Indiana firms see big drop in venture funding

Venture capital investments in Indiana trended down in 2012, but local investors see the market here steadily gaining strength.

Payments to venture-backed companies in Indiana totaled $84.1 million last year, according to data released Friday by PricewaterhouseCoopers and the National Venture Capital Association.

In 2011, venture payments totaled $177.9 million. While the 53-percent dropoff was large, most of it could be explained by the unusually large amounts raised in 2011 by Indianapolis tech stars Angie’s List Inc. and ExactTarget Inc., which raked in $55 million and $30 million, respectively.

Both companies staged initial public offerings soon afterward. Those successes, along with the acquisition of marketing software maker Aprimo Inc., have more venture capitalists eyeing Indiana’s IT sector, said Don Aquilano, managing director of Allos Ventures LLC, which has offices in Indianapolis and Cincinnati.

“I’ve spoken to a number of firms that have said, ‘Boy, what’s going on in Indiana. We’d like to learn more about the deal flow in Indiana,’” said Aquilano, whose firm is set to close this month on a new $40 million fund primarily focused on software and IT companies.

In 2012, computer and software companies continue to raise the most money, accounting for nearly $53 million of Indiana’s total take. The biggest haul went to Indianapolis-based Orbis Educational Services Inc., which raised $24.3 million from Philadelphia-based LLR Partners Inc. to grow its nurse education software business.

Also, Indianapolis-based Scale Computing Inc. raised $8.2 million last year.

“I see a lot of activity in the marketplace right now. And I expect more capital to come online in the next year,” Aquilano added.

Total venture funding in 2012 was a tick ahead of 2010, when Indiana companies raised $80 million.

Health care and life sciences companies accounted for most of the rest of the investment. Indianapolis-based Esanex Inc., a cancer development firm, raised $16.5 million last year from Indianapolis-based Lilly Ventures, Indianapolis-based BioCrossroads and North Carolina-based Intersouth Partners.

Also, Indianapolis-based Nico Corp. raised $6.6 million to continue funding growth of its brain-surgery tools.

David Johnson, CEO of BioCrossroads, which operates a seed-stage fund for life sciences companies, said investors continue to be risk averse in that sector, but have become more optimistic recently, particularly for biotech and health information technology companies.

“In the past year to 18 months, the environment is more optimistic, people are willing to think about some longer-term risk,” Johnson said. “There is plenty of money, as you know, sitting on the sidelines and the feeling is that more of it is going to play.”

Johnson noted that early-stage life sciences firms in Indiana have increasingly turned to angel investors, and that not all of those deals may be reported to the National Venture Capital Association.

The only other company to raise a sizable amount of money last year was Indianapolis-based Courseload Inc., which makes software for using digital textbooks. It pulled in $5.2 million from angel investors and Indianapolis-based radio company Emmis Communications Corp.

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