🔒Tax credit shift boosts 2015 venture investment

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Connecticut had another strong year in venture capital funding in 2015, although deal volume was down from a year earlier.

Venture capitalists injected $446.7 million in Connecticut companies last year, down from $563.9 million in 2014. Even still, 2015 represented the fifth highest annual investment total in the last 21 years.

Overall, 57 Connecticut companies received funding during the year, compared to 56 in 2014, according to the latest MoneyTree report, a joint effort of PricewaterhouseCoopers and the National Venture Capital Association (NVCA), using data from Thomson Reuters.

Nationally, venture investment hit $58.8 billion in 2015, the second highest annual investment total in the last 20 years.

Eric Kogan, a partner and chair of the business transaction group at law firm Robinson + Cole, which has offices in Hartford, New London and Stamford, said many of the Connecticut deals are fueling startup ventures.

Most active venture capitalist

“Companies benefitting most from VC activity are those in technology, software and healthcare technology [industries],” said Kogan, who added that Connecticut Innovations, the state's quasi-public venture capital arm, was the most active investor during the year.

Last year's venture capital activity, Kogan said, was helped partly by changes to the state's Connecticut Insurance Reinvestment Fund, which was renamed the Invest CT Fund. It provides tax credits to insurers that invest in Connecticut businesses through approved fund managers. In 2015, state lawmakers boosted the aggregate amount of reinvestment tax credits available to $350 million from $200 million, with the majority of funding designated for companies with fewer than 250 employees and less than $10 million in revenue. According to Kogan, the extra funding was completely drawn down.

“Some VC groups that are highly active in this fund include Advantage Ironwood, Stonehendge Capital and Enhanced Capital,” Kogan said. “Most participating companies are early stage, with some later stage, focused on areas like emerging innovation and green technology.”

Products to market

Farmington-based Avitus Orthopaedics Inc. raised at least $350,000 in three separate venture deals last year. In 2016, the company plans to launch technology that will allow surgeons to harvest autologous bone graft (autograft) using a minimally invasive approach. Autograft is the soft bone found within the hard white outer shell of most bones, that surgeons often use in another part of the body that requires fusion or healing.

“In a medical device environment, often there are large upfront costs to get a product to market,” said Maxim Budyansky, Avitus' chief technology officer and co-founder. “We needed to survive to get to that point using VC funds and grants. For early stage companies it's critical to get to the point of a viable business model.”

Avitus was founded in 2011 and is “finally able to launch [its product] and see the impact we can have on patients,” Budyansky said.

VC technology help

Another company launching new technology with the help of VC funding is Manchester-based Woven Orthopedic Technologies. The medical device firm will be introducing a product designed to help orthopedic screws better adhere to bones.

In 2015, the company raised $6.6 million in capital from a consortium of investors, which has been used to invest in product development and meet stringent regulatory requirements needed to bring their product to market, said Brandon Bendes, Woven's vice president of strategy and finance.

The company has raised additional funds this year.

Woven is now preparing to launch its product in Europe in late 2016, and in the U.S. in 2017. Its plastic woven tube, which sits between a screw and hole in the bone, aims to reduce the human and economic costs of complications caused by inadequate screw fixation.

Kogan said the continued VC-backed growth in Connecticut is helping the state attract more startups.

“We have the makings of a robust emerging companies investor ecosystem right here in Connecticut,” he said. “Between Connecticut Innovations and other state innovation programs, it's a good place to be.”

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