Triangle venture capital funding surges in Q4

The flow of venture capital dollars into the Triangle’s high-growth technology companies jumped to an impressive $163.5 million in the fourth quarter, the biggest haul in four years.

The fourth-quarter numbers being released Friday mark a turnabout from the lackluster, if not disappointing, amounts raised in the first three quarters of 2014.

Indeed, the fourth-quarter haul amounts to roughly 60 percent more money than Triangle companies raised in the prior three quarters combined.

“It’s a great quarter, a phenomenal quarter,” said Laura Robinette, who heads PricewaterhouseCoopers’ Raleigh office. “Hopefully, the momentum continues.” The data was compiled by PricewaterhouseCoopers and the National Venture Capital Association, based on information supplied by Thomson Reuters.

Propelled by the Triangle numbers, North Carolina ranked 10th in venture capital funding among the states in the fourth quarter, up from 19th in the third quarter. The Triangle historically has accounted for the bulk of the venture capital funds raised statewide, and that held true in the fourth quarter.

A total of 13 Triangle companies attracted venture capital in the fourth quarter, the most since the fourth quarter of 2013. Seven were life science companies and four were software companies.

But it was the big deals that really drove the funding total upward.

Four Triangle companies raised tens of millions of dollars each – led by Viamet Pharmaceuticals, which raised $60 million, and Phononic Devices, which raised $44.5 million. In addition, biotechnology company Scioderm and medical devices company nContact each raised $20 million.

Viamet, a drug developer based in Durham, was planning an initial public offering but withdrew its plans in October and instead raised money from private investors, including venture capital firms.

The Triangle’s venture capital market is small enough that a big deal or two, or the lack of such deals, can skew the numbers tremendously.

“When I look at these numbers, it supports what my guts and instincts have been saying,” said Chris Heivly, managing director of The Startup Factory, a Durham business accelerator that invests in and nurtures startups.

In addition, Heivly said, the national data shows that venture capitalists have money to spend these days.

According to the National Venture Capital Association, venture capital firms raised $29.8 billion in 2014, up 69 percent from 2013 and the strongest year since 2007.

Startup and early-stage companies, especially biotechnology and information technology companies, depend on venture capital funding to expand sales and marketing efforts and develop products. Venture capital firms, which themselves raise money from investors, receive an ownership stake in emerging businesses in exchange for their cash.

The $44.5 million raised in the fourth quarter by Phononic, a Durham company that sells solid-state cooling and refrigeration devices, exceeds all of the prior funding that the company had raised since its inception.

“We are moving into the growth stage as a company,” said CEO Tony Atti.

Atti said it took Phononic five months to raise its latest funding, which was faster than he had anticipated.

“I always budget six to nine months for any kind of capital raise,” he said.

Still, he added, “raising capital is never easy, regardless of whether the funding climate is frothy or moribund.”

Although Triangle entrepreneurs have long complained about a scarcity of venture capital firms that are based in the Triangle, Robinette pointed out that the fourth-quarter numbers show that venture capital firms located elsewhere are willing to plow money into Triangle companies.