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.

The content of Venture Capital Report is compiled from data and sources believed to be reliable, but is not guaranteed as to accuracy or completeness. Opinions expressed are those of the authors or the interviewees and are not necessarily the opinions of City National Bank, member FDIC. This publication is intended to be a source of general information regarding subject matters of interest to our clients. The effectiveness of the advice or suggestions presented, if any, will depend on the reader's situation and are for the reader to determine. If investments are discussed, the discussion should not be considered or relied upon as specific investment advice directed to the reader's specific investment objectives, nor should any discussion of specific securities be taken as a solicitation or recommendation for any reader to buy or sell such securities. City National Bank (and its clients or associated persons) may at times have positions in securities and investments discussed from time to time in this publication and may make additional purchases or sales inconsistent with the discussion. City National Bank, as a matter of policy, does not give tax, accounting, regulatory or legal advice. Rules and regulations in the areas of law, tax and accounting are subject to change and open to varying interpretations. The reader is encouraged to consult his or her own tax and legal adviser.

 

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