Exclusive regional VC update: www.localtechwire.com/article.cfm?u=1935&k=19&I=07 After almost two years of frosty treatment, venture capitalists finally warmed up to Southeastern tech companies in August, doling out more than $150 million in 16 deals.
But industry observers say that shining moment will be brief, and warn against expecting a continued rush of venture deals as summer slips into fall across the region.
“There’s been a moderate uptick in (deal) activity, but not enough to account for the August numbers,” says Alan Taetle of Noro-Moseley Partners in Atlanta. “I would call it an outlier as opposed to the beginning of a trend.”
Through the end of July, Local Tech Wire had tracked 72 deals worth a total of $566 million in the Carolinas and Georgia. Those numbers averaged out to about 10 deals and just over $80 million per month. But when the calendar flipped to August, the money started to flow to startups like lemonade on a hot summer day.
And it wasn’t just the usual suspects collecting the cash.
Deals were done in every sector, from software to biotechnology, from networking equipment to e-commerce. There also was a good mix of first-round funding to companies like ParinGenix and Kucera Pharmaceuticals and follow-on rounds to firms like Relativity Technologies and Wave 7 Optics.
Hatteras Networks and Nobex made the biggest splashes during August, accounting for two of the biggest deals in North Carolina this year. Hatteras bucked the down telecom market by snagging $45 million, while Nobex followed up a drug development deal signed early this summer with GlaxoSmithKline by finishing up a $35 million round it started last fall.
Market conditions not changed
“I wish I could say that August was notable and is presaging things to come,” says Ford Worthy of A.M. Pappas & Associates in Research Triangle Park, N.C. “But I don’t see any wholesale changes in the market, just a steady evolution of trends that have been around for some time.”
As if to back up that statement, the first week of September – albeit a short week following the Labor Day holiday – saw just one venture deal announced in the Southeast, a $500,000 investment by Durham-based Sustainable Jobs Fund in call center services company Ryla Teleservices of Woodstock. Ga. An uptick of a few deals last week helped, but there was no deluge.
“A lot of the deals (that closed in August) had been worked on a long time,” says John Ciannamea of Charlotte-based Academy Funds. “Most (venture) firms continue to be very cautious about investing money, so I don’t expect to see a long-term surge in the number of deals, although almost everybody is working on something right now.”
Academy, which is in the midst of raising its third fund, was involved in two of the August deals, as was Noro-Moseley. A.M. Pappas has deals going on both the east and west coasts.
“You still see money flowing to good companies,” says Jeff Clark of Durham-based Aurora Funds, which has raised half of its planned $75 million fourth fund and has already made three deals out of the fund since May. “But fewer deals are getting done, and it’s taking longer to pull them together because most involve a syndication among several (venture) firms.
“It’s an aberration that all of those closed in August.”