New England was a standout in an otherwise lackluster fourth quarter for venture capital investing nationwide, as the Boston metro area saw a surge in the number of deals and in dollars invested.
The healthcare industry, particularly biotech, continued to be the region’s major draw for venture investors.
The Boston area reported 90 financing deals last quarter, up from 81 in the third quarter and 75 in the fourth quarter of 2012.
The region garnered total financing of $1.13 billion in the quarter, up from $700 million in the third quarter and $657 million a year earlier.
By contrast, the San Francisco/SiliconValley region, always the top draw in venture funding, posted a year-over-year drop in both the number of companies financed and total dollars invested in the final quarter.
For the full year, Boston saw 325 companies receive funding, up 4% from 312 in 2012. Total investments were down 5%, to $3.57 billion in 2013. But a single energy-industry deal had inflated the 2012 total by $420 million. Excluding that, the 2013 funding total was up 7%.
Biotech, a mainstay of the region’s economy, saw its deal numbers leap: 19 Boston-area biotech firms got venture funding last quarter, up from 14 in the third quarter and 10 in the final quarter of 2012.
Total venture dollars pumped into the region’s biotech sector rose to $548 million in the quarter, up 165% from $206.8 million in the third quarter and up 254% from a year earlier.
New England healthcare firms overall received $1.56 billion in venture financing last year, accounting for 46% of the region’s total venture dollars. By contrast, healthcare accounted for 26% of venture investments nationwide.
"The biotech sector is hot, and it feels like people are still pretty bullish," said Bill Sweeney, regional director at City National’s Technology Group in Boston.
Leading the fourth-quarter capital flows to biotech were two separate fundings for Cambridge-based Moderna Therapeutics, a 3-year-old pioneer in so-called messenger RNA therapeutics. The technology aims to produce human proteins or antibodies inside patient cells -- essentially turning the body into a drug factory to target specific diseases.
Moderna received $110 million in third-round financing from a group led by Flagship Ventures. That was followed by $125 million in capital from Alexion Pharmaceuticals. Most of the Alexion investment secures options to develop drugs on Moderna’s platform.
Another big biotech deal brought $45 million in eighth-round financing to Zafgen Inc., another Cambridge firm. The company, founded in 2005, is developing new therapies for treating obesity. Zafgen’s venture investors in the latest round were led by RA Capital Management, Brookside Capital, Venrock, and Alta Partners.
Besides the large cash inflows to New England biotech firms last year, VC firms based in the region raised about $5 billion in fresh capital from investors in 2013, Sweeney said.
"That’s a very good sign for the Massachusetts market," he said.
EQUITY FINANCINGS FOR BOSTON AREA VENTURE-BACKED COMPANIES*
|4 Q 2013||3 Q 2013||2 Q 2013||1 Q 2012||4 Q 2012|
|Number of Financing Deals||90||81||80||74||75|
|Amount Invested ($M)||$1,130.2||$700.1||$827.7||$718.3||$657.1|
TOP 10 DEALS IN BOSTON
|COMPANY NAME||DESCRIPTION||CITY||ROUND TYPE||RAISED ($MM)||INVESTORS|
|Moderna LLC||Messenger RNA therapeutics||Cambridge||Corporate||$125||Alexion Pharmaceuticals|
|Moderna LLC||Messenger RNA therapeutics||Cambridge||Third Round||$110||Flagship Ventures, individual investors, undisclosed venture investor(s)|
|Ogin Inc.||Wind turbines||Waltham||Early Stage||$55||New Zealand Superannuation FUND|
|Zafgen Inc||Obesity-treatment therapeutics||Cambridge||Eighth Round||$45||Alta Partners, Brookside Capital LLC, individual investors, RA Capital Management LLC, Venrock|
|uTest Inc.||Software-as-a-service marketplace||Framingham||Fifth Round||$43||Egan-Managed Capital, Goldman Sachs Ventures, Longworth Venture Partners, Mass Ventures, Mesco Ltd., Questmark Partners, Scale Venture Partners|
|Editas Medicine||Therapeutics based on human genome editing technologies||Cambridge||First Round||$43||Flagship Ventures, Partners Innovation Fund, Polaris Partners, Third Rock Ventures LLC|
|Catabasis Pharmaceuticals Inc.||Medicines to treat inflammatory and metabolic diseases||Cambridge||Third Round||$32.4||Advanced Technology Ventures, Clarus Ventures LLC, Lightstone Ventures, Medimmune Ventures, SV Life Sciences Advisers LLC|
|Sideris Pharmaceuticals Inc.||Drugs to treat transfusion-related iron overload||Boston||First Round||$32||Hatteras Venture Partners, MPM Capital, Osage Partners|
|Aileron Therapeutics Inc.||Peptides for treatment of cancer and other diseases||Cambridge||Sixth Round||$30||Apple Tree Partners, Excel Venture Management LLC, Lilly Ventures, Novartis Venture Fund, Roche Venture Fund, SR One Ltd.|
|Reflexis Systems Inc.||Web-based workforce-management solutions||Dedham||Later-stage||$28.4||Sageview Capital LP|
*Equity financings include cash investments by professional venture capital firms, corporations, other private equity firms, and individuals into companies that have received at least one round of venture funding.
|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. 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.|