Triangle startups raise $63.7 million in Q1
A dozen Triangle startups raised $63.7 million in the first quarter, a decent start to the year in spite of a fundraising climate that many view as challenging.
The money raised by promising Triangle technology companies in the quarter far exceeded the $50.9 million raised in the fourth quarter. But it fell well short of the amounts raised in each of the first three quarters of 2015 – which ranged from $84.2 million to $131.5 million.
“It was a solid quarter,” said Laura Robinette, who heads the Raleigh office of accounting firm PricewaterhouseCoopers. The latest data was compiled by the accounting firm and the National Venture Capital Association, based on information supplied by Thomson Reuters.
Nationwide, entrepreneurial companies raised $12.1 billion in venture capital in the first quarter. That’s on par with the fourth quarter and 11 percent lower than the first quarter of 2015.
Because the number of Triangle companies that raise venture capital each quarter is relatively small, big deals – or the lack thereof – can skew the numbers.
In the latest quarter the total funding was reined in by the fact that just two companies raised in excess of $10 million – biotechnology company Envisia Therapeutics, which attracted $16.5 million, and Valencell, which licenses its technology to makers of wearable smart devices, which landed $11 million.
Six of the Triangle companies that raised money in the first quarter are software companies, an unusually high number for the region.
Technology companies often rely on venture capital funding to boost sales and marketing efforts and develop new products.
Durham venture capital firm Bull City Venture Partners recently surveyed more than 200 entrepreneurs in five states and the District of Columbia and found that an overwhelming number – 88 percent – expect 2016 to be a challenging year for raising money.
Jason Caplain, co-founder and general partner at Bull City, said the results of the survey align with what he’s observing.
“We’re not seeing a nuclear winter, but it is definitely going to be tougher in 2016 to raise capital,” Caplain said. Last year Triangle companies raised $378.8 million, up 43 percent from 2014 and the largest total since 2008.
A nearly moribund market for initial public offerings and depressed valuations for publicly held software companies is trickling down to the private sector, said Caplain, whose firm focuses on information technology startups.
“When the public markets pull back, private investors get more skittish,” Caplain said.
Caplain projects that there will be fewer deals done, with less funding, in 2016. He also predicts that valuations will be lower, which means that startups will need to sell a bigger piece of their business to investors to get the dollars they need. Venture capitalists receive an ownership stake in a company in exchange for their investment.
Even though most entrepreneurs surveyed by Bull City expect fundraising to be challenging, nearly 60 percent reported that they will seek additional funding this year.
David Ranii: 919-829-4877, @dranii
This story was originally published April 14, 2016 at 8:01 PM with the headline "Triangle startups raise $63.7 million in Q1."