Software & Internet VC for Q4 2011 in Philly area not too strong

Tom Paine

Fourth Quarter 2011 VC investment in the Greater Philadelphia region totaled $132.7 million involving 30 deals, according to the MoneyTree report issued today by PricewaterhouseCoopers and the National Venture Capital Association based on Thomson Reuters data. For the full year 2011, VCs invested $492.2 million in 122 deals here. Although the total investment represented 8% growth over 2010, it is still well below levels that prevailed for several years prior to 2009, and did not grow as much as investment nationally.

Looking at the VC picture for Internet, software and digital technologies in the region reveals larger concerns. In the fourth quarter, the four largest investments totaling $103 million were for companies with food processing and water purification technologies and for Pharma startups. Much less than the remaining $30 million went to Internet or software ventures. In fact, the largest Internet investment listed, slightly more than $4 million, was for SolveMedia, a company that's actually New York-based now though it still has a Philly office. The next largest was probably PHD Virtual Technologies; though the amount of its recent round is not shown in the MoneyTree report, CEO Thomas Charlton told me in a December interview it was for $4 million. DuckDuckGo raise $3 million, Sidecar (formerly Snipi) raised $2.52 million and Quik Inc of Blue Bell raised $2 million. One company I hadn't heard about before is LogoGarden of Wilmington, a site that helps people create custom logos, which was reported to have raised $2 million.

The remaining investments reported were all for well under $1 million, many of which were included in Ben Franklin Technology Partners' recent funding announcement.

The MoneyTree report may not capture some important dynamics, particularly in the seed/angel investment area. Although MoneyTree reports a decline of 48% in seed funding by VCs nationwide in 2011, many angels and private investors are not part of the reporting system used to collect this data, and their paticipation may not be fully reflected.

Nationwide, in 2011 venture capitalists invested $28.4 billion in 3,673 deals, an increase of 22% in dollars and 4% in deals, according to MoneyTree. One factor that could impact future investment is that VC firms raised $10 billion less than they invested last year, a pace that obviously can't continue forever. Further cuts in Ben Franklin's 2012-2013 funding could also have a negative impact locally.

Dow Jones VentureSource released its own set of numbers today released its own set of numbers today, which are somewhat different.



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