A Record Quarter: 53 Minnesota Tech Ventures Raised $155m+ In Q4 2015

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Redpath3The TECHdotMN Quarterly Capital Review underwritten by RedPath & Company is a comprehensive look at all things money in Minnesota tech every quarter.

For five years running, we’ve been following the paper trail to bring clarity around Minnesota’s investment climate.  The review serves as proxy for private funding activity, including: crowdfunding, incubators, angel investments, venture capital,
corporate strategic and equity.

At least 52 different Minnesota tech ventures received $155m+ of investment capital during the fourth quarter of last year according to information collected and analyzed from October through December 2015.

Let’s take a closer look at what happened in Q4 2015:

+Q4 saw a big lift in activity when compared to the previous quarter. Double the number of unique companies represented and double the dollars invested ($153m vs.$73m) [source: Q3 2015 Capital Review].

+Looking at the same period last year (YoY), both the number of companies and their total fundraisings were significantly higher. [source: Q4 2014 Capital Review]. In fact, the level of activity in this quarter was the highest on record for any single quarter.

+The three largest funding rounds during the third quarter were: Code42 – $85m (once again a record round), Site Improve – $27m (counting half considering the geography), and Conservis – $10m (Minnesota’s largest ag-tech play).

+Crowdfunding wins for the period include myBivy ($26k) & FLUID ($116k).

+Some local attorney’s weighed in on the prospect of equity crowdfunding, which is coming closer to reality.

+New York angel and Edina native Andrew Mitchell talked about his interest in MN-based startups.

+Mayo Clinic ‘granted’ $100k into two different health tech startups, neither of which are locally headquarted.

+TechStars + Target Retail Accelerator named Ryan Broshar as Managing Director in a move seen as complimentary to his role with Matchstick Ventures.

+Minnesota’s Angel Investor Tax Credit was in full effect this term, as half the companies listed used up some $3m in kickbacks to investors.  At the same time, the subsidy is being fairly questioned in terms of actual ROI.

Here’s a list of the companies and their corresponding funding amounts for the quarter:

RELATED

2014 Minnesota Tech Funding Review: 119 Ventures Raised $173m

Record highs for Minnesota tech investment in 2013

Minnesota’s tech ventures raised over $145 million in 2012

Tech funding doubles in Minnesota from 2010 to 2011

Comments

  • Frank Jaskulke

    Jeff,
    If you combine your data and Medical Alley’s, remove the overlap (mainly digital health) it works out to around 200 companies raised roughly $700-$750 million in capital for 2015.

    • http://tech.mn Jeff Pesek

      Hi Frank, a few questions:

      1) where does one see the data you are referring to?

      2) are you counting public companies?

      3) are you talking about for the entire year 2015?

      4) why do you think legacy media continues to source the money tree report, which misinforms the business community, given how incomplete it is (covering less than 50% of deals).

      • Frank Jaskulke

        Hi Jeff,

        1: Medical Alley’s investment report is here: https://www.medicalalley.org/library/research/2015-annual-investment-report/ Note: While the data we use is almost entirely public data, we don’t list companies unless the company has publically announced or given us permission. Many are sensitive to the information being shared even though you can easily look up the form d’s…
        2: We count public companies but only if they are using public markets to raise development capital, not growth capital. There are some medical device companies in Minnesota that are public in Australia – they re pre-revenue, pre-product approval. See Sunshine Heart as one example of this.
        3: Yes. I went back to your Q1, Q2 and Q3 reports and combined that with the number’s my co-workers put out, removed the overlap (we both count digital health). Note, 700-750 is an estimate, I didn’t go line by line on your numbers to remove duplicates.
        4: PwC’s moneytree report is good for what it measures – institutional VC backed deals. I think it receives continued coverage because it provides for a comparative number with other regions and it has historical data. I like MoneyTree for that. And to be fair, our report has been regularly covered since we started putting it out.
        We should combine forces and try and get at an overall number (or rather, closer to an overall number). Being able to say, “Minnesota’s high tech startups raised $700 million” I think could have an impact.

        • Frank Jaskulke

          small addendum – just learned from a member about another $ 4 million that was raised in 2015 that we had missed :)

        • http://tech.mn Jeff Pesek

          1) thanks – i’ll check it out again. I remember looking into it a while back, but found the lack of transparency off-putting (ie- there are companies in here but we can’t tell you who they are). I feel that if the source data isn’t disclosed then the information cannot be independently verified and therefore lacks integrity. Maybe that has changed?

          My understanding, which could be wrong, is that Medical Alley produces this report (and information like it) in part to justify/support public funding the state legislature. All the more reason that complete information should also be public (and audited). Maybe that has also changed?

          If a company doesn’t want to be revealed, then their transaction is both private and off the record. Just as we are always aware of certain deals happening not included in the above stats because of the understandible sensitive nature. It sucks sometimes to not add tens of millions more to the top line! (which is why we look at it as worst case scenario, typically 10-30% higher in actuality).

          The approach we’ve always taken in producing these quarterly/annual reports is that if counting a deal/company/amount – disclose it, and if not, then dismiss it.

          To each their own.

          2) Fair enough – to be clear, we don’t ever include publicy traded tech firms in our reports – not that it would much matter ;)

          3) Cool. Will be breaking this down a bit more coming up with our comprehensive 2015 investment review.

          4) PWC MoneyTree data is not limited to institutional VC backed deals, it attempts to span seed – late stage, albeit very incompletely, hence my concerns about the spread of misinformation given the availability of better alternatives.

