Md. is 12th in venture-capital funding

26 companies received $66 million in 2nd quarter

July 27, 2005|By William Patalon III | William Patalon III,SUN STAFF

Maryland ranked 12th among the 50 states for venture-funding deals in the second quarter, with 26 companies receiving a total of $66.1 million in financing, according to an industry report released yesterday.

That's about two-thirds more than the $39.9 million in venture capital funding that 14 Maryland companies received during this year's first quarter, when the state ranked 17th nationally. And it's better than the second quarter last year, when the state also ranked 17th, said the MoneyTree Survey, released jointly by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Venture Economics.

In the second quarter of last year, 20 Maryland companies received $60.3 million, the report showed.

"We're seeing a lot more deal flow" in the state and surrounding region, reflecting a growing recognition of the innovation and investment opportunities present here, said E. Rogers "Roger" Novak, co-founder of the Bethesda-based Novak Biddle Venture Partners. "I am very bullish on Maryland."

Nationwide, venture capitalists invested $5.8 billion in 750 companies during the second quarter. That total value eclipsed the $4.9 billion invested in the first quarter, but was slightly below the $6.1 billion invested a year earlier, according to the MoneyTree report.

Even with its No. 12 ranking, Maryland lagged far behind California's $2.8 billion and Massachusetts' $539.6 million, though all count strong biotech sectors. Also ahead of Maryland were New York, New Jersey, Texas, Washington state, Colorado, North Carolina, Virginia, Utah and Minnesota.

For a ranking such as this, however, Novak and experts such as Baltimore entrepreneur Mark J. Wesker contend it would be more proper to look at statistics for the region of Baltimore, Washington and Northern Virginia. Viewed from that vantage point, the region stacks up well: The $211.4 million in venture capital funding companies in the "DC/Metroplex" received during the second quarter would have ranked this area fifth, behind New Jersey ($360.75 million) and ahead of Texas ($204.5 million), MoneyTree statistics show.

"As entrepreneurs, we look at things regionally," said Wesker, founder of Artifact Software Inc., a Baltimore-based firm that this month landed $5 million in first-round venture financing. "We don't make distinctions between Baltimore, Washington, D.C., or Northern Virginia."

A key to the long-term fortunes of the state and the region will depend largely on how well venture funds and entrepreneurs fare in creating new companies, since the startups of today will turn into the growing employers of tomorrow, Novak said. The outlook there is upbeat, since one of Maryland's strengths is making money available to startups or early-stage ventures, he said.

A survey in this month's issue of Entrepreneur magazine said that Maryland has four organizations that are national leaders in early-stage Venure capital funding - the state-backed Maryland Technology Development Corp. and Maryland Department of Business and Economic Development and private venture firms New Enterprise Associates of Baltimore and Novak Biddle.

Novak believes that Maryland should launch a special initiative aimed at creating a single office that could link startup companies with the resources they need to get started - including public-and-private funding, office space, purchasing cooperatives, and even training-and-development programs.

"I'd love to see the state's plan for [encouraging] real early stage development," Novak said. "We have a lot already," but would really stand to gain a competitive edge if such a program was made a state priority.

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