Connecticut startup companies attracted $157.6 million in venture capital funding in 2012, a slight increase over 2011, but an amount that doesn’t indicate that investors were overly bullish last year.
The funding level was, however, 18 percent greater than the $133. 2 million in total venture vending in 2010, according to the latest MoneyTree report, a joint effort of PricewaterhouseCoopers and the National Venture Capital Association.
Nationally, venture capitalists invested $26.5 billion in 3,698 deals in 2012, a decrease of 10 percent in dollars and a 6 percent decline in deals over the prior year.
Double-digit decreases in investment dollars across most industries, specifically the traditionally capital-intensive clean technology and life sciences sectors, offset the increases seen in the software sector in 2012, the MoneyTree report said. Additionally, the stage of investment shifted from seed to early stage in 2012 as venture capitalists began engaging with companies later in their life cycle than in previous years.
Connecticut ranks in the middle of the pack in attracting venture capital, which is the lifeblood to jumpstarting innovative economies, something the state is trying to do with significant investments in bioscience and technology.
Connecticut’s $157.6 million in venture capital funding last year, ranked the state 20th out of 50 states and the District of Columbia in terms of total funding. California, led by Silicon Valley, topped the list by attracting $14.1 billion, followed by Massachusetts and New York, which raked in $3 billion and $1.9 billion respectively.
Based on population, however, Connecticut’s ranking improves. With about 3.6 million residents, Connecticut’s 2012 venture funding breaks down to $43.89 of funding per resident.
That is 12th best in the country, with Massachusetts and California leading the way with funding totals of $456.46 and $368.64 per resident.
So, what do the numbers mean? Connecticut is nowhere close to competing with the big boys in pulling the purse strings of venture capitalists. But for its small size, Connecticut does hold its own, especially when competing with states that have a similar number of residents.
“In an environment where we are competing with other emerging regions like Arizona and Texas, I think Connecticut has the chops in terms of intellectual property and talent,” said Matthew Nemerson, president and CEO of the Connecticut Technology Council. “The question is whether growth is here beyond the early stage.”
Nemerson said he admits Connecticut is not showing huge venture capital numbers, but he thinks the state is gaining traction. Also, he says Connecticut’s numbers aren’t a great indicator of trends since they can be heavily influenced — either negatively and positively — by a few deals.
In 2012, for example, there were 52 deals in Connecticut, compared to 56 in 2011. But Connecticut’s venture numbers were driven up by three major investments.
New Haven’s Kolltan Pharmaceuticals, which is developing therapies to battle cancerous tumors in humans, scored the biggest deal with a $25 million investment, followed Odyssey Logistics and Technology Corp. of Danbury and New Haven’s Rib-X Pharmaceuticals Inc., which brought in $20.7 million and $18.6 million respectively.
“In Connecticut, unlike California and Boston, trying to find trends with small numbers is difficult to do,” Nemerson said.
Still, Nemerson said he optimistic about the state’s future, especially with the aggressive investments being made to stir more technology and innovation.
That includes Gov. Dannel P. Malloy’s Bioscience Connecticut initiative, the arrival of Jackson Laboratory in Farmington, and the creation of innovation ecosystems, which will provide resources to startup companies.
Malloy also recently proposed the creation of a $200 million bioscience fund to aid start up businesses and $1.5 billion to fund science, technology, engineering, and math programs at UConn. With that momentum, Nemerson said Connecticut should shoot for doubling its venture capital numbers over the next few years.
The key, of course, is to not only create an economy that spurs startups, but also to keep those successful and growing firms in the state, Nemerson said.
In a good potential sign, Connecticut biotechnology companies took home the largest swath of cash in 2012, attracting $79.3 million in investments. That was followed by the industrial/energy, software, and medical devices industries, which attracted $25.3 million, $24. 1 million, and $16.1 million, respectively.
On the investor side, Connecticut Innovations (CI), the state’s quasi-public investment arm, had its hand in most of the Connecticut deals. CI invested about $25 million during its most recent fiscal year, which leveraged about $50 million in private capital.
