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Cyber, healthcare dominate Baltimore VC with $360M in Q2

By meerna Jul11,2024
Cyber, healthcare dominate Baltimore VC with 0M in Q2

Maryland’s largest city has spent much of the spring in a venture capital environment whose relative calm largely mirrors the situation nationwide.

Baltimore metropolitan area (MSA) companies raised $360 million across 16 deals in the second quarter of 2024, according to the latest Venture Monitor report, published quarterly by PitchBook and the National Venture Capital Association (NVCA).

That’s up about 8% from the same time last year, when Baltimore firms raised $332 million across 26 deals. In the first three months of 2024, $74 million was raised across 17 deals, compared with $92 million in early 2023. The beginning and end of the year are often slower compared with the second and third quarters.

The latest data shows Baltimore returning to some form of normalcy after an unprecedented pandemic boom in startup funding. Investment in local companies topped $1.6 billion in 2021, before falling to $791 million in 2022 and $943 million in 2023.

While deal activity has increased nationwide over the past three quarters, PitchBook said a few large deals are driving a disproportionate share of the value as investors focus their bets on the most promising companies. That’s evident in the latest data for Baltimore, where overall investment went to fewer companies than last year. The largest investors are mostly in industries like health care and cybersecurity, where companies often thrive on university and government support.

In addition, investors are becoming more selective as the public market is less forgiving of newbies who lose money. Fewer companies going public means investors have a harder time making a return — and, as a result, it’s harder for them to raise money for future funds from their LPs (limited liability partners).

“The height of the COVID-19 pandemic has brought unprecedented levels of investment across a variety of technologies,” said Bobby Franklin, president and CEO of NVCA. “Regardless of the cause, the initial influx of investment into these technologies has largely subsided, and investors are now focused on helping their most promising companies mature in the face of a historically difficult exit environment.”

One positive aspect of Baltimore and the surrounding D.C. area is that PitchBook found the combined region to be the leader in the number of companies with all-female founding teams, with 44 deals in the second quarter, slightly fewer than the 47 women-led companies in the Boston area.

Baltimore’s Biggest VC Deals in Q2 2024

Given its proximity to government agencies and research institutions like Johns Hopkins, the Baltimore area is home to a number of startups in sectors like cybersecurity and healthcare. The top startups by funding in Q2 reflect that dynamic. The biggest outlier in Q2 funding was cybersecurity provider Huntress, which raised $150 million at a valuation of more than $1.5 billion.

Check out PitchBook’s top five regional deals below. Note: These numbers may vary slightly upon publication, as some deals aren’t reflected until weeks after VC’s quarterly reports are released, or PitchBook may find errors in its data.

  1. Huntress, a Colombia-based company that manages a cybersecurity platform for small and medium-sized businesses, raised $150 million in a Series D round that closed on June 18.
  2. Delfi Diagnostics, a biotech company that creates products for early cancer detection, has raised new equity funding from Merck Global Health Innovation Fund after raising $225 million in 2022. PitchBook reported the funding round was $100 million on June 3 — a day before Delfi, which has offices in Baltimore and Palo Alto, announced the investment from Merck, without disclosing the cost of its stake.
  3. Rapafusyn Pharmaceuticals, a Charles Village-based company developing technology related to a new class of natural product-like macrocycles, has raised $28 million in Series A funding.
  4. Hanover-based Xona Systems, which develops secure remote access products, has raised $18 million in a Series A round, according to PitchBook. The company previously announced the closing of a $7.2 million Series A round in 2022, as well as a more recent $18 million “strategic funding round” last month.
  5. Backpack Healthcare, an online provider of pediatric mental health care services in Howard County, has raised $14 million in a Series A round that closed on April 5.

Some experts in Baltimore’s startup community are advocating for assessing the health of the local ecosystem based on more than just VC dollars raised. Jamie McDonald, former CEO of UpSurge Baltimore, which is building an ecosystem of equity-focused startups, previously told that she would expand the scope of her analysis to include other forms of investment, such as grant funding. She also said she would expand the geographic scope to include nearby suburbs like Columbia.

National Venture Capital Trends

Nationally, PitchBook reports that $55.6 billion was invested in about 4,226 companies in the second quarter, marking three consecutive quarters of rising deal flow but below historical averages. The value of average early-stage deals also rose to an eight-quarter high. However, PitchBook noted that just two AI startups — AI cloud company CoreWeave and Elon Musk’s xAI — accounted for 26.3% of that funding.

Strip out outliers, deal volume is roughly in line with recent quarters. And overall deal volume was low in Q2, according to PitchBook, given the few startups exiting and LPs’ wariness about investing in the VC space. So these investors need to stretch their funds as long as possible.

“Venture capitalists have become cautious, only investing in high-quality companies that demonstrate a promising trajectory for product-market fit, rather than investing in multiple smaller deals,” PitchBook wrote.

By meerna

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