Local investments slow in second quarter, report finds

The Washington region saw venture capital investments slow during the second quarter of the year, according to a report published last week, as investors funneled money into fewer local companies.

Investors sank $206.7 million into 33 companies in the Washington region — defined as Maryland, Virginia, West Virginia and the District — during the second quarter.

That represents a 42 percent decline in total dollars compared to the second quarter of 2011, when investors ponied up nearly $358 million. Forty-six firms received funding during that quarter.

The figures were released last week in a quarterly report published by PricewaterhouseCoopers and the National Venture Capital Association. Thomson Reuters provided the data.

Software outpaced every other sector in both total deals and dollars for the quarter with 10 companies claiming $131.9 million — nearly 64 percent of all local investment dollars.

McLean-based NextNav Holdings was responsible for a sizeable portion of that figure, raising $50.5 million from Columbia Capital and other undisclosed firms. The company develops global positioning software that can be used indoors and in densely developed areas.

Dulles-based Echo360, a software firm that converts college lectures into digital videos, garnered the second-largest amount at $30.9 million. Investors based in the mid-Atlantic region financed the deal, including Charlottesville’s Court Square Ventures and District-based Revolution, a firm helmed by former AOL executives Steve Case and Ted Leonsis.

In prior quarters, investment deals have been spread across a broader swath of industries. Biotechnology accounted for the second-highest amount in the second quarter, a distant $27.3 million, followed by makers of medical equipment and devices at $15.9 million.

The quarter’s other top recipients included Blacksburg biotech firm Intrexon ($25 million), Reston-based Near Infinity ($17 million) and Martinsburg-based Geostellar ($13.9 million).

But the lower end of the investment spectrum this quarter may be just as notable as the top. Eight companies raised either $50,000 or $100,000 — all financed by the Herndon-based Center for Innovative Technology.

CIT has been on an investment spree this fiscal year after the Virginia General Assembly increased its investment pool to $6 million. The money is designated specifically for firms headquartered in the Commonwealth.

“We’re investing in what we believe will be high-growth, sustainable companies and we believe if we invest in those ... new jobs will be created and new revenue streams will be realized for the state,” Tom Weithman, the program’s managing director and vice president, said in a March interview.

While it’s difficult to glean meaningful trends from any single quarter, investor confidence is often tied to the national market for buyouts, public offerings and other “exits.” A hike in acquisitions or initial public offerings means financiers are able to cash out of older investments and recycle that money into new deals.

Last week’s findings follow another report released by NVCA and Thomson Reuters earlier this month that shows venture-backed companies nationwide were responsible for 11 initial public offerings and 102 mergers and acquisitions during the second quarter. That’s half as many IPOs compared to the second quarter of 2011, and a mere six more mergers and acquisitions.

Steven Overly covers the business of technology, biotechnology and venture capital in the Washington region for The Washington Post and its weekly Capital Business publication. In that capacity, he has written about start-up struggles, investment trends and major drug discoveries.
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