RESEARCH TRIANGLE PARK, N.C. – Make no mistake about it, entrepreneurs and business owner wannabes – another “nuclear winter” when it comes to funding is about to strike with gale force.
The latest venture capital figures from the two leading VC tracking reports show investments were down again in the third quarter. And that decline was well in place before Wall Street credit froze worse than the North Pole over the past few weeks.
Yes, North Carolina firms did pull in $94.9 million through 12 deals, according to PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters. Plus, the $60 million Biolex deal made the books in October, the largest biotech deal ever in N.C. giving the fourth quarter a hot start. (Dow Jones VentureSource reported similar figures.)
But a look at the N.C. deals alone highlights a national trend: Startups are going to be frozen out of investments unless they have angels – or big friends in the family.
Of the 10 N.C. deals, only one (Oncoscope) was a startup or seed at $2 million.
Only one other (Viamet Pharmaceuticals) was an early stage deal at $3 million and change.
All the others were later stage or expansion, getting nearly $90 million.
A tip of the hat certainly is due ChannelAdvisor ($19.9 million), Integrian ($14.8 million), Nextreme Thermal ($13.8 million) and the rest for their deals. They closed before deal making froze.
However, what about the new folks – the life blood of the entrepreneurial community? If they continue to be iced for funding, where are the next Scot Wingo (Channel Advisor) and spinouts (Nextreme from RTI International) to be found?
As we’ve documented recently at Local Tech Wire, angel investors are growing ever more important in pumping antifreeze into startups as venture firms struggle to keep long-term investments alive while waiting for the exit ramps (IPOs) on Wall Street to be de-iced. But angels’ holdings have been hammered by the global financial crisis. Where’s the money now?
Remember how difficult it was for startups to find dollars in the nuclear winter of 2001 following the “dot com” implosion?
Well, “dot com” fantasies didn’t trigger the latest lockup on money. Other Wall Street shenanigans did. But the up-and-coming dot com, medical device, software, telecom and life science stars-in-waiting will pay the price. It’s going to be a long, long, winter – whether you believe in global warming or not.