Week 03/12/2007 through 03/18/2007

Prepared by Capital Hunter analysts:

After a strong past couple of weeks, funding slipped back to numbers more in-line with our previous expectations, as only $305 million was raised by 30 companies this period, a 60% drop-off from the $764 million raised last period. Biotechnology continued to receive the most investment, though the entire $76 million invested in the sector went to just two companies, Epiphany Biosciences and Tragara Pharmaceuticals. Companies in the industrial & energy sector, believe-it-or-not, received more deals than any other sector and were also the second largest destination for venture capital, raising close to $42 million, with $15 million going to Oorja Protonics, which develops alcohol-based fuel cell systems for original equipment manufacturers. Digital media continued to draw attention, as five companies raised a total of $37 million, with $14 million going to WhiteFence, which provides a portal that allows consumers to compare the price of utilities and other basic services online. The biggest surprise of the week, however, was the lack of software investment. The sector only managed to scrape together $16.9 million, which represented less than 10% of the week’s total funding, one of the worst showings the sector has had over the past few years. The largest software funding of the period, QuickCycle, which provides laboratory automation and test management solutions, only managed to take in $8.9 million from Crescendo Ventures. We expect funding to come in around $350 million next period, give or take a few million, but funding has been more volatile the past few months, so our prognostication may be off. Stay tuned.

The IPO market continued to hold steady, with five companies listing on American stock exchanges, up from four a week ago. The largest of the bunch is Gafisa, one of the largest residential homebuilders in Brazil, which raised close to $400 million Friday on the New York Stock Exchange and wishes to try their luck in the public markets despite the declining U.S. housing market. A venture-backed company, BigBand Networks, which raised over $100 million in venture capital from firms such as Charles River Ventures, Redpoint Ventures, Meritech Capital, Evergreen Partners and Time Warner Ventures, priced 10.7 million shares at $13.00 per share for a take of close to $140 million. After a few days, the stock now trades at over $17.50 a share. Here are the rest of the companies that listed this period:

Media & Entertainment Holdings AMEX:TVH-U priced at $86.4 million and is a blank-check company looking to acquire assets in the media & entertainment sector.

Bigband Networks NASDAQ:BBND priced at $139.1 million and is a developer of network platforms that allow telecommunications service providers to disseminate video, voice and data services over coaxial, fiber and copper networks.

Tongjitang Chinese Medicines NYSE:TCM priced at $98.7 million and is a provider of modernized traditional Chinese medicine.

Gafisa SA NYSE:GFA priced at $389.5 million and is a developer of residential homes in Brazil.

FCStone Group NASDAQ:FCSX priced at $122.4 million and is a provider of commodity-related risk management consulting and services.

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CapitalHunter.com was able to verify that $305 million of venture capital was invested in 30 U.S.-based companies during the past week. The average deal size was approximately 10.17 million. The amount of venture capital invested this period decreased by 60% compared the last period’s $764 million.

California was the largest recipient of venture capital funding this week. Twenty California companies raised $223.4 million in new equity financing, which accounted for a whopping 73% of the total venture capital invested this reporting period. The largest investment in California was placed into the earlier mentioned Tragara Pharmaceuticals. Tragara raised $40 million in Series A funding and is currently developing next-generation therapeutics for the treatment of inflammation and cancer.

The biotechnology sector raised the most venture capital this reporting period, with only two companies raising $76 million in venture financing. Biotechnology companies accounted for approximately 25% of the venture capital this period. The largest investment in the sector was placed into the previously mentioned Tragara Pharmaceuticals.

Start-ups raising their first stages of funding represented the largest share of the funding pie, as 43% of all money invested this period went into such companies. The largest Series A funding was placed into the previously mentioned Tragara Pharmaceuticals.

The three largest venture deals this period are as follows:

The following twelve companies and other unnamed investors funded the above mentioned top three venture capital investments for $96 million:

A total of 58 equity financings of private and public companies occurred during this reporting period. Each of the 58 equity financings are profiled in a weekly report which include venture financings, private placements, secondary offerings, PIPE’s, and IPO’s.

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