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Last year, New England companies received $3 billiom in 291 deals -- the lowestt number of deals since whenthe region's privately held companies reported 281 venture financintg rounds worth just $1.4 billion. Last year's deal volumew was down 3.4 percent from the 301 reporterd roundsof 2005, which were valuex at $3.1 billion according to a report by Dow Jones VentureOne and Ernst & Young LLP. The drop in the deal numberd suggests that local investors are lookingh beyond New England for investmentd and are syndicating withothedr investors, said Bryan Pearce, a Boston-based partner for Erns & Young. "They're going wher e the technology is," Pearce said.
"I think they'r e looking where the best opportunities are. Nationally, deal flow rose just over 1 to 2,454 deals compared with 2,422 dealds in 2005. Deal values, however, increased 8 percent. But New England' s deal flow and investment was down just over 3 percent and just unde r2 percent, respectively, during 2006. Industru experts offer various reasons forthe decline. Some agreer with Pearce that New Englanf VCs are investing outsidedthe region. Others said VCs are making more unreportexd financings in startup companies that want to operatre in stealth mode while tweakingtheir products.
Douglas managing director of InnovationAdvisors LLC, a Waltham-basedr investment bank, said the shift to investments outside New England is beinh fueled by the perception that therew is too much money chasing too few opportunitiea in New England, which also inflates prices. Michael Greeley, president of the New England Venture Capital Association and a general partner atIDG Ventures, a Boston venturs firm, described it as a combination of Stealth investment has indeec become more prevalent, he said, but he adde d that New England venture firms are also more aggressive in seeking investments outsid e the region. "I'm somewhat troubled, but I'm not overlyg concerned," Greeley said.
During the fourth New England companies posted the fewest numbeer of financing rounds since the third quarterof 2004, accordingv to the report. Despitwe the slump, New England posted the second-most fourth-quartere deals in the behind San Francisco's Bay Area. One of the nation'e largest VC investments was the $48.5 million Seriezs B round in Novembeerfor Lexington-based Concert Pharmaceuticals Inc. with investor s that included Flagship Ventures, Brookside Capital Partners Fund LP and New Leaf Venture Six ofthe quarter's top-10 financings were in life sciencess companies, according to the report.
Other fourth-quarter dealx in New England includeda $35 milliomn round by Cambridge-based drug developer Radius Health Inc. in December; a $28.7 millionh by Woburn-based chemical detection company Innov-X Systems Inc. in December; and a $20 milliob round by Cambridge-based producer of synthetic biological products CodojDevices Inc. in December. Lexington's Highland Capital Partners led New England duringb the fourth quarter with seven while Boston's Oxford Bioscienc e Partners, IDG Ventures and Cambridge-based General Catalyst Partners each reported five the report shows.
Biotechnology therapeuticsw overwhelmingly topped the sector list for investmengt amounts for the quarterwith $143 followed by the software which received $50.5 million, according to the
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