Venture capital activity in Massachusetts in the second quarter was one-third lower than in the same period a year ago, according to a report from the National Venture Capital Association and PitchBook released on Thursday. Still, that’s an improvement from the first quarter, when fund-raising dropped 43 percent year over year.
Startups in the state raised $4.4 billion in 182 deals during the quarter, led by the life sciences sector. The largest funding deals in the quarter were $401 million for ElevateBio, $300 million for Renagade Therapeutics, and $270 million for Orbital Therapeutics. Outside of biotech, water purification company Gradiant raised $225 million, and optical computing startup Lightmatter collected $154 million.
Since setting records in 2021, VC funding has plummeted nationwide as the Federal Reserve has raised interest rates and publicly traded tech stocks retreated. So far, in 2023, Massachusetts companies have raised $8.3 billion, compared to $12.6 billion in the first half of last year and $17.5 billion for the same period in 2021.
Venture capital firms have also been discouraged by a weak market for taking startups public or selling them to larger companies. So-called exit deals are on pace to total less than $20 billion in 2023, which would be the lowest in the past decade by almost $50 billion, according to the report.
“IPOs have not been viable options for VC-backed companies this year, despite the public markets showing positive returns on the year,” PitchBook analyst Kyle Stanford said in an e-mail. “Companies that were developed under the growth-at-all-costs mantra still need time to restructure their business models in a way that public market investors are willing to place a premium on, such as a well-developed path to profitability.”
Nationwide, second-quarter fund-raising declined 48 percent to $39.8 billion, NVCA and PitchBook said.
For most of the past decade, Massachusetts ranked third nationally, trailing California and New York in VC activity. In the second quarter, California-based companies raised $19.2 billion, down 33 percent from last year. New York startups raised $3.9 billion, down 61 percent and less than Massachusetts companies raised.
Aaron Pressman can be reached at aaron.pressman@globe.com. Follow him @ampressman.
