Investors putting less into venture capital

Local drop reflects a national trend

Private investors tightened the purse strings on local technology companies in the third quarter.

Biotechnology and medical-device companies were among the biggest recipients of venture-capital funding. Motricity, which develops technology for mobile devices, hauled in the largest single amount, $32 million.

Thirteen local companies received $89 million in venture funding in the three-month period that ended Sept. 30. That's down from $117 million in the second quarter and $133 million in the year-earlier period, according to the MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association.

The quarterly report is based on data collected by Thomson Financial, and tracks private investment at firms throughout the Triangle, state and nation. Outside the Triangle, only two North Carolina firms received venture funding in the third quarter.

According to the report, the decline in the Triangle reflects the national picture, in which venture investing dropped 8 percent to $6.2 billion in the third quarter, from $6.8 in the second quarter. But that was still up significantly from $5.3 billion a year earlier.

In this region and other technology hot spots, venture capital is an important economic engine, because it allows entrepreneurial drug and software developers, university spinoffs and other small companies to hire workers, fund research and develop and market new products.

Locally, the total raised fell, partly because investors focused more on raising money this year than funding new ventures, said Garheng Kong, a partner at InterSouth Partners of Durham. That could change in the fourth quarter and next year, he said.

"A lot of the venture firms have already raised significant capital, so it's reasonable to say [that] now they'll start to put that money to work," Kong said. InterSouth closed on $275 million in May and will start to invest more heavily in the next six months.

But by and large, investors will remain picky, giving more to seasoned companies, rather than riskier startups, Kong said.