By Bill Sweeney
Senior Vice President
East Coast Regional Director
City National Technology Group
(617) 380-5608
Bill.Sweeney@cnb.com

boston venture capital

Big funding deals for three cyber-security companies helped the Boston area cement its position as the second most popular destination for venture capital money last quarter, after Silicon Valley.

But overall VC financing for Boston startups declined from the third quarter, on par with the national trend. Companies in the New England capital took in $1.31 billion in funding last quarter, down 29% from the previous quarter though up 16% from a year earlier, according to data firm CB Insights.

The dollars invested last quarter were spread among 86 Boston-area companies, about flat with 85 in the third quarter and down from 95 a year earlier.

Wall Street's dive early this year leaves a cloud over the VC investing outlook for 2016. In Boston, that could challenge the high-stakes biotech industry that is the heart of the region's startup culture. In the fourth quarter, biotech firms accounted for four of the area's 10 largest VC deals.

"But Boston's computer technology sector also is attracting VC investors' interest, as demonstrated by funding deals for a trio of cybersecurity companies last quarter," said Bill Sweeney, East Coast regional director for City National’s Technology Group

The region's second-largest deal overall was a $66 million Series D infusion for Digital Guardian, a company founded in 2003 specifically to create systems that block corporate data theft. 

Right behind Digital Guardian on the deal list was Cybereason, a three-year-old firm that has automated both the real-time detection of computer hacking attacks and the defensive response to them. The company got $59 million in Series C financing, its second VC infusion of 2015.

Rounding out the top five Boston deals in the quarter was Bit9 + Carbon Black, which took in $54.5 million in Series F funding. Bit9 and Carbon Black, which merged in 2014, both focus on computer network security at companies' "endpoints," meaning PCs, laptops and smart phones.

In Boston's biotech sector, VC investors handed the biggest sums to newcomers last quarter. The region's single-biggest investment was an $80 million Series A infusion for Codiak Biosciences, a startup formed to develop exosome technology. Exosomes are minute secretions in the body that might be useful in delivering drugs directly into cells.

The No. 2 biotech deal was a $55 million Series A investment in Neon Therapeutics, another startup. The company plans to focus on using the body's immune system to recognize and attack cancers via proteins known as neoantigens.

Although the San Francisco area is a major rival to Boston in biotech, The Economist magazine recently declared Boston still "the world’s pre-eminent biotech hub."

EQUITY FINANCINGS FOR BOSTON VENTURE-BACKED COMPANIES*

  4 Q 2015 3 Q 2015 2 Q 2015 1 Q 2015 4 Q 2014
Number of Financing Deals 86 85 100 98 95
Amount Invested ($MM) $1,314.8 $1,843.2 $1,331.1 $1,351.6 $1,134.4

TOP 10 DEALS IN BOSTON

COMPANY NAME DESCRIPTION CITY ROUND TYPE RAISED ($MM) INVESTORS
Codiak Biosciences Developing platforms for therapeutic and diagnostic applications based on exosome biology Woburn Series A $80 Alaska Permanent Fund, Alexandria Real Estate Equities, ARCH Venture Partners, Fidelity Investments, Flagship Ventures
Digital Guardian Data protection solutions for endpoints Waltham Series D $66 Brookline Venture Partners, Fairhaven Capital, GE Pension Fund, LLR Partners, Loring, Wolcott & Coolidge Office, MassMutual Ventures, Siemens Venture Capital, Special Situation Funds
Cybereason Develops software to track the actions of would-be cyber attackers Boston Series C $59 CRV, Softbank Corp., Spark Capital
Neon Therapeutics

Developing therapeutics leveraging neoantigen biology to treat cancer

Cambridge Series A $55 Access Industries, Clal Biotechnology Industries, Third Rock Ventures
Bit9 + Carbon Black Provides advance threat protection and endpoint security Waltham Series F $54.5 .406 Ventures, Accomplice, Evolution Equity Partners, Founders Circle Capital, Highland Capital Partners, Kleiner Perkins Caufield & Byers, Sequoia Capital
Allena Pharmaceuticals Developing non-systemic protein therapeutics to treat metabolic and orphan diseases Newton Series C $53 Fidelity Investments, Frazier Healthcare, HBM BioVentures, Partner Fund Management, Pharmstandard International, Wellington Management
Decibel Therapeutics Developing medicines focused on hearing  Cambridge Series A 52 SR One, Third Rock Ventures
Litmus Software Email creation, testing, and analytics platform Cambridge Growth Equity $49 Spectrum Equity Investors
Perfecto Mobile Enterprise mobile application development, testing, and deployment services Woburn Series E - II $49 Carmel Ventures, FTV Capital, Globespan Capital Partners, Technology Crossover Ventures, Vertex Ventures
Solid GT Gene therapy platform focused on therapeutics for Duchenne muscular dystrophy Cambridge Series B $42.5 Biogen Idec New Ventures, Janus Capital Group, Kodiak Venture Partners, Perceptive Advisors

 

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, accounting or legal adviser.