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VC investment in Minnesota inching up
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Minnesota appears to be out of “record low” territory when it comes to venture-capital investment in the state’s startups.
Seven Minnesota firms raised a combined $51 million in funding from venture-capital firms in the first three months of the year, according to In Private’s second-ever quarterly venture survey. That’s up significantly from the fourth quarter of 2010, when companies raised about $30 million. The fourth-quarter total comes from the MoneyTree report, which is compiled by PricewaterhouseCoopers and the National Venture Capital Association using data from Thomson Reuters. Numbers for the In Private survey come from my review of regulatory filings and company announcements from January through the end of March.
The official Money Tree data will be released at the end of the month. Both sets of data exclude angel investment-only rounds. (To check out some data on those deals, download a report on the state’s angel-investor tax credit program.)
It’s no secret that 2010 was a brutal year for venture investment in Minnesota startups. The amount of funds raised fell to the lowest level recorded by MoneyTree since the report began tracking data 15 years ago. The first quarter of last year was particularly rough. Only four companies raised funds during that period — the smallest number of deals recorded in the survey’s history.
At the start of 2011, conditions appear to be improving, if not dramatically. Also, medical-technology startups didn’t win as large a piece of the total venture capital pie. Medical device companies routinely win the majority of the venture investment that flows into the state. This time, those companies raised about $20.6 million, less than half the quarterly total.
The largest deal of the quarter went to Cima Nanotech Inc., which recently reported it raised about $15 million in equity financing from an unnamed alternative-asset management company. The St. Paul-based company makes conductive coatings for flat-panel displays and other products. The second-biggest deal went to NxThera Inc., a startup that’s developing medical devices to treat enlarged prostates. The Shoreview-based firm raised about $12.6 million. Ranking third is 8thBridge Inc., a social e-commerce company that pulled in a $10 million Series B round.
8thBridge wasn’t the only tech company to raise funds during the quarter. Others include Boost Inc., a Rochester-based firm that’s developed health-related mobile applications. The firm raised about $1.5 million in a round led by Arthur Ventures of North Dakota. Minneapolis-based Rapid.IO Inc., which is developing software companies can use to track and analyze IT data, raised about $1.1 million. Investors included Vesbridge Partners and El Dorado Ventures, which is based Menlo Park, Calif., but has an office in Minnetonka.
The other two deals recorded by In Private for the quarter are: Celleration Inc., a company that’s marketing wound-healing technology, raised $8 million, and RedBrick Health, a health-services firm, raised $5 million.
As with the first-ever In Private report, I’ll note that my numbers may differ from the Money Tree report, which is based on data reported by venture-capital firms. In particular, I wouldn’t be surprised if Cima Nanotech’s deal doesn’t show up, given that it doesn’t sound like its lead investor is a venture-capital firm.
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