VC investing increases in Dallas, Texas, and US

November 1, 2009

The PWC Moneytree report has good news, as reported by The Dallas Morning News:

It looks like investments in young companies are beginning to flow again, but venture capitalists remain cautious.

Investments in early stage companies in Dallas, the state and the nation rose in the third quarter from the previous quarter but still were down from a year ago, according to a MoneyTree report released Monday by PricewaterhouseCoopers, the National Venture Capital Association and Thomson Reuters.

Texas stood out in the quarter. With $197.9 million invested in 23 deals from July through September, the state trailed only California and Massachusetts in attracting venture capital. Those investments were up from the second quarter, but down from a year earlier.

“I definitely see more activity now,” said Cindi Keith, a partner in the technology group of PricewaterhouseCoopers. Small businesses should “keep their chin up,” she said.

For the Dallas-Fort Worth area, venture capitalists invested $107.8 million in six deals in the quarter, up from $16.5 million in the second quarter but down from $121.1 million in the third quarter of 2008. One large deal –$56.6 million invested in Dallas-based Kosmos Energy, an oil and gas company – accounted for more than half the total. Kosmos was the nation’s eighth-largest deal in the quarter.

Nationally, investors put $4.8 billion into 637 deals in the third quarter, up from $4.1 billion in the second quarter but down from $7.16 billion for the same period a year ago.

Venture capitalists are making longer term investments in areas such as clean technology, which require more money and more time to reach a successful exit, said NVCA President Mark Heesen. That trend is reflected in the third quarter’s 89 percent jump in venture dollars in clean technology and a drop in software investments to the lowest level since 1996.

Pioneering ideas still get the most attention.

Dallas-based CenterPoint Ventures’ only third-quarter investment was $4 million in Richardson-based Convey Computers Corp., which attracted a total of $24 million in the quarter.

“They have created a new architecture for computers that solves a major problem in the industry: the ability to be able to compute intensive applications very fast,” said Bob Paluck, managing director of CenterPoint.

Dallas-based Sevin Rosen Funds invested a little under $10 million in 11 of its portfolio companies in the third quarter, said general partner John Jaggers. One was AirWalk Communications Inc., a Richardson-based company that provides Internet protocol-based wireless solutions for cellular networks. It received a total of $5 million from four venture capital firms.

“Each quarter, the private capital market has been getting better as people believe the world isn’t going to come to an end,” Jaggers said. “There will be a bit of an uptick next year, but it will probably level off and not get back to wild and crazy levels.”

PricewaterhouseCoopers expects investments to exceed $15 billion this year, compared with nearly $28 billion last year.

In Texas, nearly 40 percent of venture investments went to industrial or energy companies. Software was No. 2, and computers were a close No. 3.

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