In a sign that investment markets could be thawing in the state, venture capitalists injected more than $127 million in Connecticut companies during the first quarter of 2010, a 76 percent increase over the prior year period.
That sum represents 15 deals, compared to six deals for $72 million in the first quarter of 2009, according to the latest MoneyTree Report, a joint effort of PricewaterhouseCoopers and the National Venture Capital Association.
The $127 million investment total also was a 577 percent jump from the fourth quarter of 2009, when 11 deals totaled $18.8 million.
Nationwide, venture capitalists invested $4.7 billion in 681 deals during the first quarter, a 9 percent decline from the fourth quarter of 2009.
Connecticut’s results were driven up by one blockbuster deal. Stamford-based Pierpont Securities LLC, received an $85 million investment to expand its brokerage firm that deals in government securities.
The only Greater Hartford firm to receive funding in the quarter was Canton-based CardStar Inc., a software developer that received $1 million for expansion. CardStar has created a Smartphone application that allows consumers to store and retrieve loyalty, reward and club membership cards that can be scanned directly from the screen at most merchants.
Eric Dale, head of Robinson & Cole’s business transactions group, said the numbers are a sign that investors are beginning to come back to the market.
“This is an indicator of a healthy investment environment,” Dale said. “It appears that the market has turned, and the top of the funnel is becoming more robust, which is likely to lead to more deals getting done.”
The stabilization in the stock market and overall economy is leading to more healthy deal flow, Dale said. Investors and entrepreneurs are also beginning to see eye-to-eye on valuations, something that wasn’t happening when the market tumbled in late 2008 and 2009.
“Entrepreneurs expectations about the value of their companies are adjusting to the new reality,” Dale said.
Greenwich-based General Atlantic LLC and Stone Point Capital LLC, along with Rocky Hill-based Next Generation Ventures, were the biggest investors — all involved in deals over $10 million.
Nationally, the life sciences sector continues to be the No. 1 sector for venture capital investing, raking in $1.3 billion from 160 deals during the quarter.
Mark Heesen, president of the National Venture Capital Association, said he expects venture investment to increase moderately through the rest of this year.
“Investments in clean technology and life sciences will likely drive the overall levels, but likely not far past the $20 billion mark for the year.”
Dale did note that while the numbers indicate positive growth, the huge investment increase could be a timing issue. Deals could have been put on hold late last year and then completed in the first quarter of 2010, which led to the sharp increase. But if the second quarter shows another meaningful uptick in investment activity, it will confirm that the “market has bottomed out and that investors are opening their wallets again,” Dale said.
The financial services sector saw the most funding in the quarter, spurred by the Pierpont Securities deal. Software and biotechnology received the next largest chunks of cash, raking in $19 million and $11.7 million respectively.
Five other industries — including industrial/energy, media and entertainment, and telecommunications — also received funding in the quarter.
Connecticut Innovations, the state’s quasi-public authority responsible for technology investing, was involved in five deals totaling nearly $3 million.
“However, we still anticipate investment levels to mirror that of the mid-1990’s as many venture firms will be focused on fundraising this year,” Heesen said.
