Indiana startups snare surging venture capital

Indiana startups landed more than $28 million in venture capital in the third quarter, the highest quarterly total in three years and a sign of accelerating entrepreneurial momentum in the state, VC experts said.

Five Hoosier companies reeled in $28.6 million between July and September, according to The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. That marked the highest figure since the third quarter of 2012.

Scale Computing, which sells box-sized IT infrastructure, and SmarterHQ, which sells contextual marketing software, led the way in the latest quarter with $18 million and $8 million financing rounds, respectively.

The third-quarter sum brings the tally so far this year to $49.2 million, on track to outpace last year's total of $49.8 million.

"I think this shows that the venture and startup industry is nicely back on its feet after the recession," said Don Aquilano of Carmel-based venture firm Allos Ventures.

"Activity continues on a healthy but not irrational pace, and I think this will continue unless the markets turn south significantly," Aquilano said.

National figures also are ticking up, according to the NVCA. U.S. companies reeled in $50.7 billion in venture funding last year, the highest since 2000. That figure sits at $47.2 billion through three quarters this year, up from $35.1 billion through three quarters last year.

In Indiana, the venture funding raised over the past few years pales in comparison to amounts raised between 2007 and 2012. During those six years, companies like ExactTarget, Angie's List, and Stonegate Mortgage often closed eight-figure rounds, and the state saw an average of $123 million invested per year.

By comparison, Hoosier startups landed $23 million and $49.8 million in 2013 and 2014, respectively.

Despite the drop-off, some believe the state's high-growth startup ecosystem, which mainly includes technology startups, is in the best shape it has ever been.

Tim Kopp, who leads the Indianapolis office of Hyde Park Venture Partners, said he sees much more experienced talent, many more local venture dollars and many more high-quality startups in the pipeline compared to 10 years ago.

"I think it was pretty sporadic before," Kopp said of the venture capital heyday of a few years ago. "It was great, but there wasn't a true ecosystem able to consistently generate companies like that.

"The flywheel is really turning now, and the machine is in place to crank out companies like that on a far more consistent basis."

Two big venture deals not mentioned on recent NVCA's lists include the $35 million that enterprise device management firm MOBI Wireless obtained in July, and the $35 million that "startup studio" High Alpha landed in May. High Alpha did not break down how much money it used for its operations and how much it placed in a pool to fund portfolio companies.

It was not immediately clear why the MOBI deal was not included. Calls to MOBI and NVCA were not returned before IBJ deadline.

Please enable JavaScript to view this content.

Story Continues Below

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.