TetraLogic, other biotech firms power local venture investment

Without its vibrant biotechnology sector, Philadelphia would barely rate as a region that venture capitalists might want to visit once in awhile.

That’s clear from the quarterly MoneyTree Report, released Friday by PricewaterhouseCoopers and National Venture Capital Association.

The report, which uses data from Thomson Reuters, shows 10 of the 31 venture financings of Philadelphia-area companies during the third quarter were for biotechnology firms.

Those 31 companies collectively attracted $136.3 million during the three months ended Sept. 30. Not great, but not horrible. In the second quarter, 29 Philadelphia-area companies raised $120.3 million. As for the third quarter of 2009, 27 local companies collected $94.4 million.

Albert Piscopo, the PricewaterhouseCoopers partner who heads up the Philadelphia venture capital practice, said that what bodes well for the region is that early-stage companies accounted for most of the deal flow.

Sixteen of the 31 local deals were classified as early-stage investments, while five others involved companies in the start-up or seed stage.

Those are the companies that are tapping into the talent pool in the area, Piscopo said. They tend to possess cutting-edge technology and hold the potential to become growth companies that one day could employ even more people and create business for more suppliers.

That’s the dream, anyway. The reality of venture capital is that, even as selective as the professionals are, very few of their investments turn into runaway successes.

And Philadelphia, while possessing a smattering of venture capital firms, is not one of the nation’s hotbeds for investment. Even a fifth-grader could tell you that Silicon Valley is where venture capitalists write most of their checks.

As investment declined nationally to $4.82 billion in the third quarter from $6.94 billion in the second, Silicon Valley barely missed a beat. More than 200 firms there attracted $1.75 billion.

The MoneyTree Report tracks 18 regions and ranks them by the amount of venture capital invested in their hone-grown companies. If Silicon Valley is always No. 1, the runner-up is generally New England, thanks to Boston’s fertile entrepreneurial community. A hundred companies there raised $539.5 million in the third quarter.

And Philadelphia? Ranked No. 11 in the third quarter.

The biggest financing for a local company was TetraLogic Pharmaceuticals Inc., a Malvern firm working on experimental cancer treatments, which raised $32 million.

The MoneyTree Report also listed Trevena Inc., a King of Prussia start-up pursuing a treatment for acute heart failure, as having raised $17.5 million. (For its part, Trevena said in July that it had completed a $35 million financing.)

One non-life-sciences company that raised a lot of money was AirClic Inc., a Trevose provider of software for mobile devices. The later-stage company raised about $18 million.

Unfortunately for the Philadelphia region, one of its early-stage companies that obtained financing in the third quarter won’t be growing here. 6fusion USA Inc. moved from Wilmington to Durham, N.C., in connection with its $3 million funding by Intersouth Partners, a North Carolina firm with $780 million under management.