Md. investment money drops in Q1, but analyst preaches caution

Maryland venture-backed firms raised $79 million during the year’s first quarter, less than in any quarter since 2016, according to the quarterly PwC/CB Insights MoneyTree Report.

Despite a significantly lower number than the state had seen in nine quarters, the low total should be seen as a blip on the radar for now, said Brad Phillips, director of emerging company services at PwC.

“It was a significant drop. We would have hoped for a stronger quarter for investment into Maryland,” he said. “It’s been quite turbulent over the past five years. … When we look at a low quarter, we need to be careful not to read too much into it.”

The $79 million raised was a 64% drop from $221 million raised during the fourth quarter of 2018 and broke a streak of five straight quarters with at least $220 million raised.

It was the lowest amount raised by venture-backed firms since the fourth quarter of 2016 when $43 million was raised. That was followed by a $214 million quarter to start 2017.

The issue for Maryland firms at the start of the year appears to be a lack of large deals. The number of overall deals rose to 18 — up from 12 last quarter — but the biggest deals were $15 million raised by biotech firm Gliknik and computer firm Racktop Systems.

The previous quarter the most money raised was $93 million for Beltsville-based NextCure. And four other firms topped the $15 million mark.

More deals but less money may lead to more benefits down the road as some of the firms that received smaller funding this quarter look to raise larger amounts of money as they grow.

“We shouldn’t understate the importance of the number of deals because all of those little deals that were invested in are little experiments that have the opportunity to grow,” Phillips said. “The more companies we have now that are funded, that’s going to mean more large investments down the road.”

Maryland’s drop in funding coincided with a large national drop as well. For the first quarter nationally, $24.6 billion was raised, a drop of 35% from the $37.8 billion fourth quarter of 2018.

But that fourth quarter was more of an outlier. Typically, capital raised nationally is in the $20 billion-$25 billion range.

The national trend of fewer deals than the quarter before also continued, with just 1,279 deals, down from 1,328 in the previous quarter.

That coincides with an increase in so-called mega-rounds, rounds where firms raise more than $100 million. There were 46 mega-rounds last quarter, down from a record fourth quarter but still above historic levels.

Included in those mega-rounds were significant rounds of $1 billion for coworking company WeWork and digital freight company Flexport. There have only been 25 billion-dollar rounds ever.

Top Md. deals in Q1 of 2019

Source: Quarterly PwC/CB Insights MoneyTree Report.