National Venture Capital Association

The outlook for venture-capital investment sounds similar to the prognostications for the rest of the economy in 2011: better than 2010. However, the recent survey by the National Venture Capital Association contains one worrisome sign for the Philadelphia region. Life sciences may no longer be ascendant. Attach your favorite reason for why that may be. The Food and Drug Administration is approving fewer new drugs than in the past. There is continuing uncertainty over how health-care reform will affect reimbursement for drugs and diagnostic tests.

Mirroring the frustratingly slow recovery in the broader economy, the venture capital sector cheered improved, if somewhat simmering, activity in the first quarter. Nationally, about $5.9 billion was invested in 736 deals in 2011's first three months, according to the PricewaterhouseCoopers / National Venture Capital Association MoneyTree Report, released Friday. In the fourth quarter, venture capital firms poured $5.6 billion into 827 deals. Based on data from Thomson Reuters , the MoneyTree Report tallied 22 deals for the Philadelphia region totaling $149.6 million for the first quarter.

The swoon may be over for the venture capital industry nationally with the number of deals and the amount invested rising in 2010 for the first time since 2007. But region- ally the action was more subdued. The PricewaterhouseCoopers/- National Venture Capital Association MoneyTree Report, released Friday, shows some improvement for an in- dustry that has never returned to the manic heights it reached during the days of Internet Bubble 1.0 in 2000. The question is: With nosebleed valuations of $50 billion for Facebook and $15 billion for Groupon being bandied about, are we in the middle of another Internet bubble?

The flow of venture capital into Philadelphia-area companies slowed in the last quarter, but venture capitalists, ever mindful of how their industry crashed in 2001, say this year is off to a solid start. A quarterly survey of venture investing, released this week, shows 15 local companies were funded in the first quarter, the same number as in the final three months last year. But the amount of money invested in the Philadelphia area declined to $63.18 million in the first three months of 2006, compared with $117.

Investors usually love growth, but venture capitalists, craving stability after their industry crashed in 2001, say they're happy it has neither grown nor shrunk substantially since. A quarterly survey of venture investing, released last week, should keep them cheerful. The survey reported what it has for three years: The amount of money invested by venture capital funds in small, innovative companies has plateaued. Nearly $5.8 billion was invested in 750 companies in the second quarter of this year, according to the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association.

Looking out of his office window in a Malvern corporate park, Paul L. Hallenbeck said it was the kind of neighborhood he had in mind last year as he pondered where to locate his new cancer-drug company, Neotropix Inc. Biotechnology company Gentara Corp. sits on one side and another, Cephalon Inc., soon will locate on the other, said Hallenbeck, a former top researcher at a Gaithersburg, Md., division of pharmaceutical firm Novartis AG. The Philadelphia region's multitude of life-sciences companies provides a supportive environment for a newcomer like Neotropix, Hallenbeck said.

Philadelphia area start-ups received $77.4 million in venture-capital financing in the third quarter, up 28.6 percent from the second quarter of the year, when $60.2 million was raised. But venture funding slipped 33 percent, compared with the third quarter of 2004, when 23 area firms attracted $116 million in funding, according to the MoneyTree Survey released today by PricewaterhouseCoopers, Thomson Venture Economics, and the National Venture Capital Association. For the first nine months of 2005, Philadelphia companies attracted $237.

Private investors in new technology companies, who were staggered by losses from the collapse of many Internet-based ventures just a few years ago, have regained their footing, largely by turning to health-care firms, an industry survey reports. These investors have been heartened by a surge in both initial public offerings and acquisitions. These two methods of selling companies in their portfolios had virtually dried up in recent years, discouraging investors from making commitments.

Venture-capital investing in the Philadelphia region reached its highest level since 2001 in the second quarter, driven by strong interest in biotechnology and life sciences. Two local companies, Tengion Inc. and Cardiokine Inc., were among the 10 biggest U.S. venture-capital investments across the country, receiving $50 million and $49.9 million, respectively, according to a quarterly survey released yesterday. Tengion, of King of Prussia, is developing replacement organs, starting with a bladder, using patients' own cells.

Vis.align Inc., of West Chester, could be a poster child for the state of the venture-capital industry. The information-technology company, built by private investors, is on the comeback trail from severe setbacks four years ago when the technology boom collapsed and it had to lay off hundreds of employees. It received $400,000 in the quarter ended Sept. 30, bringing to $9 million the amount it has raised over the last five years. Earlier this week, it was making a pitch at the Mid-Atlantic Venture Conference in Philadelphia for $5 million more, to buy smaller companies next year.