          4a) yes

          • Frank Jaskulke

            Jeff,

            I think you might have missed something about me – I work at Medical Alley.

            On the transparency – you can find all the deals here: http://www.formds.com/ and add them up/ We just don’t publish who did what unless we have permission to share it

            We do disagree on methods, which I’m ok with.

            Additionally, if our methods were not trusted, the legacy media would not publish it. Unlike the blogosphere, legacy media journalists, especially at print publications, have a professional code around information verification. The Star Tribune would not publish our data if they thought it was made up or subpar.

            On the legislative part – the primary reason for doing the report was to correct misperceptions about the level of investments in Minnesota startups. Many people I would talk to would say things like, “there are no startups,” “yeah there are big venture deals but no early stage deals, ect.” We created the report to correct for that.

            on your #4: see their methods section at the link below. MoneyTree is instituiontal VC money
            https://www.pwcmoneytree.com/Definitions/Definitions#Report

            “The report includes the investment activity of professional venture capital firms with or without a US office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing.”

            “Angel, incubator and similar investments are considered pre-venture financing if the company has received no prior qualifying venture capital investment and are not included in the MoneyTree™ results.”

          • http://tech.mn Jeff Pesek

            “I think you might have missed something about me – I work at Medical Alley.”

            +Nice. Then you are in a position to directly improve the product!

            “On the transparency – you can find all the deals here: http://www.formds.com/ and add them up/ We just don’t publish who did what unless we have permission to share it”

            +If that’s the case, then the data is already public…whose permission do you need to source that in your report?

            “Additionally, if our methods were not trusted, the legacy media would not publish it. Unlike the blogosphere, legacy media journalists, especially at print publications, have a professional code around information verification. The Star Tribune would not publish our data if they thought it was made up or subpar.

            +where does one find this “professional code around information verification” and does legacy media review your data under such “code”?

            “On the legislative part – the primary reason for doing the report was to correct misperceptions about the level of investments in Minnesota startups. Many people I would talk to would say things like, “there are no startups,” “yeah there are big venture deals but no early stage deals, ect.” We created the report to correct for that.”

            +Totally appreciate that and relate! Even with the reality check that these reports offer, there are non-entrepreneurs and non-investors who choose to believe in a perceived problem because they have something to gain by it being that way.

            And legacy media is complicit in such willful ignorance by consciously choosing to present knowingly incomplete information such as the PWCMT data.

            Furthermore, it’s very disrespectful to the entrepreneurs and investors not to receive equal treatment as both the PWCMT + legacy media are cherry picking deals and playing favorites.

            “on your #4: see their methods section at the link below. MoneyTree is instituiontal VC money”

            +I see that, which is in contrast with this chart which tells me they are attempting to count all investment activity now:

          • Frank Jaskulke

            On public data: We have a legal ability to publish the information. We choose not to because the companies have asked us not to.

            Code of ethics: http://www.spj.org/ethicscode.asp
            Journalists do not (usually) verify every data point they receive. Rather they determine if the sources are trustworthy and then determine what level of scrutiny should be applied
            On #4: it is not inconsistent at all. That chart does not show what you think it shows. An institutional VC can make seed stage investments. Amphora Medical, a local medical device startup, raised $12 million about 2 years from a VC. It was their very first financing. Despite the source the large dollar amount, that was their seed round.
            We had another member that did a $20 million series A round a few months ago.
            PwC has always tracked seed, early, ect. They are not attempting to count all investment activity, they are attempting to count all institutional VC investment activity.

          • http://tech.mn Jeff Pesek

            Sorry for the delay, Frank.

            So with the PWCMT data, what you’re saying is that they go by the investing firm – not the company when considering whether or not to count it.

            If that’s the case, why are they factoring these figures in total when not all is sourced from actual institutional investors, I wonder?

            The Big Know – $3m – led by LFE, but not all that was from LFE or “institutional capital” it also inclduded invididual angels, which they are counting.

            Zipnosis – $17m – also Led by VC, but also included some angel investors or non institutional.

            Evidentia’s $1.2m was led by Invenshure, not clear who else participated, but I’d wager that there was angels involved.

            Additionally, I’d be curious to know the sources for the med tech listed in early/seed stage: Celcuity & Andarta, for example – to see what that reveals about this notion of only tracking “institutional” investment.

            Looking back on some of the data from previous quarters shows the same pattern…of the limited number of companies that their report does count, many include money from sources that don’t match their stated method. It’s not only a consistently incomplete source, it’s also methodically inconsistent.

          • Frank Jaskulke

            Jeff,

            According to their methods they count rounds that have angels in others in them if they have an institutional investor,

            from: https://www.pwcmoneytree.com/Definitions/Definitions#Report

            “The report includes the investment activity of professional venture capital firms with or without a US office, SBICs, venture arms of corporations, institutions, investment banks and similar entities whose primary activity is financial investing. Where there are other participants such as angels, corporations, and governments in a qualified and verified financing round, the entire amount of the round is included.”

            On Celcuity and Andarta: I don’t know who Andarta’s investors are but Celcuity has Brightstone, a local VC firm, as an investor (http://brightstonevc.com/)

          • http://tech.mn Jeff Pesek

            Hmm…good catch.

            So if company A raises $1m from a group of 10 angel investors, it doesn’t count.

            But if company B raises $1m from 1 “VC” and 9 angel investors, it counts.

            Why?

          • Frank Jaskulke

            Exactly!
            The why is their Intent is to track deals that have a VC or VC like entity involved. Their intent is not to track total investment activity. They defined their space as a subset of the total.
            This is why we started doing our count – our goal is to get closer to a total

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