Prepared by Capital Hunter analysts:
Venture capital investment, much to our surprise, surged to $669 million this period despite the short week due to Labor Day. Normally the week leading up to a three-day weekend and the following week see reduced funding numbers, as companies tend to wait to issue reports until after everyone gets settled in after the holidays. The biggest reason for the surge this period, however, is the $200 million investment (split into separate $40 million and $160 million tranches) placed into Cilion, an ethanol producer spun out from Western Milling that plans to build ethanol plants throughout the country. Companies participating in the funding include Khosla Ventures, which has been on an alternative energy investment tear the past few months, Advanced Equities, Yucaipa Companies, Virgin Fuels and Western Milling themselves. This marks the fourth time this quarter an alternative energy company has received a round of investment greater than $100 million, more than any other industry so far. Applied Predictive Technologies also received a good chunk of dough, receiving $54 million from Accel-KKR in order to continue their sales and operations expansion. Other notable fundings include Artisan Pharma, which received $39 million in order to continue the development and commercialization of ART-123, a human thrombomodulin licensed from Asahi Kasei Pharma currently in late Phase II trials, and Neuronetics, which received $35 million to continue developing noninvasive psychiatric and neurological therapies.
California received the lion’s share (of course) of the funding for the period, with over 55% of all venture capital flowing into companies headquartered in the Golden State. After California, no other region was able to manage even 10% this period, but you should expect Massachusetts and other major VC locales on the East Coast to get their share in the coming months. The software sector garnered the most capital this period, although industrial & energy companies (or more specifically, Cilion) received almost as much funding, though software companies outnumbered industrials 21-2. Biotech did well again, but unlike most weeks where a small handful of companies would raise a significant sum of capital, this week we saw a lot of startup companies receiving relatively small sums. In fact seven of the ten companies that received funding got less than $10 million, almost unheard of considering the immense amount of money (and luck) required to successfully launch a new drug. We expect venture funding to even out over the next month, so do not expect any surprises in the coming weeks ahead.
For the third week in a row, there was only a single IPO, but this time it is not a blank check company. The company, New Oriental Education & Technology, is a provider of educational services in China and priced at $112.5 million last Thursday on the New York Stock Exchange. It trades under the symbol EDU. We said last week that the IPO market was in a deep slump, but this is ridiculous. Don’t expect improvement this coming week but the week after has some companies gearing up to go public, so stay tuned.
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