Maine venture capital deals rise in number, fall in value
More Maine companies found venture capital investments in 2014 over the prior year, but the total value of the deals was about 68% less for the year, and fourth quarter numbers were anemic compared to each of the first three quarters.
The full year saw a total of 12 deals valued at $18.67 million compared to five deals valued at $27.54 million in 2013, according to figures provided to Mainebiz by PricewaterhouseCoopers LLP. The fourth quarter saw two deals, but only the value of one, at $75,000, was revealed in the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, which was released today. Data from the report came from Thomson Reuters.
In the fourth quarter, Quoddy Inc., a Perry-based shoe manufacturer, raised $75,000 in a later stage round from St. Louis-based Advantage Capital Partners. And 4tell Solutions LP, a Portland software company, raised an unspecified amount from Arrowroot Capital LP of Boston and Cedarpoint Investments Inc. of Toronto.
For all of 2014, Maine’s biotech industry received the most venture capital at $16.66 million, thanks primarily to a $16.06 million later stage fund raised in the second quarter of 2014 by veterinary product company Putney Inc. of Portland. Biotech was followed by consumer products and services at $900,000, industrial/energy at $433,000, software at $325,000, telecommunications at $280,000 and retailing/distribution at $75,000.
The Putney deal was the largest of the year in Maine, followed by Hyperlite Mountain Gear Inc. of Biddeford with $900,000.
Most of the 2014 funding was later stage, some $17.41 million of the total, with the rest for expansion funding. No companies received seed or early-stage financing. The report’s numbers do not include private equity deals or debt sales.
Megadeals pervasive nationally
Nationally, for the first time in the MoneyTree study history, two deals topped $1 billion, and there were more than 40 “megadeals” topping $100 million, according to Mark McCaffrey, global software leader and technology partner at PricewaterhouseCoopers. He also noted that there was an influx of private equity investors at a level not previously seen.
McCaffrey said that with the continued economic conditions, he expects venture capitalists to be positioned to continue strong levels of investing in 2015. Maine has some limitations, however, as it is not in a “hot spot” like Silicon Valley or Boston. He also said it is important for early-stage companies in the state to have access to talented workers in order to grow and attract investment.
“A key to look at is the talent pool,” he told Mainebiz in a telephone interview from PwC’s San Jose, Calif., office. “I see companies gaining significant momentum and needing talent. Once companies get out of the incubation stage, they need to hire to grow infrastructure. A lot of companies go international right out of the gate. If they can’t hire, that limits their prospects down the road and their ability to raise money.”
McCaffrey added that “venture capitalists are willing to go where innovation and disruptive technologies are being created. If it’s a good story, they’ll invest.”
John Burns, managing director of the Newport-based Maine Venture Fund, agrees with McCaffrey about the importance of finding talented workers, and is positive about what he is seeing in Maine.
“I’m feeling better and better about Maine in that regard,” Burns said. “In greater Portland, I see quarter-to-quarter increases in experienced managerial talent and sector expertise, and hopefully that [trend] is rippling north.”
Burns said the study’s quarterly numbers for Maine reflect the venture capital environment in the state. “The reason you see great lumpiness quarter-to-quarter is that we don’t have that many companies that raise venture capital,” he said.
Burns said efforts like the recent Tech Walk and other innovation strategies in the state are long-term investments that will pay dividends. “We need to maintain and sustain them,” he said. “They will bring notice to the [innovation] community.”
He added that venture capital funds themselves also raised a lot of money in 2014. A report issued Jan. 12 by the National Venture Capital Association and Thomson Reuters found that U.S. venture capital firms raised $5.6 billion from 75 funds during the fourth quarter of 2014. That’s up 14% compared to the number of funds raised during the third quarter of 2014, but down 9% in dollar commitments. For the full year, venture firms raised $29.8 billion from 254 funds, up 69% in dollars over 2013 and the strongest annual period for fundraising dollars since 2007.
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