VENTURE INVESTING UP 35% IN STATE; $250 MILLION TOTAL FOR 2006 MOST IN FIVE YEARS, PRICEWATERHOUSECOOPERS SAYS
BYLINE: JANICE PODSADA; Courant Staff Writer
Last year, venture capitalists invested nearly $250 million in Connecticut companies, a 35 percent increase from 2005, when investments for the year totaled $185 million, according to a new survey.
``At approximately $250 million, this is the highest level of venture-backed funding since 2001,'' said Owen Davis, co-chairman of PricewaterhouseCoopers' venture capital/private equity practice in Connecticut and New York's Westchester County.
After 2001, the nation's economy retracted because of several factors, including the bursting of the technology bubble and the terrorist attacks of Sept. 11, 2001.
In 2002, Connecticut's venture capital investments dwindled to $176.7 million from $536 million in 2001.
In 2006, the biggest beneficiaries of venture capital were Connecticut's life sciences companies, which received nine investments totaling almost $142 million, double the $71 million that sector received in 2005, according to the new MoneyTree survey of venture capital.
Life sciences companies also increased their share of total venture funds, from 50 percent in 2005 to 57 percent in 2006, the report said.
The MoneyTree survey was prepared by PricewaterhouseCoopers and the National Venture Capital Association, based on data that Thomson Financial provided.
``This demonstrates that venture-backed life sciences companies in Connecticut are maturing and should be making stronger contributions to the Connecticut economy in the future,'' Davis said.
Rib-X Pharmaceuticals Inc., a New Haven developer of antibiotics, received the largest single investment for 2006 -- $50 million in the second quarter of 2006, said Susan Poole, a spokeswoman for PricewaterhouseCoopers LLP.
Axiom Venture Partners LP of Hartford participated in that deal.
Connecticut software companies received the second-largest amount in 2006, $28.9 million invested in six companies.
The semiconductor industry ranked third because of a second-quarter $25 million investment in one company, CiDRA Corp., a Wallingford designer and manufacturer of optical components and modules for networks.
Investors in that deal included Axiom and Connecticut Innovations Inc.
Although the number of investments in 2006 was almost equal to 2005 -- 31 in 2006, vs. 30 in 2005 -- the average size of a deal increased by about $2 million, from $6.1 million in 2005 to $8.1 million in 2006.
In the fourth quarter of 2006, venture capitalists distributed $21.7 million to five Connecticut companies. The largest single amount went to LifeMed Media Inc., a privately owned multimedia company in Westport.
The 2-year-old firm received $9.5 million. LifeMed is the parent company of dLife -- For Your Diabetes Life! -- which serves diabetics and their families with its website, radio ads, newsletters and nationally televised program.
Foundation Source Philanthropic Services Inc., a Fairfield company that provides support services for private foundations, received $6.7 million.
Evolution Benefits Inc. of Avon, which helps manage employee benefits programs through pre-paid benefits cards, received $3 million.
Other fourth-quarter investments included:
Shoreline Solutions, a Wallingford company that designs, produces and personalizes ATM cards, received an undisclosed amount. Because of the confidential nature of some investments, the amount was not disclosed, Poole said.
TwoFish Media, based in Willington, which provides CD duplication services, got $2.5 million.
Overall, the state is seeing a lot of activity, said Peter V. Longo, chief investment officer at Connecticut Innovations Inc., the state's technology investment arm in Rocky Hill.
``The investments, in both quality and quantity, are the strongest I've seen since pre-2000. We're really encouraged,'' Longo said. ``We're working with companies that want to come to Connecticut, as well as companies that are being started here.''
Contact Janice Podsada at jpodsada@courant.com.