CB Insights’ data is showing that Massachusetts early stage fund raising, as a $ volume, really dropped in the past quarter.
Massachusetts Funding Plummets – The state sees a five quarter low dropping below half a billion dollars of funding while dealflow stays consistent. Healthcare remains dominant but loses some share of dollars and deals to internet and software. Portion of state’s deals going to seed deals significantly less than New York and California.
While the number of deals in the state remains the same, the dollar volume is way, way off. A chart from CB Insights’ report:
Basically, it looks like the size of dollars invested by deal has dropped in half since Q1 (~$10mm per deal vs ~$5mm per deal.)
It also seems like NYC has surpassed Boston for early stage internet deals. This is actually a pretty big thing. I’m not against NYC doing well, and also postulate that there is some positive spill over to Boston for a good funding environment in NYC – in fact, OfficeDrop‘s funding source in NYC based.
But what is prompting the drop in Boston, while both CA and NYC have gone up? What is going on?
Some potential ideas on the funding situation in Massachusetts
Healthcare seems to have been hit hard this quarter. Healthcare has been a very important part of the Boston venture scene, and also tends to have higher average deal size. Over the past three quarters, for example, the average healthcare deal size has been about $10mm per deal, vs about $6mm for internet investments. See page 41 of the report to see some charts on this in Mass.
Lack of big deals. Other regions have some serious Series C deals – that have lots of capital invested, thus dramatically popping the average + total deal size. Did Mass have any really big later stage deals?
Lack of clean tech. “energy and utilities” are 7% of deal volume in California – but only 3% in Mass. These tend to be bigger deals than internet. Did Massachusetts miss the cleantech boom?
Are Mass companies too quiet? For example, when my company raised funding last year we didn’t really let any of the data providers know, do a press release, or even a blog post. I know of several other MA companies that have raised $500k+ that haven’t announced it. Maybe fund raising isn’t enough of a status thing in MA?
Is seed funding too popular in Mass? This chart is from page 42.
Actually, now that I compare the above chart to California, I think the answer is no. CA not only has more seed deals, but also has more Series D+ deals. Maybe the real idea is that MA companies get sold before needing huge capital raises? IDK.
This is a very good report. Download it.
November 30th, -0001 at 12:00 am
Healy – Thanks for the thoughtful post on our Q3 Venture Capital numbers. We've seen lots of conversation about what is going on in Massachusetts this quarter as well as overall given the high deal count and low dollar volume of funding.
You hit on an interesting area at the end of your post which is comparing seed VC deals in Mass vs. Cali and NY. In Mass, seed deals were 3% of all deals in the quarter while Cali and NY were 11% and 17%, respectively. It would be interesting to get your and other Boston/Mass area startups' impressions on the seed funding environment in the area.
Thanks again for the post.
Best,
Anand
November 30th, -0001 at 12:00 am
Anand, thanks to you and your team for the great report.
My opinion on the Boston area seed scene is that it is on the upswing, but still does not match the volume seen on the West Coast. In particular, the angel investors here seem a little slower to pull the trigger, back consumer focused plays, back young founders and – very importantly – do not cultivate the same brand/social media noise as many of the better known West Coast angels.
November 30th, -0001 at 12:00 am
Seem to be having issues with our comment engine, but Anand also emailed me the following:
Healy – On the topic of angels, here is one post that may be of interest (it's a list of 'super angel funds' and what they invest in and where). One thing to note is that all 14 or so super angel funds detailed are Cali or NYC-based and generally invest in those markets although they do play in Mass as well. I wonder if we've missed any "super angels" from Mass? Thoughts? Or is the Super Angel phenomena not occurring in Mass?
http://www.chubbybrain.com/blog/2010/09/a-guide-t…
Best,
Anand
Disclosure: ChubbyBrain and CB Insights are part of the same company.
November 30th, -0001 at 12:00 am
In response to Anand's 2nd comment (which I had to post above due to technical issues):
There are some super angels here, although they make less noise. http://www.leaddog.com/ is John Landry's "fund" but it looks like his website is having issues now.
Launchpad http://www.launchpadventuregroup.com/ is another group that comes to mind.
I'm sure I can think of some others, just need a little time.
October 27th, 2010 at 1:43 pm
[...] This study contradicts my non-scientific view into the seed funding scene (for example, I ate dinner with one of the most active seed investors in Boston who said he had done way more new deals this year vs. last, despite having told his wife he was going to back off this year!) It also seems to go against the data recently released by CB Insights (which I blogged about because it showed that VC investing was going down in Massachusetts.) [...]