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October 14, 2016

Venture capital deals, dollars soften in Q3

Photo / Peter Van Allen
Photo / Peter Van Allen
Maine Venture Fund's John Burns says venture capital deals typically decline in the third quarter because of vacations.

Venture capital deals and investment dollars both dropped in the third quarter of this year ended Sept. 30, partly due to a typical annual third-quarter cycle and to uncertainty over the presidential election.

"This quarter was one of the lowest since 2010," Tom Ciccolella, U.S. Venture Capital Market Leader at PricewaterhouseCoopers, told Mainebiz. He referenced data released Friday in the MoneyTree Report from PwC based on data from Thomson Reuters. "This is something to keep an eye on if it's down two quarters in a row."

In the second quarter of this year, dollars were up but the number of deals was down 5% over the first quarter of 2016.

Nationwide, venture capitalists invested $10.6 billion in the third quarter, down 58% over the second quarter. The 891 deals in the third quarter were down 6% over the prior quarter.

Notably, total venture dollars for startup companies declined 32% quarter-to-quarter, and the deal count was down 25% versus the second quarter.

John Burns, managing director of the Maine Venture Fund, said the third quarter decrease reflects "everybody going away [on vacation] in August." He said venture capitalists are raising a lot of funds but not yet doling them out.

"There's a lot of dry powder about to be deployed," he said. "I expect to see closings [new fundings for MVF] in the fourth quarter with some new companies." MVF had two exits in the third quarter, with Coast of Maine Organic Products Inc. of Portland and Look's Gourmet Food Co. of Whiting both taking on new investors.

Burns added that the larger funds being raised by venture capitalists forces them to put more money to work, which means more money into later-stage companies that may be close to an initial public offering instead of smaller amounts in startup companies.

That was the case with the only Maine company in the study that received money in the third quarter. Tilson Technology Management Inc., a Portland-based telecommunications company, raised all of a $3 million equity and debt offering. The company also had raised $600,000 in February 2015.

Other Maine companies filed with the Securities and Exchange Commission during the quarter to raise money, but didn't fit the Thomson Reuters criteria for the study, PwC said.

Tilson has been growing quickly, having been named the past six consecutive years to the Inc. 5000 List of America's Fastest-Growing Companies.

Read more

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