Venture capital funding to New England start-ups fell 10 percent in the first quarter of the year as investment firms put less money into fewer young companies.
Companies in New England collectively received $677 million during the quarter, compared with $754 million in the same period last year; moreover the number of software, biotechnology, and other fledgling companies that received money fell 20 percent to 88, according to the quarterly MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association, based on data provided by Thomson Reuters.
Nationally, funding by venture firms was down 6 percent to $5.8 billion, with some of the biggest deals going to computer and software companies instead of biotechnology and life science start-ups, which tend to require massive infusions of cash and have typically driven investments in Massachusetts.
“We are seeing a trend toward larger investments in less capital intensive businesses,” said Kevin Shaw, a partner in PricewaterhouseCoopers’ emerging company services practice in Boston.
For just the second time in eight quarters, software companies edged out biotech and medical device firms, and captured the bulk of the venture money being poured into Massachusetts. The biggest deal in New England was the $50 million funding of Waltham software company Actifio Inc. by Silicon Valley venture capitalists Technology Crossover Ventures and Andreessen Horowitz, which was cofounded by Internet pioneer Marc Andreessen, who helped start Netscape.
That investment sets the stage for Actifio to file to become a public company. It was founded by the local tech entrepreneur Ash Ashutosh in 2008.
Andreessen’s firm made its first investment in the area earlier this year when it led funding of DataGravity, a Nashua start-up that received $30 million in January. That deal was among the biggest in the region during the quarter, according to the MoneyTree Report.
The growing interest among venture capital firms in companies that develop complex data-management software and other business software was evident in the quarterly survey, and should translate to a boon for the Boston area, which is a hub for these kind of start-ups, said Jeff Bussgang of Flybridge Capital Partners of Boston.
“The shine is off many consumer-tech companies,” said Bussgang, whose firm backed Boston start-up DataXu Inc., a marketing analytics firm that raised about $30 million earlier this year. So far, that company has raised $66 million and could file to become a public company as early as 2014.
Flybridge was one of the most active firms during the quarter, making eight investments in such local companies as Plastiq, an online payments start-up that closed a $6 million round in February.
In the biotechnology sector, Cambridge start-up Jounce Therapeutics Inc., which develops cancer treatments, landed the biggest deal and had the second largest amount of investment of any local start-up during the quarter. It launched in February with $47 million in funding from local firm Third Rock Ventures LLC. In March, Third Rock closed a $516 million investment fund and has previously started 21 start-ups.
As usual, Silicon Valley companies received the vast majority of venture funding with a total of $2.2 billion in deals. The Boston area had the second highest level of funding, and New York came in third with $576 million in new deals.