Week 02/20/2006 through 02/26/2006

Prepared by Capital Hunter analysts

Venture capital investment rose this week, as $413 million was placed in 37 separate companies, up over 37% from the previous period. Unlike in previous weeks, where early stage funding generally dominated the headlines, later stage funding stole the spotlight, as almost 60% of the aforementioned $413 million went to such ventures. Biotechnology and software, the two most popular sectors for venture investment, received the lion’s share of the week’s funding, as 24% and 20%, respectively, were placed into such companies. A significant amount of this week’s biotech funding was invested in Cadence Pharmaceuticals, a pharmaceutical company located in San Diego which develops and licenses therapeutics that can be utilized in hospital settings. Cadence received $60.8 million ($53.8 million in Series B growth capital and $7 million in debt financing) in growth financing from well-known venture capital firms Frazier Healthcare Ventures, Versant Ventures, Technology Partners, Domain Associates, ProQuest Investments, BB Biotech, CDIB BioScience Venture Management and a group of individual investors.

The IPO market, which was hot a few weeks ago when over 30 companies listed within a two week stretch, has cooled considerably. This reporting period has only two IPOs to report, and one of them is a blank-check listing (for those of you unaware of what a blank-check listing is, a blank-check company is a company that has no business plan or is planning to merge or acquire either assets, such as land or real estate or another established company. Such offerings that qualify for any of the three major exchanges are usually of the merger & acquisition nature.) The two companies that listed this week are as follows:

Liquidity Services, which priced at $76.9 million on the NASDAQ, is an online auction marketplace for wholesale, surplus, and salvageable assets.

Grubb & Ellis Realty Advisors, which priced at $125 million on the AMEX, is a blank-check company organized to acquire real estate-related assets.

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CapitalHunter.com was able to verify that $413 million of venture capital was invested in 37 U.S.-based companies during the past week. The average deal size was approximately 11.16 million. The amount of venture capital invested this period increased by 37% compared to last periods $302 million.

California was the largest recipient of venture capital funding this week. Eighteen California companies raised $231 million in new equity financing, which accounted for 55% of the total venture capital invested this reporting period. The largest private venture financing in California was placed into Cadence Pharmaceuticals. Cadence Pharmaceuticals raised $53.7 million in Series B financing and is a developer, acquirer and licensor of hospital-related therapeutic products.

The biotechnology sector raised the most venture capital this reporting period, with three companies raising $96.4 million in venture financing, which accounted for 24% of the venture capital this period. The largest private venture financing in the medical device sector this period was invested into the aforementioned Cadence Pharmaceuticals.

Start-ups raising their Series C round of financing represented the largest share of the funding pie, as 29% of all money invested this period went into such companies. The largest late stage financing was placed into EndoGastric Solutions. EndoGastric Solutions raised $32 million in financing and is developer of endoluminal reconstructive gastric procedures as well as instruments used to perform the procedures.

The three largest venture deals this period are as follows:

The following twenty-two companies and other unnamed investors funded the above mentioned top three venture capital investments.

A total of 77 equity financings of private and public companies occurred during this reporting period. Each of the 77 equity financings are profiled in a weekly (in this case biweekly) report which include venture financings, private placements, secondary offerings, PIPE’s, and IPO’s.

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