Minnesota slips in venture capital money during second quarter, first half of 2015

Venture capitalists cooled on Minnesota companies during the second quarter of 2015.

Seven companies received investments totaling $61.4 million during the period, down from $104.5 million that seven companies took in during the same period a year ago, according to the MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association.

Year-to-date, the state has seen $105.9 million in 12 deals, down from $187.9 million in 18 deals in the first half of 2014, according to the MoneyTree Report, which is based on data from Thomson Reuters.

Nationally, it's a different story as software deals drove venture capital totals in the second quarter to levels not seen since the tech-boom fueled fourth quarter of 2000. The venture capital total nationally last quarter hit $17.5 billion in 1,189 deals.

"Our feeling on Minnesota is that it's too early to say there's a negative trend," said Mark Scholtes, a Minneapolis-based partner in PwC's technology-client group who examines the numbers. "There were seven deals in second quarter. There could be 12 or 15 deals in the third quarter, which would put Minnesota right back in the national trend.

"Our five-year quarterly average for dollars in Minnesota is $66 million. The second quarter was $61.4 million. It's a little below average but I'm not worried. We have strong economic indicators and a healthy economy here."

Minnesota, which has typically raised about 1 percent of the venture capital distributed throughout the country, got less than 0.5 percent last quarter.

Four of the seven Minnesota companies receiving venture capital in the second quarter are considered expansion-stage companies. They have survived their earliest years and are on their second or third round of capital raising.

"The expansion stage is the point in a company's evolution where it's making its largest leap," Scholtes said.

Other local companies getting venture capital in the second quarter included Neochord of Eden Prairie, as well as Gravie, Tenksolar, Live Better Brands and Segetis of Minneapolis.

Scholtes said the $31 billion raised nationally during the first half of 2015 is more than the full 12-month period in 15 of the last 20 years. The largest recipients of venture capital continue to be the huge states and technology bastions of California, New York, Texas and Massachusetts.