Investors hit the brakes
Even as entrepreneurs dangled newfangled technologies and services for venture capitalists last week in Stamford, a new report showed that venture investment in Connecticut scraped to historic lows in the first quarter.
An initial release of PricewaterhouseCoopers”™ quarterly MoneyTree report suggested that Connecticut companies raised $36 million in venture capital in the first quarter, but that appears to be an artificially high figure due to $14 million attributed to a company called Pequot EnzymeRx Investment Corp. that listed a Westport headquarters.
The listing apparently refers to an investment by Westport-based Pequot Capital Management in EnzymeRx L.L.C., a Paramus, N.J., startup that is developing a treatment for gout.
EnzymeRx founder Tony Fiorino said the company plans to keep its headquarters in Paramus.
Excluding the EnzymeRx investment, Connecticut companies raised $22 million according to the quarterly MoneyTree report published by PricewaterhouseCoopers and the National Venture Capital Association, which relies on data from Stamford-based Thomson Financial.
That is down from $75 million in the fourth quarter and is the second-lowest total of the past decade, besting only the third quarter of 2004 when four Connecticut companies raised a mere $10 million.
Overall, venture investment in Connecticut diverged sharply from the national figures, with countrywide investment still producing the fifth highest amount since 2001, or $7.1 billion, despite dropping 9 percent from the fourth quarter of 2007.
While Connecticut produced a small fraction of that activity, some technology outposts have produced stellar results in the past decade. From $32 million in 1997, Pittsburgh-area companies received nearly $200 million in venture capital last year. New Mexico and the Seattle region have also enjoyed exponential growth in venture investment during that period.
Connecticut companies, by contrast, raised only slightly less venture capital in 1997 than they did in 2007, when they registered approximately nearly $280 million.
“There are certainly economic headwinds out there if you look at the economy, but ”¦ I typically don”™t draw too many conclusions from a single quarter,” said Owen Davis, co-chairman of PricewaterhouseCoopers”™ venture capital and private equity practice in Connecticut. “One of the interesting things in Connecticut last year was that there was a tremendous amount of investment in early-stage companies, which was not a trend in the previous years.”
NVCA indicated early-stage investments dropped 17 percent nationally in the first quarter from the fourth quarter last year. That could reflect what has been a difficult market for initial public offerings of stock and mergers, as venture capitalists horde cash to support relatively mature portfolio companies.
Against that backdrop, entrepreneurs gathered in Stamford last week at the annual Crossroads Venture Fair, which provides them a forum to air their business plans in hopes of raising cash from venture capitalists. The conference is sponsored by the Fairfield-based Connecticut Venture Group, which bills it as the largest such gathering in the Northeast.
Meanwhile, some local companies have plowed ahead on their own. Norwalk-based TriHealix Inc. raised $7 million in funding during the quarter, as it develops an alternative credit-card payment system for retailers. Shelton-based Oil Purification Systems Inc. registered $3.5 million in funding for its vehicle-oil cleansing system. And College Wiki, a Westport startup, received $2 million as it develops wikis for specific colleges, or Web sites that allow users to contribute content on various topics.
More recently, Shelton-based HealthPlanOne L.L.C. raised $6.5 million in initial funding last month, as it develops an online health insurance quotation engine. The company”™s chief executive officer is Bill Stapleton, who previously was a Health Net Inc. executive managing the company”™s Medicaid program in Connecticut and New Jersey.