The latest figures on venture investing in North Carolina read like a good news, bad news joke.
The bad news: Just $64.6 million was invested in technology companies statewide during the first three months of the year, according to the quarterly MoneyTree Survey published by the National Venture Capital Association, accounting firm PricewaterhouseCoopers and research firm Venture Economics.
That’s the lowest quarterly total in two and a half years – it’s down more than 70 percent from a year ago – and projects out to $260 million for all of 2002, which would mark the weakest investing environment for the state in six years.
The good news: It can’t get much worse.
“It’s just got to get better,” says Jeff Barber, who heads PricewaterhouseCoopers’ technology practice in the Carolinas. “With the amount of (un-deployed venture) money we have in the system, I don’t see how we can drop much below where we are.”
Local Tech Wire’s own venture figures through mid-May show 26 North Carolina firms raising some $128 million. For Georgia, LTW figures show $284 million in 28 deals.
Barber had predicted that the venture market had bottomed out at the end of last year, when the MoneyTree Survey showed the first quarterly increase in investing both statewide and across the country in more than a year. But the continued shake economy and the aftershocks of the Sept. 11 terrorist attacks caused venture firms to tighten the purse strings yet again early this year.
“I guess we had a false bottom,” he says in disbelief.
Deal flow turns to trickle
Just 14 venture deals were done in North Carolina in the first quarter, including 12 in the Triangle. They were led by Norak Biosciences raising $13 million, MediaSpan Group raising $8.5 million and NetOctave raising $7.8 million.
If investment activity continues at that rate for the rest of the year, the 56 deals for 2002 would be the lowest total in seven years.
“Everyone is just being ultra-cautious,” Barber says. “The ironic thing is that it’s a good time to do deals. It’s really a buyer’s market, with valuations low and so many firms looking so hard for money.”
Software and biotechnology continue to be the most popular sectors for investment, accounting for eight first-quarter deals. But the amount invested in those sectors, as well as in telecommunications and information technology services, was way down from a year ago, from 38 to 96 percent less.
Georgia deals few but big
Technology companies in Georgia raised more than twice as much as their North Carolina counterparts during the quarter, with 20 companies nailing $133.3 million in venture capital. Although the number of deals was the lowest in six years, the amount raised was about 40 percent higher than a year ago, primarily because of several large fundings, including $45 million for Inhibitex and $16 million for Servigistics.
“It’s tough to call it an upward trend, as we had four deals total about $86 million,” says Wes Getman of PricewaterhouseCoopers’ Atlanta office. “They were all B and C rounds, which doesn’t leave much for the A rounds.”
Georgia’s total ranked the state eighth nationally for the quarter, up four spots from the previous quarter, while North Carolina dropped two notches to 16th nationwide.
Barber says one of the more ominous figures from the latest MoneyTree Survey is that North Carolina attracted just 1 percent of the venture money invested nationwide during the first quarter. The state traditionally brings in between 1.5 and 2 percent of the national total.
“You would think North Carolina is growing at a faster rate than the total amount invested,” he says, noting the state’s strength in biotechnology, one of the more popular havens for venture capital these days.
“It shouldn’t be this bad, but it is.”
LTW’s deal list for North Carolina: www.localtechwire.com/article.cfm?u=889
LTW’s deal list for Georgia: www.localtechwire.com/article.cfm?u=890