The Nutter administration is expected to announce Friday two initiatives, including a seed-capital fund aimed at supporting the city's growing entrepreneurial community. Through the Philadelphia Industrial Development Corp., the city intends to invest up to $3 million in a new "Startup PHL Seed Fund," which would be managed by an outside professional investment firm. That money would need to be matched by private investors at least dollar for dollar, according to a request for proposals that the city intends to issue.

Though I've pretty much given up hope of seeing an initial public offering of a Philadelphia-area company that's as eagerly anticipated as Groupon's , I still pore over the quarterly roundup of venture financings. If nothing else in these days of economic water-treading, it's a reminder that there are some who will put money where some entrepreneurs' dreams are. Let me emphasize "some," because venture-capital investing in the region remains solidly in second gear. Thirty-six area companies attracted $119.86 million during the recent soggy summer, according to the PricewaterhouseCoopers/National Venture Capital Association MoneyTree Report released Wednesday.

Billion-dollar deals may grab all the attention, but it's when smaller firms with unfamiliar names get snapped up that I start thinking the merger market may be popping. PricewaterhouseCoopers L.L.P. tallied 1,276 announced transactions with a total value of $454 billion during the first five months of 2011. Over the same period of 2010, there were 1,336 transactions worth $327 billion. Now that suggests fewer deals are getting done for more money. But for both years, more than 36 percent of the deals struck have been for less than $1 billion, or transactions involving smaller companies.

Mirroring the frustratingly slow recovery in the broader economy, the venture capital sector cheered improved, if somewhat simmering, activity in the first quarter. Nationally, about $5.9 billion was invested in 736 deals in 2011's first three months, according to the PricewaterhouseCoopers / National Venture Capital Association MoneyTree Report, released Friday. In the fourth quarter, venture capital firms poured $5.6 billion into 827 deals. Based on data from Thomson Reuters , the MoneyTree Report tallied 22 deals for the Philadelphia region totaling $149.6 million for the first quarter.

It would be hard to pick a worse time to try to raise a venture capital fund than 2010. Many institutional investors and wealthy individuals were shying away from a type of investing that simply had not produced the riches promised. Thomson Reuters and the National Venture Capital Association counted 157 funds that raised $12.3 billion in 2010. Both were well below the 237 funds and the $31.2 billion raised in 2007. Those able to raise money needed an unbeatable track record or a new approach.

The swoon may be over for the venture capital industry nationally with the number of deals and the amount invested rising in 2010 for the first time since 2007. But region- ally the action was more subdued. The PricewaterhouseCoopers/- National Venture Capital Association MoneyTree Report, released Friday, shows some improvement for an in- dustry that has never returned to the manic heights it reached during the days of Internet Bubble 1.0 in 2000. The question is: With nosebleed valuations of $50 billion for Facebook and $15 billion for Groupon being bandied about, are we in the middle of another Internet bubble?

The outlook for venture-capital investment sounds similar to the prognostications for the rest of the economy in 2011: better than 2010. However, the recent survey by the National Venture Capital Association contains one worrisome sign for the Philadelphia region. Life sciences may no longer be ascendant. Attach your favorite reason for why that may be. The Food and Drug Administration is approving fewer new drugs than in the past. There is continuing uncertainty over how health-care reform will affect reimbursement for drugs and diagnostic tests.

   While those who run venture-capital funds may get more attention, angel investors invest in far more start-ups in a given year.    The National Venture Capital Association cites data from Thomson Reuters that show 728 companies obtained their initial investments from venture funds in 2009 - a total of $3.3 billion invested.    In contrast, 57,225 businesses raised $17.6 billion from 259,480 individuals in 2009, according to the Center for Venture Research at the University of New Hampshire .    However, like the shrinking venture-capital industry, angel investment has also been declining, said the center.

As U.S. stock values fell and the cost of going public rose, small companies backed by venture-capital investors have stopped listing new shares on U.S. stock exchanges, an investors' trade group said. Start-up companies face a "capital markets crisis" after the number of initial public stock offerings, or IPOs, by venture-backed firms fell to zero in the last three months, according to the National Venture Capital Association. "This is the first time this has happened in 30 years" for which the association has tracked IPOs, said Emily Mendell, the group's Philadelphia-based vice president.

The slowing economy is taking a toll on venture-capital spending for young start-up companies, according to a quarterly survey. Venture capitalists were more cautious in the first quarter this year, investing $7.1 billion nationally in 922 deals. That was down 8.5 percent from the fourth quarter, when $7.8 billion was invested in 1,045 deals. In the Philadelphia area, deals and dollars were actually up in the first three months of this year - $173.4 million went to 21 companies, compared with $67.1 million and 13 deals in the fourth quarter of 2007.