Colorado Springs missed out on the best quarter for venture capital funding in two years during the third quarter, according to the MoneyTree Report on venture capital investments.
No local startup landed a venture investment for a second consecutive quarter after Cherwell Software LLC landed $50 million in the first quarter, the biggest local investment in nearly 17 years. Pyxant Labs Inc. raised $530,000 during the third quarter of 2016, according to the report from accounting giant PricewaterhouseCoopers LLP and CB Insights.
The dearth of local venture funding came despite a 32 percent jump from a year earlier in nationwide venture investments in the third quarter to $19 billion, the most since venture funds pumped $20.2 billion into more than 1,500 deals during the third quarter of 2015. About 40 percent of the total came in 26 deals of more than $100 million, including two startups that landed nearly $3.5 billion from Japanese investment giant SoftBank Group. Nationwide venture funding in the first three quarters of the year is up 8.6 percent from the same period last year to $52.6 billion.
"As with last quarter, we saw a healthy number of mega-financings in (the third quarter) which drove strong funding totals," Anand Sanwal, cofounder and CEO of CB Insights, said Tuesday in a news release. "But megarounds now account for a rising share of totaling funding, while overall deal activity remains in a lower range than 2015 and early 2016."
Statewide venture funding declined 34.5 percent from the third quarter 2016 to nearly $178 million, mostly because three large deals combined to make last year's third quarter the strongest of the year. This year, the biggest deal was $34.9 million five venture funds invested in Aurora-based Mycotechnology, which has developed a fermentation process with gourmet mushrooms to improve taste, value and health benefits of some foods. That deal was just a fraction of the nearly $170 million Boulder-based health care monitoring firm SomaLogic Inc. landed in the second quarter's largest deal.
Venture investments in Colorado are on track to top $1 billion this year for just the third time since 2001, totaling nearly $877 million in the first three quarters of the year. The year-to-date total is up 36.4 percent from the same period last year and already ahead of the $768.5 million invested during all of 2016.
"Colorado continues to get funding and build on its reputation as an innovative environment. It is only a matter of time before we will start seeing investments in Colorado companies developing artificial intelligence and augmented reality technology," said Rob Ward, a PricewaterhouseCoopers audit partner in Denver.
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