The Council for Entrepreneurial Development (CED), the largest and longest-running entrepreneurial network in the nation, today released a mid-year update to its annual Innovators Report. The report tracks technology-based entrepreneurial activity in North Carolina.
Today’s update details equity investments in North Carolina entrepreneurial companies during the first six months of 2015. The last full-year report covering all of 2014 was released in March.
The mid-year update released today shows that in the first half of 2015, 85 North Carolina entrepreneurial companies in the life science, technology, cleantech and advanced manufacturing and materials sectors collectively raised nearly $427 million in funding through 90 equity investment deals. This includes venture capital, angel investments and strategic investments.
Funding is up 70 percent from the first half of 2014, when companies raised nearly $250 million, and up more than 100 percent – more than double – the $205 million raised by mid-year 2013.
“This has been a blockbuster two quarters for North Carolina entrepreneurial companies – and the third quarter also looks strong,” said CED President and CEO Joan Siefert Rose. “Life science is on a roll, tech continues to hold its own, and the cleantech and advanced manufacturing and materials sectors have continued to attract investor notice as well.”
According to business research firm Mattermark, there was a 50 percent increase in year-over-year U.S. startup funding from Jan. 1 to Sept. 3 for 2015 versus 2014.
“So if our 70-percent-uptick trend continues — and from the early third quarter data, it looks as though it has — we’re beating the national average,” Rose said.
The report noted that the 90 total deals done in just the first half of 2015 beat the 87 deals done by mid-year 2014, and amounted to more than the total deals done in all four quarters of 2013, which came in at 85.
The 90 deals so far this year broke down this way by sector:
- Tech: 48 deals worth more than $114 million for 46 companies
- Life science: 26 deals worth more than $268 million for 26 companies
- Advanced manufacturing and materials: 10 deals worth more than $34 million for 9 companies
- Cleantech: 6 deals worth nearly $10 million for 4 companies
In terms of location, the Triangle continued to dominate. Seventy-four (74) of the 90 deals in 2015 were done with companies in the Triangle region. Raleigh companies had the most deals at 24, followed closely by 21 deals for Durham companies, and 14 deals for companies based in Research Triangle Park.
Rose said North Carolina has a number of companies that have moved well past the startup stage to what are known as “scaleups.”
“Scaleups are companies that are experiencing meaningful and sustained year-over-year growth,” she said. “They are likely to be adding new markets, making big hires, and looking beyond just the region for both customers and talent. These companies are at the tipping point to become major players in the local economy. We believe North Carolina can become a top five entrepreneurial hub in the nation if we do everything in our power to push these high-growth, high-impact companies over the finish line to success.”
CED’s proprietary Innovators Report tracks data not readily available elsewhere. CED leverages its deep relationships with companies and investors, and its partnerships with organizations and sources such as the National Venture Capital Association, the North Carolina Biotechnology Center, Ernst & Young and PricewaterhouseCoopers MoneyTree Report to gather, analyze and report these data. In addition to absolute numbers, the report uncovers trends in the entrepreneurial sector.
“There’s a real hunger for this kind of information,” Rose said. “CED has always been the organization that entrepreneurs come to for introductions to investors. So we have a natural leadership role to play in mapping these relationships, tracking investor outreach and collecting success stories. That’s why we’ve made an investment this year to transform our Innovators Report into a dynamic, digital interactive tool.”
Rose said the digital Innovators Report (www.cednc.org/innovatorsreport) contains all three years of data — from 2013 to 2015 — that CED has collected on funding, funders, deals, and exits. It allows for filtering across a number of useful categories, including year-over-year comparisons, sectors, locations, funding and investor types and many more.
“We will continue to build this as part of a new website we’re launching very soon, and we believe it will become the gold standard for bringing entrepreneurs and investors together in our community,” she added. “This will be a useful resource for those in the entrepreneurial community and those who are looking to support it.”
Below is a breakdown of how the nearly $427 million in total funding during the first six months of 2015 was distributed across the four sectors, and how 2015 mid-year funding compared to 2014 and 2013 mid-year funding.
Life science companies were the funding stars in the first half of 2015.
- Twenty-six (26) life science companies raised more than $268 million.
- That is an increase of more than 650 percent from the first half of 2014, when life science companies attracted more than $35 million.
- It is an increase of 124 percent from the first half of 2013, when life science companies attracted nearly $120 million.
- The two biggest life science deals were Novan Therapeutics, which received more than $39 million, and Sprout Pharmaceuticals, which received roughly $50 million. A large percentage of the funding for both deals was from high-net-worth individuals.
“This is interesting because we continue to see high-net-worth individuals and undisclosed investors driving a great deal of investment activity in North Carolina,” said Dhruv Patel, CED’s director of investor relations.
Overall, Patel said, life science companies are steadily attracting investment.
“Life science companies are on a roll this year,” he said. “In fact, we’ve seen a steady uptick in funding in the life science sector for five straight quarters. And the next quarter looks just as strong.”
