An online education company claimed the lion’s share of the first quarter’s venture capital investment in Maryland, even as investors kept mostly to later-stage businesses.
2tor, which in February moved its headquarters to Landover from New York, secured $26 million, or 40 percent of the $65 million in deals Maryland companies landed in the quarter, according to the most recent MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomas Reuters.
Although 2tor is an early-stage company, nine of the state’s 15 investment deals went to later-stage companies, with only one seed investment and two early-stage investments. Maryland also had three investments for expansion.
Both the number of deals and their total value were down from 16 deals worth $91 million in the first quarter of 2011 and 16 deals worth $79 million in the last quarter of 2011.
With the number of deals year-over-year virtually the same, “this leads me to believe that deal flow and the activity of investors has not changed materially,” said Robert Rosenbaum, president and executive director of the Maryland Technology Development Corp.
The significant drop-off in dollar amounts could be the result of many factors, “including more syndication activity, the stage of the companies from one year to the next, or the decreasing capital needs of [information technology] companies resulting from technologies such as software as a service and cloud base infrastructure,” Rosenbaum said.
Tedco provides from three to five $75,000 investments per quarter to early- and seed-stage Maryland businesses, he said. Tedco activity should increase in the third quarter because of the added capacity from the Propel Baltimore Fund, which commits $3.3 million for angel investments of as much as $220,000 in Baltimore city businesses, he said. Tedco is managing the fund and expects to add as many as six deals per year through it.
Companies that managed to snag funding last quarter mostly benefited from past accomplishments.
“We’re building preeminent online degree programs with renowned U.S. universities, whose reputations are known around the world,” Chip Paucek, co-founder and CEO of 2tor, said in an email. “As for upcoming company plans, in the next few weeks we plan to announce a new partnership with a top-tier university to deliver a program that is the first-of-its-kind in its field.”
2tor partners with universities to offer online degree programs.
OpGen, which provides optical mapping to help analyze genomic material, was among the state’s five bioscience companies to receive funding in the first quarter. The Gaithersburg company raised $9.4 million from six investors.
Software companies were the second-largest investment sector with four deals.
“We’re happy to have raised the money and bring in new investors,” said Eric Winzer, CFO of OpGen. “The fact that we got it done proves there’s money out there if you had good technology.”
OpGen raised about $20 million in 2010-11. The cash supports the commercialization of its mapping system, Winzer said.
He added OpGen’s previous commercial sales of the system might have made the company more attractive to investors.
“There’s a lot of people asking for funding and they don’t even have any sales yet,” Winzer said.
Psyadon Pharmaceuticals in Germantown has found investment hard to come by beyond the $8 million commitment it originally received from New Enterprise Associates of Chevy Chase upon its launch in 2008, CEO Richard Chipkin said. The company received $2 million in the first quarter, representing the third and final tranche of the $8 million.
Chipkin formed the company to develop a treatment for Lesch-Nyhan disease, an inherited orphan disease that causes brain damage that leads patients to injure themselves. Psyadon’s ecopipam treatment is in phase 3 trials and the company expects to complete the studies by the middle of 2013.
“I have been looking for more money recently, and it’s not easy,” Chipkin said, adding that he wants to raise an additional $10 million to $12 million.
“There’s low risk tolerance out there,” he said. “People are looking for sure bets.”