Venture rebound includes software

Minnesota companies attracted $83.4 million in venture capital in the first quarter, a better-than-usual total as funding for young companies continued to rebound from a dismal first half of 2013.

The winter surge in investment showed a shift toward Minnesota software start-ups, according to the MoneyTree Report by the National Venture Capital Association and PricewaterhouseCoopers (PwC), using data from Thomson Reuters.

"It was a solid quarter, and it's continuing this recovery trend we saw starting in the third quarter of last year," said Mark Scholtes, a Minneapolis-based partner for PwC.

The largest deal of the quarter was $21 million in early-stage funding for Tendyne Holdings, a Roseville firm that makes technology to treat leaky heart valves.

But only three of the 11 deals in the first three months of the year were in medical technology, and four were in software. The second-largest was for software firm TST Media, which developed the Sport Ngin platform and attracted $15 million in funding.

Cima NanoTech, an industrial materials firm with headquarters in St. Paul, raised $13.4 million. Gravie, a company that guides consumers through the process of buying health insurance, raised $10.5 million

"It's good to have some industry balance," Scholtes said. "I'd consider that a positive sign."

From 2010 through 2013, Minnesota's quarterly average venture funding was $60.2 million on nine deals, so the first quarter of 2014 was better by both measures.

Nationally, venture capital dollars increased 12 percent quarter-by-quarter to $9.5 billion. Software, with its low capital requirements and quicker payoffs for investors, continued to get the most funding, attracting 42 percent of U.S. venture dollars in the fourth quarter, or $4 billion.

Medical device investment, which has been in long-term decline, ticked upward in the quarter. In Minnesota, the amount of med-tech venture funding has yet to return to prerecession levels, but the four software deals in the first quarter are a sign that other types of start-ups are starting to attract significant dollars.

Also, recent data from the trade group LifeScience Alley offers encouraging signs for the medical device industry. Including venture capital, angel funding and investment in small firms by large companies, funding of young life sciences firms rose 81 percent in 2013.

The top venture capital recipient in the United States in the first quarter was San Francisco-based Internet storage firm Dropbox, which attracted $325 million.