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Pittsburgh area startup companies find fewer dollars at venture capitalists

| Saturday, April 20, 2013, 12:01 a.m.

Tough times continued for startup companies looking for money from venture capitalists during the first part of the year.

Venture capital firms invested just $10.9 million in Pittsburgh-area startups from January through March, the lowest level in 14 years, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, using data from Thomson Reuters.

That money went to 22 companies, the same level as a year ago, when investors placed $36.0 million here.

The amount invested was the lowest since venture firms put $10.4 million into three area companies in early 1999.

Innovation Works and unidentified investors made the largest deals during the period: $3.25 million for Wombat Security Technologies Inc., a software developer; $2.55 million in Cognition Therapeutics Inc., a biotechnology company; and $2.1 million for NewCare Solutions LLC, a medical devices and equipment maker.

Venture capital invested here also fell in the final three months of 2012 to $24.7 million in 21 deals.

Despite those numbers, total investments in Pittsburgh-area startups is on an uptick, said Gary Glausser, chief investment officer at Innovation Works, a government-funded nonprofit that is one of the region's most active investors.

Investments by venture capital firms are a minority of deals done here, Innovation Works said in a report last week. Nearly two-thirds of startup financings come from individuals, called “angle” investors, and other private funds.

In 2012, all investors put $329.1 million in 190 companies in the region, according to the study by Ernst & Young and Innovation Works. By comparison, investments from venture firms last year totaled $168.97 million in 79 deals, MoneyTree Report said. Innovation Works tracks investments from all sources.

“The angles really stepped up,” said Glausser of the difference.

Venture capital firms aren't investing as much because their ability to raise money is at a six-year low, according to the National Venture Capital Assocation. In the first three months of the year, they raised $4.1 billion, the lowest since 2007, in part because less money is available from foundations and university endowments.

“That's not a good indicator,” Glausser said. “If venture capital is having difficulty raising money, then down the road there will be less money invested.”

Nationally, venture capitalists invested $5.9 billion in 863 deals in the January-March period, according to MoneyTree Report, a decline of 12 percent in dollars and 15 percent in deals compared to the fourth quarter of 2012 when $6.7 billion was invested in 1,013 deals.

Nationally, venture capitalists invested $26.5 billion in 3,698 deals in 2012, a decrease of 10 percent in dollars and a 6 percent in deals from the prior year.

John D. Oravecz is a Trib Total Media staff writer. Reach him at 412-320-7882 or joravecz@tribweb.com.

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