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3 Mass. venture firms stand out in fund-raising

Three local investment firms that back young technology and life sciences start-ups lead the ranks of venture capital fund-raising so far this year, beating similar firms in the Silicon Valley and New York City.

Battery Ventures of Waltham, Third Rock Ventures of Boston, and Spark Capital of Boston were the top three in raising new funds from investors during the first quarter of 2013, in which overall investments to venture firms nationwide was $4.1 billion.

Massachusetts venture firms raised $1.88 billion collectively during the period, or almost half of all the money generated nationwide since the beginning of the year, according to figures released Monday by Thomson Reuters and the National Venture Capital Association.


“To the extent that these funds are investing in Massachusetts companies, have their tentacles in the laboratories, it bodes well for Massachusetts,” said John Taylor, head of research at the National Venture Capital Association, an industry group in Alexandria, Va.

Battery Ventures and Spark Capital, which both invest in software and Web companies, closed funds valued at $650 million and $450 million earlier this year. Third Rock closed a $516 million round — its largest ever — in March and will use the money to continue launching new life science companies.

Their success comes as the fund-raising climate market for venture firms generally has been tough. The market for initial public offerings of new companies, a major payoff day for venture firms, is still in recovery, and biotechnology and life science backers are showing signs of fatigue. In 2013, for example, just 35 firms have raised money compared with 53 in the same period of 2012, and the total raised was 14 percent less compared with that period, too.

“All indications are that we will see slightly less capital in many fewer hands,” said Taylor. In the life sciences industry, where it can take years to develop a new product, Taylor said, “the largest issue is just the sheer amount of capital to get a new drug out the door.”


The ongoing cautiousness in the market means many venture firms are waiting before they set out to raise more money, said Todd Dagres, general partner at Spark Capital, whose firm was an early investor in hot social media companies such as Twitter Inc. and Tumblr Inc. and expects to make about 30 investments with its new fund.

But even though the total dollars raised have been low so far this year, C.A. Webb, executive director of the New England Venture Capital Association, expects other local firms to announce big funds over the next year. “I don’t think it means that the year is lost by any means.”

Michael B. Farrell can be reached at michael.farrell@globe.com.