Venture Capital Report: 1992
Forty-two Companies Report Funding in Excess of $87 million for 1992The 1992 Research Triangle Investment Survey, conducted by the Council for Entrepreneurial Development in cooperation with the Durham and Raleigh Chambers of Commerce, reveals that 42 area companies who responded raised in excess of $87 million in equity funding. The annual survey, which was first conducted in 1988, collects information about private equity investment from individuals, venture capitalists, and corporations.
The survey has charted a steady rise of about 20%-50% per year in the amount of private equity capital invested in Triangle area companies from 1988 through 1991. The increase from $37 million reported in 1991 to $87 million reported in 1992 is indicative of the emergence of the Research Triangle area as an entrepreneurial hotbed with more companies receiving region's high-technology entrepreneurial economy.
Telecommunications companies were the big winners with investments of more than $20 million, with biotechnology companies (including biomedical and pharmaceuticals) in second place with $15,494,000 in investments. Overall, high-technology companies predominated as they have in the past, but there were also very significant investments made in manufacturing, retail and other non-technology industries.
This is the fifth investment survey conducted by the CED and the Durham and Raleigh Chambers. Over the past five years, companies have reported that more than $250 million has been placed in the hands of promising Triangle entrepreneurs.
Industries Receiving Investments
The major high-tech industries in and around the
Research Triangle Park -- telecommunications,
biotechnology/pharmaceuticals, computers/software,
and environmental diagnostics raised more than $53
million.
Two telecommunications companies raised $20,185,229 (23%), ten biotechnology companies raised $15,494,000 (18%), ten computer/software companies raised $10,877,000 (12.5%), and three environmental companies raised $6,975,000 (8%). One advance materials company also received a seed investment of $126,000.
Four retail and service companies received $648,630, while three healthcare companies received $2,185,000 (2.5%). Four manufacturing companies received $1,840,000 (2%) and other investments in five miscellaneous non-related companies totaled $28,780,000 (32%).
Stage of Investment
Sixteen seed/start-up stage companies representing
38% of the respondents received $55,257,229, 63% of
the funds raised. These figures represent a dramatic
increase in the amount of investment in seed/start-up
companies in the Triangle area. For the purpose of
the survey seed/start-up companies were defined as
companies not yet selling products. The increase
reflects several factors including the emergence of
strong private investor networks in the Research
Triangle area and an increased number of corporate
equity investments in young high technology
companies.
Start-up biotechnology companies, with their long products cycles, accounted for $8,194,000 (15%) of start-up capital, while one telecommunications company's $18,185,229 investment accounted for 33% of this category. The remaining investments were made in environmental, manufacturing, and other industries.
Twenty-six companies representing 2% of the respondents received $31,960,000 in expansion capital, 37% of the total investment reported.
Size of Investment
The size of investments reported ranged from $5,000
to $26 million, which compared to a 1991 range of
$85,000 to $8,662,720. Twenty-seven (64%) of the
investments were under $1 million, which is
consistent with the spread in 1991. While the average
investment in 1992 increased to $2,076,020 from
$1,421,289 in 1991, the median investment in 1992 was
$500,000, slightly down from $520,000 in 1991.
State and Federal Resource Leveraging
State and federally-financed innovation programs have
provided early stage funding to technology-based
businesses in the Research Triangle area during the
1992 survey period. The North Carolina Biotechnology
Center funded five area firms through the Economic
Development Finance and Small Business Innovation
Research programs totaling $440,000. The Technology
Development Authority provided $100,000 to two
Research Triangle companies. Research Triangle firms
also received $2.3 million of the $3.4 million in
Small Business Innovation Research funds awarded to
technology-based North Carolina companies.
Trends in Investments
Several important trends have emerged over the past
five years of surveying equity capital investment in
Research Triangle companies:
Companies are combining corporations and venture
capitalists as partners in their growth
strategies.
The year 1992 demonstrated a significant increase in
the number of corporate equity investments in
Research Triangle area companies, primarily in the
biotechnology, telecommunications, and computer
fields.
More companies are receiving equity
investment
Past surveys have documented responses from
approximately twenty-five entrepreneurial companies
each year while in 1992 forty-six companies responded
with investment data.
The total amount invested has more than doubled after years of slow and steady increases. The total equity investment reported in 1992 was in excess of $87,000,000-more than twice the $37 million reported in 1991. Annual increases for prior years averaged 34%.
The range of investment has increased
dramatically
While the median investment remained stable at
$500,000, there was a shift toward larger investments
in both start-up and expansion companies. However,
the 1992 survey documents that capital was available
for new companies needing under $100,000.
At the high end of the investment spectrum, six companies raised in excess of $4 million. The company with the highest single investment in 1991-a telecommunications company which raised $8,662,720-raised an additional round of $18,185,229 in 1992, and another company raised $26,000,000.
"Angel" investing is on the rise
A network of sophisticated private investors has
emerged to provide financing and management expertise
to many of the promising young companies in the
Research Triangle area. Groups like the Tri-State
Investment Group (TIG) in Chapel Hill are playing an
increasingly active role in preparing companies for
professional venture capital investment. In a
corollary survey, companies cited North Carolina's
Qualified Business Venture tax credit as an incentive
for private investment.
Initial Public Offering Activity Strong in
1992
In addition to private equity investments, the
Research Triangle continues to experience healthy
initial public offering activity. During 1992 three
area companies went public. They were Sphinx
Pharmaceuticals, which raised $75 million in a
January 1992 offering; SapiensInc., a software
company which raised $23 million in a June 1992
offering; and Medic Computers, a medical software
company which raised $21.4 million in a July 1992
public offering.
Companies Receiving Investments:
The following companies are among those who received
equity investment in 1992 (partial list)
|
Bioxy, Inc. |
ICAgen |
Companies Making Venture Capital
Investments:
Among those making venture capital investments in
Triangle companies in 1992 were:
|
Brantly Venture Group |
Medical Science Partners |
1992 Research Triangle Investment Survey
Sponsors
The 1992 Research Triangle Investment Survey was
conducted by the Council for Entrepreneurial
Development in cooperation with the Durham Chamber of
Commerce and the Raleigh Chamber of Commerce.
|
Survey Committee |
|
|---|---|
| Co-Chairmen | |
|
Robert L. Guthrie, Associated Insurers |
Elton Parker, Deloitte & Touche |
|
Members |
|
|
Mitch Mumma, Intersouth
Partners |
David Welker, KMPG Peat Marwick |
Special thanks to Kelly Griggs of Price Waterhouse who compiled the data for the 1992 Research Triangle Investment Survey.
The Council for Entrepreneurial Development (CED) was founded in 1983 to foster a productive environment for emerging growth companies and venture investors. CED provides mentoring, education and networking opportunities for entrepreneurs, investors and those who serve them in the private and public sectors. With over 1000 members representing 600 companies, CED is the largest entrepreneurial support organization in the United States.
CED sponsors an annual venture capital conference each May at Duke University which attracts 250 financiers to meet with 15-30 of the Southeast's most promising investment opportunities and sponsors monthly programs, seminars, and publications which assist entrepreneurs.
To learn more about resources for local
entrepreneurs or opportunities to invest in Triangle
companies, contact CED.