Business

NC startup funding rises 71%

Cindy Whitehead, CEO of Sprout Pharmaceuticals in Raleigh, which raised about $50 million this year.
Cindy Whitehead, CEO of Sprout Pharmaceuticals in Raleigh, which raised about $50 million this year. hlynch@newsobserver.com

Led by a huge surge in funding for life science companies, North Carolina’s entrepreneurial companies raised $426.9 million during the first half of this year – up 71 percent from a year ago and more than double the total from two years ago.

CED, the Triangle support group for entrepreneurs that compiled the report, released it Tuesday at the outset of the two-day Tech Venture Conference at the Raleigh Convention Center.

CED officials labeled the funding total “blockbuster.” The report’s data includes investments from venture capital firms, angel investors and corporations in privately held, up-and-coming technology, life science, advanced manufacturing and “clean tech” companies across the state.

Pointing to a nationwide study from business research firm Mattermark that shows a 50 percent increase in overall funding for startups so far this year, CED’s president, Joan Siefert Rose, noted: “We’re beating the national average.”

Rose also was upbeat about the funding picture for the rest of this year, noting that the preliminary third-quarter data “looks strong.”

As is typical, Triangle companies accounted for the bulk of the state’s funding deals. Of the 90 North Carolina deals reported by CED in the first half of this year, 74 involved Triangle-based companies.

The state’s life science companies – pharmaceutical, biotechnology and medical device businesses – accounted for $268.4 million in funding, more than 60 percent of the total and a whopping 655 percent increase from a year ago, when life science funding dipped. The funding for life science companies also was more than double the amount raised in the first half of 2013.

“Life science companies are on a roll,” Rose said.

The 90 deals reported in the first half of this year is only marginally more than the 87 deals over the first six months of 2014. As a result, the average deal size this year totaled $4.74 million, versus $2.87 million a year ago.

Rose attributed the larger deals to the burst in funding for life science companies, which typically require much more capital than other businesses. The two largest life science deals involved Triangle companies: Sprout Pharmaceuticals, which raised about $50 million, and Novan Therapeutics, which attracted more than $39 million.

Last month Sprout agreed to be acquired by Valeant Pharmaceuticals for about $1 billion in cash – a deal that was struck just two days after the Food and Drug Administration approved the company’s female libido pill, Addyi.

The state’s technology companies actually raised less money over the first half of this year compared to a year ago – $114.5 million, down from $182.1 million.

The big difference, said Dhruv Patel, CED’s director of investor relations, was the $100 million raised last year by Cary business software company Dude Solutions. In fact, he noted, 46 tech companies raised money over the first six months of this year, an increase from 39 a year ago.

“The great story for us here is that we are one of the few regions in the country that has a very diverse set of entrepreneurial companies, with a strong sector on the tech as well as the life science side,” Patel said.

Although local entrepreneurs often complain about the dearth of venture capital funds that are based in the Triangle, Rose noted that the data shows that the region’s startups are attracting investors from across the country and around the globe.

The 74 institutional investors that plowed money into North Carolina companies in the first half of this year included 19 firms based in the Northeast, 16 West Coast firms and six international investors.

“So the bottom line here is, there is money for North Carolina startups,” Rose said.

David Ranii: 919-829-4877, @dranii

Read the report

The CED’s “Innovators Report” is at cednc.org

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