N.C. Climbs in Venture Funding Despite Sharp Drop in Seed Investments

annual venture capital report

published by the Council for Entrepreneurial Development.

N.C. finished 12th in 2004, according to CED figures. Its previous high was ninth in 2002.

Overall, venture funding jumped 40 percent from 2004 to 2005, with biotech deals leading the way.

Of the North Carolina deals, $430 million was invested in RTP area firms. Of 61 investments, 53 were in the Triangle.

According to the CED data, North Carolina ranked third nationally in life science investments at $288 million, up from ninth in 2004 and fourth in 2003. The share of life science investments in the state climbed to 58 percent from 38 percent a year earlier, reflecting the importance of the biotech, medical device and related fields to the state's economy. "No other state's life science sector claimed more than 50 percent of the total venture capital raised," the CED said.

CED figures differ somewhat from those compiled by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. Their MoneyTree report said North Carolina firms generated 56 deals worth $507 million.

However, the venture news was not as good for new companies. Seed funding for start-up firms plummeted by 60 percent, according to the CED report. Seed investments have gone from $14 million in 2003 to $7.7 million in 2004 to $3 million in 2005.

"While North Carolina is back on track in terms of total funding, the lack of seed financing continues to be of overwhelming concern," said Monica Doss, president of the CED. "This year's 60 percent decline follows a 40 percent decline last year, while at the same time CED is seeing more start-ups and pre-start ups in competitive emerging technologies. Compared to national trends, our seed capital resources are lagging."

Early stage funding did increase 42 percent to $166 million.

The report was released in advance of the CED's 23rd annual venture capital conference, which is May 2-3 in Pinehurst.