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Md. startup funding rebounds after poor first-quarter showing

(Alexstar / Depositphotos.com)

(Alexstar / Depositphotos.com)

Maryland companies funded by venture capital raised $226 million during the year’s second quarter, rebounding strongly from a first quarter that was the state’s worst in two years.

The quarter, boosted by several large deals, also saw an increase in the number of deals and was especially one of the best quarters for seed-stage transactions in years, according to data from the quarterly PwC/CBInsights MoneyTree report.

“It was a significant rebound, obviously, from Q1,” said Brad Phillips, director of emerging company services at PwC.

The $226 million raised by companies represented a return to form after an $80 million first quarter. That quarter came on the heels of a $1 billion year and five straight quarters of at least $226 million raised.

Because Maryland generally has fewer deals than some other states — it ranked 11th nationally with 21 deals and 12th in funding amount during the second quarter — its fundraising totals can be dependent on just a couple of large deals every quarter.

That volatility happens both in Maryland and regionally. Sometimes it represents itself in smaller quarters, other times it means one state in the region, like Maryland this quarter and Virginia last quarter, attracts most of the deals and funding.

“We see a lot of choppiness because we don’t see a lot of $50-plus million deals,” Phillips said. When we get one, it looks good. When we don’t get one, the quarter doesn’t look so good.”

The second quarter was helped by two larger deals, accounting for 55% of the total raised, along with several midsized deals.

Viela Bio, the Gaithersburg-based AstraZeneca spinout, raised $75 million during the second quarter. Another Gaithersburg firm, the manufacturing online marketplace Xometry, raised $50 million.

These are the types of deals that can make the difference between an underwhelming quarter and a stronger quarter.

Just as important as the funding, though, can be the number of deals, especially the number of seed deals, which could turn into the big transactions of the future.

“It’s easier to raise a seed round than it is to raise a Series A,” Phillips said. “We can’t ignore the fact that the seed rounds are the first investments going into these companies and give them a bump to help them take their product to market.”

Nationally, companies could be on pace for a record year. Already, venture-backed firms have raised $55 billion, significantly above what was raised last year. The record for the MoneyTree Report, which dates back to 1995, is $120 billion.

At the same time, mega-rounds of $100 million or more are taking up more funding amounts while smaller rounds, like seed rounds, are declining. Mega-rounds accounted for nearly half of all money raised in the second quarter.

Another second-quarter trend could indicate that more deals are on the way. It was a big quarter for initial public offerings by tech companies, up 450% from the first quarter. That frees up investors’ money for new deals, Phillips said.

“What we saw this quarter, because IPOs are so strong, we’re seeing a very very frothy IPO market,” he said. “What happens is with the IPO the investors get some of their money back and then they can put it to work again.”

Top Deals in Maryland, Q2

Viela Bio Gaithersburg $75 million
Xometry Gaithersburg $50 million
Sirnaomics Gaithersburg $22 million
MotionSoft Rockville $17 million
Protenus Baltimore $13 million
Ion Storage Systems College Park $8 million
LifeSprout Baltimore $6.5 milllion
BioFactura Frederick $6 million
Breethe Halethorpe $6 million
Whitebox Baltimore $5 million

Source: PwC/CBInsights MoneyTree report


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