“Who’s Getting Funded and Why?” at Venture Assn. New Jersey Meeting
Friday, February 24, 2012 • 6:01pm
The regular monthly meeting of the Venture Association New Jersey (www.vanj.com) was held on Tuesday, January 31, at the Marriott Hanover, Whippany, NJ. The featured speaker was Frank J. Graziano, Angel Investor and Managing Partner, Monmouth Venture Partners (www.fjgraziano.com), a boutique merchant bank that focuses on making investments in middle-market companies that have strong, established competitive positions and excellent growth prospects.
"Venture investing is back!” Graziano observed, opening his presentation with a discussion of “macro trends” in the industry. “It dropped from an earlier peak of 2,752 deals worth $30.1 billion in 2007 to a low of 2,461 deals worth $20.8 billion in 2009 before rising to a new high of 3,051 deals worth $30.6 billion in 2011. Both the number and the dollar volume of deals were substantially higher during all four quarters of 2011 compared with the same four quarters of 2010, averaging $2.5 billion a month.”
From 4th Quarter 2010 to 4th Quarter 2011, Internet ventures received the largest share of Venture Capital (VC) funding, approximately one-third of the total, while Healthcare ventures received about one-fourth.
Seed deals during this same period, while accounting for only a small percentage of total funding, were on an uptrend from 11 percent to 14-15 percent of the total. “This trend is driven by Super Angels like Reid Hoffman, Former PayPal Executive Vice President and Co-Founder of LinkedIn,” said Graziano. “Like Hoffman, many Super Angels are beginning to form their own investment funds.”
“In terms of number of deals, California ranks number one, consistently accounting for over 40 percent of deal volume,” Graziano told the audience. “New York and Massachusetts, however, ironically the two competitors in the Super Bowl, regularly compete for second place. In terms of where their investments are going, however, there is no competition whatsoever. During 3rd Quarter 2011, for example, 62 percent of investments by NY-based VC firms were in Internet ventures compared with only 25 percent by MA-based firms. During the same period, however, 34 percent of investments by MA-based VC firms were in Healthcare ventures compared with only 4 percent by NY-based firms.”
In spite of this fierce competition, New Jersey cannot be ignored, according to Graziano. “The state ranks 9th in total investments by VC firms,” he noted. “It is behind only Texas, Illinois, Colorado, Virginia and Washington in terms of total investment, and 5th in investments in Healthcare ventures.”
In conclusion, Graziano offered the following observations:
- The VC industry is alive and well in the U.S.
- “Super Angels” and Seed Investing are growing trends.
- Despite this “frenzy”, seed valuations remain steady.
- Start an Internet company if you want to raise money from NY VC’s.
- NY is either vulnerable or superbly positioned depending on Internet sector future direction.
- NY’s early stage ecosystem very well developed due to unique circumstances of geography and resource concentration.
- NJ punches above its weight class in early stage investing.
- NJ has potential to be a national leader in healthcare VC.
- Components of a robust ecosystem exist, but remain diffused and uncoordinated in NJ.
The PowerPoint presentation used by Graziano at the January 31 meeting can be found in the Archives section of the VANJ website at www.vanj.com.
Next Meeting Tuesday, February 28
The next regularly scheduled VANJ meeting will be Tuesday, February 28. The speaker will be Joe Allegra, General Partner, Edison Ventures (www.edisonventure.com), a VC firm focusing on expansion-stage, information technology companies. His topic will be, “Investor Guidance on Business Plans and Presentations.”
Advance reservations can be made by calling Clara Stricchiola at (973) 631-5680, faxing (973) 984-9634 or e-mailing firstname.lastname@example.org and mailing a check ($35 for members, $55 for non-members) to VANJ, 26 Main Street, Chatham, NJ 07928-2402. Registration at the door is $75 after 12:00 Noon on Monday, February 27.