3 is VCs taking a slight breather as folks digest Q2 deals and evaluate pricing in the market."
Overall, the Boston area still ranked as the third-biggest regional destination for venture money, after California's Silicon Valley and New York City.
The region's largest venture deal last quarter was a $55 million investment in Civitas Therapeutics. The Chelsea, Mass.-based firm has developed a new technology for delivering large doses of drugs to patients via an inhaler. The five-year-old company in late August filed initial documents for a public stock offering.
Another medical technology company, Boston-based Flex Pharma, raised $40 million in Series A funding last quarter. The firm is developing drugs to treat muscle cramps and spasms by halting repetitive firing of a patient's motor neurons.
Cambridge, Mass.-based start-up Synlogic is taking a different approach to fighting disease: It seeks to develop bacteria that can sense a patient's physiological condition, perform a therapeutic action, then "deactivate" themselves after their job is done. The one-year-old company raised $29.4 million in VC money last quarter.
EQUITY FINANCINGS FOR BOSTON AREA VENTURE-BACKED COMPANIES*
|3 Q 2014||2 Q 2014||1 Q 2014||4 Q 2013||3 Q 2013|
|Number of Financing Deals||65||100||88||93||80|
|Amount Invested ($MM)||$681.7||$1031.5||$898.9||$972.9||$608.8|
TOP 10 DEALS IN BOSTON
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Therapeutics||Inhaled therapeutics biopharmaceutical company||Chelsea||Series C||$55||Longitude Capital, OrbiMed Advisors, Canaan Partners, Bay City Capital, Fountain Healthcare Partners, Wellington Management, Adage Capital Management, Alkermes, RA Capital Management, Sofinnova Ventures, Rock Springs Capital, Partner Fund Management|
|DraftKings||Online daily fantasy sports platform||Boston||Series C||$41||Atlas Venture, Redpoint Ventures, GGV Capital, The Raine Group|
|Flex Pharma||Biopharmaceutical company developing treatments for neuromuscular disorders||Boston||Series A||$40||Bessemer Venture Partners, Alexandria Real Estate Equities, Jennison Associates, Bindley Capital Partners, Longwood Fund, Peter Lynch, City Hill Ventures, The Kraft Group, CD-Venture, John Sculley, Lightstone Ventures, EcoR1 Capital, Richard Mark Beleson, Todd Dagres, Daniel Gold, Richard Gibbs, Wyc Grousbeck, Robert Steven Kaplan, John Maraganore, Judy Pagliuca, Steve Pagliuca, William Sahlman, Diane Sculley, Jonathan Seelig|
|Fractyl Laboratories||Type 2 diabetes treatment and procedure development||Waltham||Series C||$40||Bessemer Venture Partners, Domain Associates, General Catalyst Partners, Mithril Capital Management|
|Veracode||Cloud-based application Intelligence and security verification services||Burlington||Series F||$40||Atlas Venture, .406 Ventures, Meritech Capital Partners, StarVest Partners, In-Q-Tel, Symantec, Wellington Management|
|DC Devices||Medical devices for the treatment of congestive heart failure||Tewksbury||Series D||$34||General Catalyst Partners, Lumira Capital, Third Rock Ventures, Accelmed|
|HealthEdge Software||Financial, administrative, and clinical software platform for healthcare Industry||Burlington||Series C||$30||Psilos Group|
|Synlogic||Biotech company focused on the development of therapeutic microbes||Cambridge||Series A||$29.4||New Enterprise Associates, Atlas Venture|
|erecruit||Staffing industry management platform and analytics||Boston||Private Equity||$25||North Bridge Venture Partners|
|DataRobot||Helps users build better predictive models in the cloud||Boston||Series A||$21||New Enterprise Associates, Atlas Venture|
*Quarterly tallies consist of equity rounds completed in the quarter and in which a venture capital or corporate venture firm participated in the round.
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