Maryland companies had a roller-coaster year for venture capital in 2011, with medical devices companies faring well in the fourth quarter.

Investments grew to $80.2 million in the fourth quarter from $45.8 million in the fourth quarter of 2010, according to the latest MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters.

But for the year, Maryland companies racked up $283.7 million, down 9.7 percent from $314.1 million in 2010.

“From the venture capitalist perspective, they spent most of their money in ’09 and ’10 shoring up their investments. This bled a little into 2011,” said Mike Buher, partner and life science leader for the mid-Atlantic region of Grant Thornton, which provides financial consulting services. Buher is on the executive board of the Tech Council of Maryland.

When venture money became scarcer, companies also sought creative ways to concentrate available funding, such as shifting their focus to certain products while abandoning others, Buher said.

Maryland’s results ran counter to the national trend, which saw investments rising 22 percent from 2010 to $28.4 billion. That was the third-highest total in the past decade, according to the Moneytree report.

Investors considering Maryland companies might also be waiting until they see more certainty from the federal government on its funding commitments, upon which many companies depend, Buher said.

Seventy-four Maryland companies secured venture capital in 2011, according to the report, with most of the deals in the second quarter, which peaked at $98.7 million. NovaSom of Glen Burnie, which markets sleep apnea devices, landed the biggest deal of the year, $35 million in July.

The medical device market and high-tech markets encourage more investment because those companies average faster returns than life science companies, Buher said.

He cautioned that investors are shifting more money to Asia, particularly China, which is favoring health care investments.

But biotechs by nature are flexible and can adapt, Buher said, and many focus on more, but smaller, deals.

“Maryland has a wealth of strong, small life science businesses who are working on exciting things. It’s just a matter of the right valuations,” Buher said.

VC deals in Maryland’s software and biotech sectors followed the national pattern of seizing the lion’s share in 2011. Twenty-four deals were made in the software sector, with 18 in biotech. The medical device sector was third, with nine deals.

Most of the Maryland deals went to early- and later-stage companies last year, with 26 and 25 deals, respectively. Investors contributed to 16 expansion deals and seven startup or seed funding deals.

Having investment spread across multilple stages, as it was throughout the mid-Atlantic region, is especially encouraging, said Julie Spicer, executive director of the Mid-Atlantic Venture Association in McLean, Va.

“This reinforces having a robust ecosystem up the spectrum of capital,” Spicer said. “You can see great technology, but once they get to a certain stage, if there’s no place for them to go, they’ll struggle.”

CSA, Sensors top Q4 recipients

Among Maryland’s fourth-quarter recipients was CSA Medical of Baltimore, which landed the second-largest deal, $20.5 million, in December. College Park's New Markets Venture Partners was among CSA's numerous investors for this round.

The company plans to spend the cash to expand its spray cryotherapy system, which is used to treat esophageal disease through endoscopic application of liquid nitrogen spray at a temperature of minus-321 degrees. CSA Medical is looking for federal approval of the technology’s next generation, said CFO Steven Schaefer.

The current system is used at more than 80 cancer centers and academic teaching hospitals in the country, according to the company.

Securing investment for medical device companies such as CSA Medical can be challenging because of the concern over regulatory risks, he said. Plus, many investors have high expectations.

CSA Medical received $12.6 million in the second quarter from Blue Heron Capital, which also contributed in this latest round.

“We have a novel technology that can help people and believe it’s going to improve outcomes and reduce the cost of health care,” Schaefer said.

Sensors for Medicine and Science of Germantown landed the fourth-quarter’s biggest investment deal, $30.6 million. That was just part of a total round of $54.1 million in equity financing it received, with the rest to be reported in the current quarter.

The company plans to use the new cash to fund the next development phase for its continuous glucose monitoring systems for diabetics and advance its worldwide clinical development programs and regulatory approvals.

Two other companies that received investment deals among the state’s top five hope to use their funding to bolster their work forces.

Vorbeck Materials of Jessup, which focuses using graphene in circuit development, plans to add 15 employees to its sales, tech support and product development staffs, said CEO John Lettow.

The company received $10 million in December to expand sales of its Vor-ink, a graphene-based conductive ink for printed electronics. Black Powder and Fairbridge Venture Partners led the financing round, with 15 other investors.

“It put us in a good position for now, but we’re leaving open the possibility of a follow-up round for investors who didn’t get in on this one,” Lettow said.

He said Vorbeck already has seen a “terrific” response to its product launch and needs more workers to meet the additional sales.

SemaConnect, an Annapolis developer of electric car charging stations, plans to use its $4.2 million to hire a network of regional sales executives in seven cities throughout the U.S., said spokeswoman Naly Yang.

The company is expanding from the Chesapeake Innovation Center incubator to a 8,000-square-foot facility and hopes to grow its staff from 10 to 25 by the end of the year, she said.

“Everything was very timely. A lot of people are starting to ask about electric vehicles and executives are becoming interested in charging stations,” Yang said.

Top Venture capital Investments in Fourth Quarter

Sensors for Medicine & Science of Germantown: $30.6 million, later-stage funding.

CSA Medical of Baltimore: $20.5 million, later-stage funding.

Vorbeck Materials of Jessup: $10 million, expansion funding.

Merkle of Columbia: $10 million, later-stage funding.

SemaConnect of Annapolis: $4.2 million, expansion funding.

Source: PricewaterhouseCoopers MoneyTree Report

lrobbins@gazette.net