New England VC deals plummet in Q1

Venture capital investments in New England companies fell 40 percent in the first quarter -- to its lowest level in a decade -- compared with the same quarter last year.

Nationally, VC investments also declined, but by only 7 percent, according to a new report.

Investments in local venture-backed companies reached $576.7 million in first-quarter 2008 -- down from $961.2 million during the first quarter 2007, according to Dow Jones VentureSource. It was the lowest first-quarter investment total since 1998, when local financings reached $439 million.

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The volatility of the public markets combined with New England's cluster of technology and biotechnology companies contributed to the region's sharp investment decline compared with national totals. In a down economy, tech and biotech investments are inherently risker than traditional sectors such as retail, according to Christopher Pasko, senior managing director for private equity firm Blackstone Group in Boston.

"My sense is that the New England (financing) drop is related to the composition of our companies, not the quality of the companies," he said.

Investors financed 72 local deals during the quarter, nearly flat with the 73 deals transacted in the year-earlier quarter.

The top three deals in the quarter were all in the $20 million range:

• Bedford-based Reveal Imaging Technologies Inc. took in $20.3 million;
• Lowell-based Virtual Iron Software Inc. attracted $20 million;
• and Cambridge-based Vlingo Inc. also attracted $20 million.

Lexington-based Highland Capital Partners was the most active VC firm based locally, with eight investments. North Bridge Venture Partners was No. 2 with six investments, according to Dow Jones.

Nationally, investments reached $6.8 billion during the quarter compared with $7.3 billion during the first quarter 2007. Investors completed 603 financings during the quarter compared with 628 during the same period last year, according to the report.