Recently it was announced that Sprout Pharmaceuticals would be acquired by Valeant Pharmaceuticals for $1 billion, and Scioderm, Inc. was bought by Amicus Therapeutics for up to $947 million. Those numbers will be included in the third-quarter figures for 2015.
Tech companies raised less in the first two quarters of 2015 versus 2014, with 46 companies attracting more than $114 million.
- That is a decrease of roughly 37 percent from the first half of 2014, when tech companies attracted more than $182 million.
- It is an increase of more than 141 percent from the first half of 2013, when tech companies attracted more than $47 million.
- The highest-dollar-value deals for the tech sector were nCino, Inc. with over $29 million and Samanage at $16 million.
“Despite a dip, the reality is that the tech sector continues to be very strong,” Patel said. “You have to remember that in the comparable period last year, we had one deal valued at $100 million, so 2014 was just an extraordinary year. But 2015 is still coming in strong for tech.”
Furthermore, Patel said, there were more tech companies that received funding in the first half of this year — at 46 versus 39 at this time last year.
“We’re also one of only a few regions in the country with a very diverse set of entrepreneurial companies – with a strong roster for both life science and tech,” Patel said. “Both of these sectors continue to attract funding, so that’s a strong, positive trend.”
In the emerging sector of cleantech, 4 companies raised nearly $10 million in the first two quarters of 2015.
- That is an increase of nearly 20 percent from the first half of 2014, when cleantech companies attracted more than $8 million.
- It is an increase of more than 376 percent from the first half of 2013, when cleantech companies attracted more than $2 million.
- The top two cleantech deals were WasteZero, Inc. receiving more than $5.6 million, and International Thermodyne, Inc. receiving nearly $1.5 million.
Advanced Manufacturing and Materials
Nine (9) advanced manufacturing and materials companies attracted more than $34 million in the first half of 2015.
- That is an increase of 43 percent from the first half of 2014, when advanced manufacturing and materials companies attracted more than $24 million.
- It is a slight decrease of roughly 4 percent from the first half of 2013, when advanced manufacturing and materials companies attracted nearly $36 million.
- The top two advanced manufacturing and materials deals were Nomacorc receiving $22 million, and CalStar Products, Inc. receiving $10 million.
Said Patel: “Both the cleantech and advanced manufacturing and materials sectors are up this year over the same period last year, and both continued to grow and draw investor attention.”
|2015 Q1-Q2||2014 Q1-Q2||2013 Q1-Q2||2015 v. 2014
|2015 v. 2013
|$426,936,747||$249,833,304||$205,043,752||70.89% increase||108.22% increase|
|$268,336,928||$35,558,136||$119,765,762||654.64% increase||124.05% increase|
|$114,452,319||$182,096,369||$47,362,174||(37.15% decrease)||141.65% increase|
|$9,747,500||$8,137,175||$2,046,400||19.79% increase||376.32% increase|
Advanced Manufacturing and Materials
|$34,400,000||$24,041,624||$35,869,416||43.09% increase||(4.10% decrease)|
A Variety of Funding Sources
North Carolina companies attracted investments from 74 unique institutional funders in the first half of 2015.
Funding in the first two quarters of 2015 came from a variety of geographic locations, with:
- 24 investors coming from the Southeast, including 19 from North Carolina,
- 19 from the Northeast,
- and 16 from the West Coast.
There were 6 international investors that participated in deals. These investors are based in Germany, China, France, Israel and the United Kingdom. The remaining investors came from across the country.
The top state for investors was North Carolina with 19 investors, which includes 4 angel groups. North Carolina investors participated in 20 life science deals, which was nearly double the 11 deals they participated in for tech companies. The second-highest state for investors was California, with 15. California investors participated evenly in tech and life science deals, with 7 deals in each sector, plus one deal each in cleantech and advanced manufacturing and materials.
Massachusetts and New York are tied for third, with 8 investors from each state.
“The big take-away here is that North Carolina entrepreneurial companies are attracting investment from both of America’s two major funding hubs – the Northeast and California,” Patel said. “Last year California was the second-largest source of active investors by state, and we’re seeing that trend continue this year. And cities in the Northeast continue to invest in North Carolina. So there is money out there for North Carolina companies.”
There was one IPO, MaxPoint (MXPT), in the first half of 2015. Ten (10) entrepreneurial companies were involved in M&A activity. The two biggest M&A deals were:
- Salix Pharmaceuticals, which was acquired by Valeant Pharmaceuticals for $11 billion.
- Bronto Software, which was acquired by NetSuite, Inc. for $200 million.
In other M&A activity:
- Automated Insights was acquired by Vista Equity Partners and portfolio company STATS, LLC.
- Bioptigen, Inc. was acquired by Leica Microsysems, Inc.
- BlueStripe Software, Inc. was acquired by Microsoft.
- Implus Corporation was acquired by Berkshire Partners.
- KBI BioPharma, Inc. was acquired by the JSR Group, which includes CMIC Holdings Co., Ltd., and Innovation Network Corporation of Japan.
- Two Toasters was acquired by
- DARA BioSciences, Inc. merged with Midatech Pharma Plc.
- Regado Biosciences, Inc. and Tobria Therapeutics merged.