Some points to consider on VC spending in 2023 and Baltimore’s Q4 performance

According to the latest version of that report, which publicly debuted on Thursday, in Q4 2023, the US VC market experienced a decline in deal activity overall. NVCA President and CEO Bobby Franklin said that this downturn may not ultimately signify a calamity.

“While the continued drop in activity does not lend itself to optimism, it would be a mistake to declare the market in crisis,” said Franklin in the report’s executive summary.

According to the Venture Monitor’s summary, the VC landscape shifted due to factors such as heightened political risk and evolving dynamics in global supply chains since early 2022. Additionally, there are positive national trends, with investments surging into AI, life sciences and clean tech, reflecting substantial interest from both the public and private sectors in these advancing fields.

Overall, PitchBook and the NVCA cataloged a total of $725.81 million raised across 99 deals throughout the Baltimore metropolitan statistical area (MSA) in 2023.

What’s in a fourth quarter?

Ten years ago, in Q4 2014, a modest $57.62 million was raised through 18 deals in the Baltimore MSA, according to PitchBook and the NVCA’s data. Fast forward to recent years, and the area wrapped up with banner highs.

Fourth quarters — like 2020’s, with Baltimore companies raising $30.2 million over 12 deals — may not be an apt way to predict trends for VC activity in the following year. If you were to just look at that year’s Q4 numbers, for instance, you wouldn’t know that venture capital had been on a high during the pandemic.

According to the Venture Monitor, closing figures for Q4 2021 stood at $391.28 million across 25 deals.

2020’s Q4 would not have shown you that 2021 was a historic year for Baltimore regarding investment where this MSA would gain momentum. Technical.ly’s prior reporting that direct quarter-over-quarter comparisons may not provide a comprehensive view.

During the fourth quarter of 2023, PitchBook and the NVCA reported a total capital raise of $153.92 million, distributed across 21 investment deals in the Baltimore MSA. Notably, this indicates a decrease in both the total capital raised and the number of deals in the region during Q4 2023, compared to the same period in 2022.

(As always, it’s important to note: These figures may vary slightly after publication, as some deals aren’t accounted for until weeks after quarterly VC reports are published, or PitchBook may find errors in its data.)

The decrease may not mean a smaller number of deals or investments overall in 2024. It also doesn’t account for other forms of capital like grant capital, nondilutive capital, venture debt and exit funding.

Are PitchBook and NVCA the only entities with methods for tracking VC in the Baltimore region?

No, for while PitchBook’s reporting methodologies include its definition of VC as a form of financing where capital is invested into a company, it excludes the aforementioned “important” types of capital, according to UpSurge Baltimore’s senior data analyst Chris Bunner.

UpSurge has usually taken matters of tracking VC into its own hands. Now, the equity-minded startup ecosystem builder uses a more “specific” approach to how it examines VC for startups in Baltimore.

“So [we’re] really not using venture capital as a catch-all for all capital funding for startups, but really focusing on this specific group of venture capital investments, which range from angel investments all the way through exits, as you [might] traditionally think about it from institutional venture capital investors,” said Bunner.

To adopt a more “specific” approach to Baltimore’s VC data, Bunner mentioned that in his efforts, he would be focusing on other forms of capital like grants and exit funding. He found this shift “important” for capturing VC activity and assessing the overall health of Baltimore’s VC ecosystem.

During a call with Technical.ly, both he and UpSurge CEO Kory Bailey highlighted plans to broaden the geographic scope of their analysis to track the level of investment in Baltimore’s startups. Bunner mentioned that they have been reporting at a greater Baltimore level while acknowledging its associated challenges. Bailey added further insights to that point.

“You know, the Tech Hubs work that is being done is for the Baltimore MSA, so that creates some alignment there — that the numbers that we’re going to be tracking align with Towson, Baltimore City, Columbia and the counties that are included in the Baltimore MSA,” Bailey said. “So it’ll be a good way for us to make sure that [our] data is aligned with the work that’s happening with the Tech Hubs consortium.”

Technical.ly previously reported on geographical issues in the Venture Monitor’s record of top deals for the Baltimore MSA — for instance, misunderstandings of what companies actually reside in Baltimore. “Lumping” Baltimore in with other cities might be “harmful” in this respect, according to UpSurge’s CEO.

“In terms of how they’re reporting the ecosystem data, sort of lumping it … and bringing us into the DC numbers is harmful for Baltimore because it doesn’t give a clear picture of how strong our ecosystem actually is,” said Bailey

Which Baltimore MSA companies got top deals in Q4?

These investments overall highlight the region’s innovation ecosystem, with a focus on healthcare, biotechnology, financial services, education technology and IT. The infusion of capital might reflect confidence in the growth potential and impactful contributions of these companies within their respective industries.

1. In October 2023, off-the-shelf therapeutics company ManaT Bio secured $120 million in funding during its Series A1 round.
2. Following with the second-most capital raised was healthcare company Elixirgen Therapeutics, which raised $7 million in a later-stage round on Nov. 9.
3. Cutting it close to the end of the year, fintech company Cerebro Capital secured a $6.1 million seed round on Dec. 21.
4. Before that, on Oct. 5, edtech company Concentric Educational Solutions raised a $5 million Series A.
5. Around the same time as Cerebro, Turngate, which specializes in software and network management, secured a $5 million seed round on Dec. 19.  The Ellicott City-based company is the only one out of the Q4 top five not based in Baltimore, according to Securities and Exchange Commission (SEC) filings.

There were no major exits this quarter.

Which 2023 deals did UpSurge Baltimore find noteworthy?

UpSurge Baltimore provided Technical.ly with a spreadsheet of notes cataloging Baltimore’s 2023 deals over $50 million. They include Blackpoint Cyber of Ellicott City raising $190 million in Q2.

UpSurge did mention the same ManaT Bio deal as PitchBook while also pointing out Hanover-based Dragos’ Series D extension. The org added that another Ellicott City cyber company, Huntress, raised $63 million in a round Technical.ly originally reported at $60 million.

Other Baltimore deals highlighted in UpSurge’s spreadsheet included Fearless’ raise of $32 million in venture debt, Scene Health’s $17.7 million Series B and Haystack Oncology’s being acquired for what UpSurge said was $392 million. Technical.ly initially reported the acquisition to be at $450 million.