Hartford Business Journal

HartfordBusiness.com | February 8, 2021 | Hartford Business Journal 9 STARTUPS, INNOVATION & TECHNOLOGY Our flexible lending solutions and experienced team may be just what your business needs. Visit chelseagroton.com/growthatbusiness or call 860-448-4295 You can count on us! "There is a support network in Connecticut," Cocuzza said. "If you can demonstrate there's a product market fit, … CI and [others] will get you in front of investors." CI has played a leading role in Connecticut startups receiving venture capital. In fiscal year 2020 alone, it invested $43.2 million in about 100 Connecticut companies, a nearly 10% increase from the year-ago period. But CI's investments can also create an entourage effect in which VC investors are more willing to put money into a company if someone else appears comfortable taking that risk. McCooe said the use of CI's pocketbook sends a signal to other prospective investors. Any VC investment is a risk, McCooe said, but losing money on an unknown company based in a location without a history of successful startups is harder for investors to explain than losses from companies in San Francisco or New York. "You don't want to be the first person trying to make your hay in, say, Norwalk," McCooe said. By the numbers The VC money rolling into Connecticut is largely going to companies in the healthcare/bioscience and tech spaces. Healthcare-related companies in the state raised $492 million in VC funds in 2020, according to PwC, while internet- related tech companies raised $102.6 million. The next three top money- attracting sectors — consumer products and services, software and food and beverages — received a combined $93.5 million in 2020. Venture investment is also going disproportionately toward southeastern Connecticut, data show. The 10 Connecticut companies that received the most VC investment last year were all located in New Haven or Fairfield counties. One company with Greater Hartford ties, bioscience startup Rallybio, actually raised the most money in 2020 — $145 million. Rallybio, which is developing a portfolio of pharmaceutical technologies to treat severe and rare disorders, had been headquartered at UConn's Technology Incubation Program facility in Farmington, but moved to New Haven to be closer to the Elm City's bioscience cluster. The increase in Connecticut VC money makes sense to Tim Shannon, a general partner at Westport- based early-stage investment firm Canaan. The levels of VC investment nationwide are about five times what they were a decade ago, Shannon said. U.S.-based companies raised a record $130 billion in 2020, up 14% from a year earlier, according to the PwC/CB Insights MoneyTree Report. Shannon said the industries and geographic locations VCs are favoring in Connecticut match what he'd expect to see. Tech and health care — including biotech, medical devices and digital health — are hot markets everywhere. Further, Fairfield County is right next door to New York City, and New Haven hosts Yale University and all the talent and resources it attracts. There is room for Hartford to establish itself as a tech hub, Shannon said, and efforts to attract tech startups to the city are a positive sign. But it will take a while before VCs associate Hartford with tech the way they associate New Haven with life sciences. "For an area like Hartford to really provide a tech presence, it's a 10-year commitment. It's not going to happen overnight," Shannon said. "Do I think it could happen? Absolutely." Beyond Silicon Valley Eric Rosow, CEO of Farmington- based Diameter Health, said being based in Greater Hartford hasn't deterred investor interest in his medical- technology company, which helps health information exchanges, IT vendors, care providers and payers consolidate and better assess clinical data. Diameter raised $18 million in VC funding last year. Rosow is no newcomer to growing successful tech companies. He started Diameter about six years after selling his software firm, Premise Corp., to Atlanta-based medtech firm Eclipsys Corp. for $38.5 million. He said he finds investors are much more interested in whether the people running a company are capable than where they're located. "I think there are a lot of [VCs] that are interested in the best team, whether you're in Connecticut or not," Rosow said. Some VCs are actually beginning to see investing in Connecticut companies preferable in some ways to putting more money in Silicon Valley. Howard Mergelkamp, a managing partner at San Francisco-based VC firm Mosaik Partners, said while there's a higher volume of tech and entrepreneurial talent in his backyard, it's also much more expensive to invest in that hyper competitive market compared to places like Connecticut. Mergelkamp, whose firm invested in Payveris, also noted that Michael Brooder Ron Bergamesca Tim Shannon CI provides Connecticut companies funding, mentorship and access to an investor network so that they're ready for prime time. "When a company has a Connecticut Innovations or similar type of state- sponsored [fund] backing it, it does two things: it gets the company further along before it has to find that venture capital and gives the company connections," Mergelkamp said. Connecticut startups have been showing results, too, McCooe said. At least seven Connecticut firms were acquired for at least $1 billion over the past five years, McCooe said. And Norwalk-based software firm Datto raised $594 million last October in a high-profile IPO. Payveris CEO Bergamesca said other VC investors like Mergelkamp will increasingly see Connecticut as a good place to invest, especially if the state continues to lean into supporting startup development. "I don't know too many states that are as supportive as Connecticut," Bergamesca said. "The extent that the state is behind us and companies like Payveris makes it a very attractive place to have your headquarters." CT venture fund investment Source: PwC/CB Insights MoneyTree Report Year # of deals $ raised 2011 69 $298.3 2012 69 $194.7 2013 68 $259.7 2014 67 $689.8 2015 40 $582.3 2016 48 $201.4 2017 62 $361.1 2018 54 $414.7 2019 58 $556.5 2020 58 $707.3 Here's the amount of money CT companies have raised over the last 10 years.

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