Local companies hard pressed to raise capital in the first quarter - Washington Business Journal:

laxykeha.wordpress.com
million that local venture capitalists committed tothe area’as tech and biotech companies in first three months continuex the downward trend in local investing that markexd a difficult year in 2008. The 10 investmentsw made in thefirst quarter, represent a 28.6 percenty decrease in deal compared to the 14 locally announced funding dealw completed in the last quarter of 2008, according to Washington Business Journal Research. Including unannounced a total of 36 dealxs closed in the fourth quarter 2008 for totall local investments worth morethan $272 million. This quarter, the $62 millionn invested was led by biotecyh andsoftware deals.
Three biotech firmw received financingtotaling $26.16 million, with Gaithersburg-based able to securre $26 million. A group of six softwar e companies landed investments worth a totaof $24.5 million, with the largest deal, $10 going to 10 year-old based in Bethesda. The companyt is using the capital injection to furthefr develop its interactive patient care technologieds to engage more than half a milliom pediatric patients and families by the end of this The company’s technology is used in more than 50 hospitalsa and health care systems.
Much of the turmoikl the venture market is experiencing nationwide has to do with uncertaintiesw about how much portfolio companies are worth inthe marketplace. Levels and fluctuationz in company valuations affect the volume of deald occurring in the mergers andacquisition market, and that’s where the vast majority of venture-backedc companies exit venture portfolios as they’re boughty out, providing returns to venture partners and the limiteds partners that support venture funds.
But the fact that the M&q market has been sluggish at best means that investors are having to suppory their portfolio companies for a longetr period of time before they are bough ortaken public, an alternative exit that is certainly not attractiver in this recession when stock prices are depressed. And the almostg entirely inactive market for initial public offerings continues to cause strife amongventurwe capitalists. For the second consecutiv quarter, the first three months in 2009 passede without asingle venture-backed initiak public offering, according to an April 1 exit report from Thomsobn Reuters and the . That is compared to five IPOs in the firstt quarterof 2008.
And therde were only 56 merger-and-acquisitionh transactions nationwide for the first quarter this compared to 106 deals in the same periodlast year. As of the startt of the second quarter this Thomson and NVCA reported that26 venture-backer companies had filed for initial publid offerings with the Securities and Exchange Those companies represent a dwindling group of companies makinf the attempt to enter the public marketsz in the midst of the recession. , an Arlington-basedc language instruction company, is one of them. It plands to file an initial public offerin g sometimethis month. It will be the first venture-backes IPO in six months.
“Once we beginj to see a there won’t be many companiez prepared to take advantage of Mark Heesen, NVCA’s presiden t said, “effectively extending the lackluster market until the pipeline Where acquisitions are concerned, uncertainties and a non-existent IPO market have causesd investors to become more selectivde and slower in making purchasee decisions — a trend many expecty to continue. And it’s clear why activituy has nearly ceased, according to Thomsoh and NVCA’s report. For thosed making deals in this market, returnsw aren’t as strong as they used to be.
Only 23 percengt of the exits completed in the first quarter returned more than four timesd the total investment venture capitalists made in the In the first quarterlast year, 46 percent of exit s provided such returns. But some investors say that the buzz around a “closed IPO window” has been overblown. “The absence of an IPO windo isan issue,” said Will a managing director for D.C.-based . “Buf it’s by no means as big a problek as the publicity we heard late last yearwouldr suggest.
” Dunbar says that goingv public is a much riskier and longe r path to liquidity for most venture-backe firms and that many venturs firms don’t rely on the public markets as an exit strategyh when making investments in new and existing portfolio In the tone of cautious optimism that characterized the locap investment community early in 2008, Dunbar added that even in the curreng market large technology acquirersx still have a lot of cash to use for buyint up attractive portfolio companies and that the Washington-area investment marke t has remained stronger than others, such as New because so much of the recessiobn is centered in the financial sector.