Triangle startups raise $106.8 million in fourth quarter

dranii@newsobserver.comJanuary 17, 2014 

The amount of venture capital raised by Triangle startups in the fourth quarter outpaced the prior two quarters combined, surging past the $100 million mark for the first time in 2-1/2 years.

A total of 16 startups shared in the bounty, the most since the second quarter of 2008, according to investment numbers scheduled to be released Friday by the accounting firm PricewaterhouseCoopers and the National Venture Capital Association, based on data supplied by Thomson Reuters.

“It certainly was an exceptional quarter, no doubt about it,” said venture capitalist Ben Brooks of Raleigh’s Southern Capitol Ventures.

Brooks, however, believes that the $106.8 million raised last quarter will prove to be an anomaly rather than a trend-setter.

“I think the fourth quarter was more of a pent-up demand issue,” he said.

Historically, the Triangle’s record of venture capital investments has bounced up and down like a yo-yo because the region lacks a critical mass of companies that depend on venture capital. A single big deal, or the lack of one, can skew the quarterly numbers.

The strong fourth-quarter propelled the overall amount of venture capital raised by Triangle companies in 2013 to $227.6 million, up 67 percent from 2012. However, 2012 was the worst year for venture capital investments locally since 1997.

Before the fourth quarter, the Triangle venture capital totals were in a two-year slump, which some in the entrepreneurial community have attributed to factors such as the resurgence of local angel investors – angel investments aren’t reflected in the venture capital tally – and lower startup costs for information technology companies. Still, the depths of the local slump weren’t reflected nationwide.

Venture capitalists that provide cash to young technology companies receive an ownership stake in return. They make money when the companies in their portfolio go public or are acquired, and they lose money if the companies founder.

Meanwhile, the startups that receive the infusion of cash typically use the money to advance their technology or upgrade their sales and marketing.

The top 5 companies:

Phononic Devices, a Research Triangle Park company that has developed cooling technology for use in refrigeration devices, led the way among Triangle companies in the fourth quarter by raising $21 million.

It was one of five companies to raise in excess of $10 million in the fourth quarter. The others, according to the data being released Friday, were: Argos Therapeutics, Envisia Therapeutics, G1 Therapeutics and Metabolon.

Given the way the numbers are tallied, there can be discrepancies between the amounts companies announce raising and the survey results. For example, companies may report the total amount of dollars committed, but some of that money may be contingent on achieving milestones. In such cases, the survey tallies the dollars when they are actually received by the company.

Laura Robinette, who heads the Raleigh office of PricewaterhouseCoopers, said she couldn’t remember the last time that five Triangle companies raised more than $10 million in a single quarter.

Last year, 82 venture-backed companies nationwide launched successful initial public offerings of stock, the most since 2007, Robinette said.

“That, I think, really had an impact on the investments in the fourth quarter,” she said. “When you have some deals flowing and you’re able to have some successful exits, then you’ve got more money to invest.”

Nationwide, venture capitalist invested $29.4 million in 2013, up 7 percent from 2012. The number of deals rose 4 percent to 3,995.

Ranii: 919-829-4877

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