Are investors willing to venture this storm?
State sees sharp drop in funding
Over the years, Harry Rein has come up with a simple litmus test for investments in technology startups by his Foundation Medical Partners – if an entrepreneur says he will make Rein rich, it is a good bet that founder will walk away from Foundation’s office the poorer for it.
If the latest figures are any indication, equally skeptical venture capitalists are yanking the reins on local investments – for richer or poorer.
Nutmeg State companies raised a scant $15 million in venture capital in the fourth quarter and $127 million for all 2008, according to the MoneyTree survey by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Stamford-based Thomson Reuters. It was the second lowest quarterly total since 1996 and the lowest annual total since 1998, a worrisome trend for state officials hoping to promote the formation of fast-growing employers down the road.
Perhaps incredibly, the state-backed Connecticut Innovations Inc. was the only venture capital group to stage multiple investments in Connecticut in the fourth quarter.
Fairfield County is home to several private equity and venture capital companies, including Canaan Partners, a Westport firm co-founded by Rein who subsequently left to start up Foundation Medical Partners in Norwalk.
Canaan Partners was one of the dozen most active venture capital firms in the nation last year with 11 deals, none of them in a Connecticut company. Both Canaan Partners and its Westport neighbor Oak Investment Partners were among the 30 most-active venture companies nationally in 2008.
Venture capitalists invested $28.3 billion nationally in just over 3,800 deals in 2008, down 8 percent and 4 percent respectively and marking the first decline in annual investments since 2003.
Investments in the fourth quarter of 2008 totaled $5.4 billion in nearly 820 deals, down 26 percent from the third quarter and the lowest amount of dollars invested since the first quarter of 2005.
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