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Md. startups post middling Q3 fundraising totals

moneytree-q3Venture capital funding for Maryland-based companies fell during the year’s third quarter as investment in venture-backed firms fell nationally.

Maryland firms raised $142 million across 16 deals, down from $231 million raised across 21 deals during the year’s second quarter, according to the quarterly PwC/CB Insights MoneyTree report. But while the quarter was not great, it was not a bad performance, either.

“It’s hard to be excited about this level of funding for Q3 or the total that we have through the first three quarters of the year,” said Brad Phillips, director of emerging company services at PwC. “However, we need to keep in mind that 2018 was the fourth-best year on record for this region, so it was exceptional and the level of funding was high.”

The year 2019 has been a comedown for Maryland startups after a record year in 2018. Venture-backed firms raised more than $1.1 billion last year, the first time startups totaled at least $1 billion since 2001.

But through the first three quarters of 2019, just $446 million has been raised. It matches a national trend of venture funding decelerating after one of the strongest years ever.

Nationally, funding fell from $30.3 billion raised in the second quarter to $25.9 billion in the third quarter. Mega-rounds — rounds of $100 million or more raised, also fell from a record 67 in the second quarter to 55 this quarter.

These numbers are all declines, but Phillips said funding remains “elevated.”

In Maryland’s region, which also includes Washington and Virginia, funding for venture-backed firms tends to fluctuate. Venture capitalists are mostly based outside of the region and view it as a whole rather than splitting Maryland, Virginia and Washington into distinct categories.

Much of that fluctuation depends on how many significant deals there were and the size of those deals. This quarter’s biggest deals were $42 million to Gaithersburg firm Arcelix and $23 million to Bowie firm Trinity Cyber.

In the second quarter, the top deals were $75 million for Viela Bio and $50 million for Xometry.

“The variability fluctuates a lot more significantly in a quarter where we have a limited number of large deals. That actually was prevalent this quarter,” Phillips said. “Given that we don’t see a lot of big deals, when we don’t get one it looks quite different.”

Funding also tends to drift between the three main jurisdictions in the region. Maryland posted four of the top five deals this quarter, but in other quarters Virginia or Washington will garner more funding.

There is hope that Maryland and the region can rebound in the fourth quarter, Phillips said. Over the past couple of years, the most dollars have been invested during the fourth quarter.

“There’s some history that suggests the region can rebound in Q4,” he said. “But through the first few quarters, we have dug ourselves a hole.”

Maryland has seen significant fluctuation not just across quarters but also across years recently. Over the past five full years, three years saw funding of more than $800 million and two years saw funding of $366 million or less. 

There is precedent for Maryland reaching above $800 million for the year based on a strong fourth quarter.

In both 2015 and 2017, venture-backed firms had raised less than the $446 million raised this year through the first three quarters. But fundraising totals of $562 million and $414 million in those years’ fourth quarters, respectively, pushed the annual sum closer to $1 billion.

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