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Hoosier startups grab $24 million in VC in first quarter

April 15, 2016

Venture investments in Indiana companies in the first three months of 2016 were slightly higher than in comparable quarters in recent years, although most of the money this go-round went to a 9-year-old medical device company.

Three Indiana companies secured $24.4 million in venture capital in the first quarter of 2016, according to The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters. NiCo Corp., an Indianapolis-based neurological medical device manufacturer, accounted for $15 million of that amount.

The quarter was still pretty solid by Indiana standards, considering that the sum raised was the highest first-quarter total since 2011, when eight companies, including email software giant ExactTarget, collectively raised $99 million. Since then, deal totals have been somewhat modest, including a 2015 first quarter that saw four companies land $17.5 million in capital.

Indianapolis pales in comparison to cities like Chicago that capture more than $1 billion in venture money annually, but a July 2015 Kaufmann Foundation study found that high-growth companies in Indianapolis "were able to survive and grow largely without external angel or venture capital investment."

Besides NiCo, the other two outfits landing equity capital in the recent quarter were Indianapolis-based Lesson.ly Inc., which produces employee training software, and Go Electric Inc., an Anderson upstart that creates meter-energy solutions. The two raised $5.3 million and $4.1 million, respectively.

Nationally, venture capitalists pumped $12.1 billion into 969 deals in the latest quarter, marking the ninth consecutive period that topped the $10 billion mark. But both deals and dollars were down 11 percent compared with the same period last year, data show, and investor excitement seems to have waned in some segments.

"The first quarter appears to tell us that investors still have faith in the venture ecosystem," Tom Ciccolella, U.S. venture capital market leader at PwC, said in written remarks. "However, the increase in expansion and later-stage financing, combined with the drop in first-time financing, suggests a shift towards relatively mature startups."

The MoneyTree Report, now in its 22nd year, has not always captured every venture investment in Indiana, partially due to its methodology. For instance, it didn't mention MOBI Wireless Management LLC's $35 million equity investment last summer in its third quarter 2015 tally because it considered it more of "a minority buyout investment than venture capital investment," a PwC spokeswoman said last fall.

Zionsville-based Clear Software LLC, which makes business software easier to use, raised $1.5 million through a debt offering in late February. It was not included on the recent MoneyTree list.

The second quarter is shaping up to be an active one for Hoosier companies raising money, led by Fishers-based Internet-of-Things consultant CloudOne Corp.'s $9 million round announced April 1. A review of Indiana securities filings show that other firms in the midst of lining up capital include phone-software provider Fathom Voice, digital marketing network Torchlite Technologies Inc., and micro-consulting software creator ConsulTeams LLC.

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