$128M invested in Atlanta

November 1, 2009

The Atlanta Business Chronicle reports that the venture capital industry is peachy on the Peach State.

Venture capital invested in metro Atlanta firms nearly doubled in the third quarter from a year ago, even as slightly fewer deals got done, according to the MoneyTree Report.

That’s in sharp contrast to the national picture, where venture capital investment swooned more than 30 percent year-over-year to $4.8 billion, according to the report, published by PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA).

The spike in Georgia’s third-quarter venture funding doesn’t necessarily suggest VCs are chasing some “hot new idea or industry that’s brand new,” said Nathan Briesemeister, partner in PwC’s Atlanta technology practice.

Instead, it’s reflective of larger checks being written as investors gravitate to mid- to later rounds of funding in more mature tech companies, he said. The number of VC deals done locally dipped to 17 from 19 in the third quarter of 2008.

“Recessions are good times for VCs to plant seeds to be harvested during the next market upswing,” Leavitt said. “VCs are now sensing the window to get invested at good prices with resilient companies is closing and want to get some bets out there before prices start rising again.”

While deals continue to get done, in many cases they are follow-on financings from the companies’ existing investors. With limited available “exits” — opportunities to sell their investments through mergers, acquisitions and initial public offerings (IPOs) — tech investors find themselves having to reinvest in portfolio companies to keep them operating.

Later-stage deals are generally safer bets and offer better risk-return benefits than early-stage investments, he said.

“You can buy mature businesses at more reasonable multiples,” Garrard said. “There’s good value investing that can go on in a more mature company.”

MoneyTree’s third-quarter data illustrate a gradual and deliberate industry shift toward a longer-term venture capital investment strategy, NVCA President Mark Heesen said in a statement.

Venture capitalists are becoming increasingly focused on industry sectors that require multiple rounds of financing for an extended time horizon, Heesen said. Clean tech and life sciences firms require significant capital and expertise often over a one-year to 12-year period, he said, resulting in more follow-on rounds, higher average investment levels, and a longer average time to a successful exit.

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