Q3 report: Funding up with $267.7 million in nano, micro and MEMS

Nov. 5, 2004 — Investors put $267.7 million into 35 companies involved in MEMS, microsystems or nanotechnology in the third quarter, according to a Small Times analysis of the MoneyTree Survey by PricewaterhouseCoopers, Thomson Financial Venture Economics and the National Venture Capital Association. Both the amount invested and number of deals are higher than the second quarter results, when investors put $222.5 million into 29 companies.

Third quarter results reflect a continuing trend toward deals of smaller size. The dollar amount invested this quarter is up just slightly over the $261 million invested in the third quarter of last year, but the number of deals is up sharply over the 27 closed in the same period last year. As a result, the average small tech deal size of $7.7 million is down from the $9.7-million average in Q3, 2003.

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Small tech’s deal flow was responsible for 5.8 percent of the 601 deals that closed in the quarter. On a dollar basis, the quarter’s $267.7 million was responsible for 6.7 percent of the $4.3 billion deployed, a sharp increase over the 4 percent posted last quarter and up slightly over the 6.2 percent of the year-earlier period.

An analysis by funding stage shows that 16 expansion stage companies were responsible for $156.6 million and 12 later stage companies accounted for $88.8 million. Seven early stage companies accounted for $22.4 million. There were no startup/seed investments during the period.

An analysis by industry showed a diverse allocation of investments across many industries. The category of medical devices and equipment netted the most dollars, $72.2 million in six deals. The semiconductor category posted the most deals, eight, which accounted for $67.5 million.

Although it is not a distinct category for the purposes of the MoneyTree Survey, display applications stood out in the funding of MEMS companies, with four of them reporting raising money. Iridigm Display of San Francisco raised $10 million. Keyotee of Austin, Texas, raised $1.25 million. Miradia Inc. of Santa Clara, Calif., raised $22.2 million. Reflectivity Inc. of Sunnyvale, Calif., raised $18.3 million. Iridigm was bought by one of its investors, Qualcomm, during the quarter.

A nanotech-only analysis showed investors putting $43.6 million into 11 companies. NanoDynamics Inc., a Buffalo, N.Y.-based nanomaterials developer, posted the largest nano round of the quarter, raising $12 million in an early stage deal.

A 2004 trend toward classifying nanotech investments as early stage continued in the quarter with five of the 11 deals early stage. Four deals were expansion stage and two were later stage.

During the first three quarters investors put $122 million into nanotechnology companies, leaving the sector on track to fall far short of the $301 million invested in nanotechnology in 2003.


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