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UpSurge report finds Baltimore’s startup ecosystem maturing

‘We’ve seen a growth in the average deal size, which has really been exciting to see,’ says UpSurge CEO Jamie McDonald. (Submitted Photo)

‘We’ve seen a growth in the average deal size, which has really been exciting to see,’ says UpSurge CEO Jamie McDonald. (Submitted Photo)

UpSurge Baltimore, an organization launched in January with the aim of supporting city startups and transforming Baltimore into a “top tier” innovation city, has published its first report on the “startup ecosystem” of Baltimore, outlining how many of these companies received investment funds over the past decade, how much money they received and where those investments came from.

The report follows 193 financially backed companies that launched after 2011 and are still headquartered in Baltimore to show how the city’s startup ecosystem has expanded significantly in recent years. Startups experienced a sharp increase in funding from 2016 to 2020, a standout year despite the pandemic, with the companies raising a total of $79 million in capital in 2016 as compared to a whopping $317 million in 2020. The average size of deals was roughly four times higher in 2020 than in 2016.

“We’ve seen a growth in the average deal size, which has really been exciting to see,” said UpSurge CEO Jamie McDonald. “As companies mature over time, and they move through the stages of investment … you’re likely to have some number of companies reach a stage of maturity that allows for much bigger and later-round investments. The other thing to recognize, though, is unless you’re talking about the six or seven big tech hubs in the country, a couple of really big deals can skew numbers.”

The report highlights the largest deals of the past five years, such as Thrive Earlier Detection, a Cambridge, Massachusetts, health care company with a significant presence in Baltimore that received $257 million in 2020, the largest Baltimore investment in the past five years by almost $150 million.

Several significant deals have already been made in the first four months of 2021, according to the report, with Delfi Diagnostics, PGDx and AbsoluteCARE each being awarded more than $100 million. According to McDonald, the average deal size for 2021 is on track to outpace 2020.

The report also notes the most active investors in the 193 companies analyzed in the report. TEDCO tops the list, having invested 75 deals in these companies, followed by The Abell Foundation at 24. The highest-ranking investor outside of D.C., Maryland and Virginia is VentureWell, a Massachusetts accelerator that has made 22 deals with Baltimore companies between 2011 and now.

UpSurge’s analysis also compares investments into companies headquartered in the city with investments into companies with a significant presence in the city, but that are headquartered elsewhere. In 2020, $61 million more in capital went into companies that are not based in Baltimore than into those that are.

“Looking ahead, UpSurge’s work is focused on creating the ecosystem and infrastructure for Baltimore companies to grow to a point where they become the acquirors, and encouraging acquired companies to continue investing in Baltimore as a significant growth hub,” the report read.

Startups in Baltimore run the gamut of industries, the report shows, but health care and information technology startups collectively make up just below two-thirds of Baltimore’s startup ecosystem, with a wide range of subcategories within those industries. The majority of Baltimore’s startups are young companies that are yet to receive their Series A financing or beyond.

By 2030, UpSurge hopes to make Baltimore the nation’s first “Equitech” city, which refers to an innovation hub that sees diversity as a competitive advantage and prioritizes companies that drive progress in society. The organization describes Equitech as “a lens to attract, align and support startups — not a filter to exclude them.”

UpSurge Baltimore is planning three more baseline surveys: one that will compare Baltimore’s metrics against six comparable cities, one that will take an in-depth look at the investor community and one that will evaluate Equitech metrics.

“The reports that we’re putting out right now are establishing a series of baselines against which we will measure our progress and share with the city our progress over time,” said McDonald.

 


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