AI / Biotechnology / Cybersecurity / Healthcare / Venture capital

Baltimore VC investment surges to $360M in Q2, higher than last year, but on fewer deals

Regionally dominant industries like cybersecurity and healthcare landed the top deals in 2024’s second quarter.

Baltimore skyline over the Inner Harbor (Sameer Rao/

Maryland’s biggest city spent much of the spring in a venture capital environment whose relative stasis largely reflects the national picture.

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

That’s a roughly 8% increase over the same time last year, when Baltimore companies raised $332 million through 26 deals. 2024’s first three months saw $74 million raised across 17 deals, compared with $92 million in the beginning of 2023. The start and end of the year are often slower compared to Q2 and Q3.

The latest numbers see Baltimore settling into some form of normalcy after an unprecedented pandemic boom in startup funding. Investment in local companies surpassed $1.6 billion in 2021 before falling back down to $791 million in 2022 and $943 million in 2023.

While deal activity has increased throughout the nation for the past three quarters, PitchBook said, a few large deals account for an outsized amount of the value as investors concentrate their bets on the most promising companies. That shows in the most recent data for Baltimore, with overall investment going to fewer companies than last year. The top raisers primarily operate in industries like healthcare and cybersecurity, where companies frequently thrive on the back of university and government support.

Moreover, investors are becoming more selective due to a public market less forgiving of money-losing upstarts. Fewer companies going public means investors are struggling to make a return — and, in turn, find it harder to raise money for future funds from their LPs (limited partners).

“The peak of the COVID-19 pandemic saw unprecedented levels of investment in a variety of technologies,” said Bobby Franklin, the NVCA’s president and CEO. “Regardless of cause, the initial flood of investment into these technologies has largely abated, and now investors are focused on supporting their most promising companies to maturity amid a historically challenging exit environment.”

One notable bright spot for Baltimore and the nearby DC area is that PitchBook deemed the combined region a leading one for funded companies with all-female founder teams. 44 deals were completed by such firms in the second quarter, just shy of the Boston area’s 47 female-led companies.

Frank Glover, the Baltimore area-based founder of VC firm Interrobang Ventures, praised Baltimore’s high marks on this metric. He also said that the overall deal flow figures suggest a prioritization of “higher quality investments.”

“This change suggests that investors are leaning towards supporting more mature and solid-footed startups, which could result in steady growth for these companies and the local startup scene,” he said, adding: “While there may have been a decrease in the number of deals, the rise in deal value and attention towards high-potential companies bodes well for Baltimore’s position as a serious place to consider for venture capital.”

Baltimore’s biggest VC deals in Q2 2024

Given the proximity to government agencies and research institutions like Johns Hopkins, the Baltimore area houses many startups working in sectors like cybersecurity and healthcare. The top startups by funds raised in Q2 reflect that dynamic. The biggest outlier in terms of Q2 funds was Huntress, a cybersecurity vendor that raised $150 million at a valuation of over $1.5 billion.

Check out PitchBook’s top five regional deals below. 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.

  1. Huntress, a Columbia-based company behind a managed cybersecurity platform for small to medium-sized businesses, raised a $150 million Series D that wrapped on June 18.
  2. Delfi Diagnostics, a biotech company creating early cancer detection products, raised new equity financing from Merck Global Health Innovation Fund following a $225 million raise in 2022. PitchBook reported that round at $100 million on June 3 — a day before Delfi, which has offices in Baltimore and Palo Alto, announced the Merck fund’s investment without specifying the stake’s cost.
  3. Rapafusyn Pharmaceuticals, a Charles Village-area company creating technology related to a novel class of natural, product-like macrocycles, raised a $28 million Series A.
  4. Xona Systems of Hanover, which developes secure remote access products, raised an  $18 million Series A, according to PitchBook. The company previously announced the close of a $7.2 million Series A in 2022, as well a more recent $18 million “strategic funding round” last month.
  5. Backpack Healthcare, an online pediatric mental healthcare provider from Howard County, raised a $14 million Series A that closed on April 5.

Glover, who noted that these companies showcase locally strong sectors, said the trend of bigger later-stage deals reflect the particular care that investors are taking in this economy.

“With investors putting teams locally through the paces, the result could be a more resilient startup landscape ready to take on the rigors of the broader market,” he said. “As investors remain cautious, we can expect continued support for sectors where Baltimore has established strengths, such as cybersecurity, healthcare and life sciences.”

Some experts in the Baltimore startup community have advocated for assessing the local ecosystem’s health on more than just VC dollars raised. Jamie McDonald, the former CEO of equity-minded startup ecosystem-building organization UpSurge Baltimore, previously told that it would broaden the scope of its analysis by including other forms of investments like grant funding. She also said it would broaden the geographic scope to include nearby suburbs like Columbia.

National venture capital trends

Nationwide, PitchBook reports $55.6 billion was invested across an estimated 4,226 companies during the second quarter, marking three straight quarters of increasing deal flow but lower than historical averages. The value of the average early-stage deals also increased to its highest in eight quarters. But PitchBook noted that two artificial intelligence startups alone — AI cloud company CoreWeave and Elon Musk’s xAI — took in 26.3% of that funding.

If you strip out the outliers, deal value is about in line with recent quarters. And the overall number of deals in Q2 was slow, according to PitchBook, given the few startups exiting and LPs’ caution about investing more in the VC industry. These investors thus have to stretch their funds as long as possible.

“VCs have become cautious and are committing to only high-quality companies that show a promising trajectory to hit product-market fit, as opposed to investing in numerous smaller deals,” PitchBook wrote.

Nizar Tarhuni, PitchBook’s vice president of institutional research and editorial, said that many VCs are pulling back from fundraising because they have been unable to recognize returns on many of their investments. Younger VCs, who entered the industry during the nearly two decades of pre-pandemic growth and invested in a low interest rate environment, may struggle the most to remain in the industry as their LPs scrutinize their portfolios. Today’s higher interest rates, intended to tamp down on COVID-19-era inflation, make investing in startups less enticing than before. NVCA and PitchBook say that LPs look to keep their exposure to venture capital low and, instead, invest money elsewhere.

Tarhuni also noted that the hype on AI could pose another threat as some VCs have poured capital into the hottest companies with minimal diligence. If those mega-investments turn sideways, that poses a significant risk to funds down the road.

“Given the factors at play, this market will likely continue to be challenging for VC fundraising, and, in turn, startups looking to raise capital,” he concluded.

As always, however, the best companies with promising growth and revenue should have no trouble raising capital no matter the macroeconomic environment.

This article has been updated with comment from Frank Glover, the founder of VC firm Interrobang Ventures. (7/15/2024, 8:30 p.m.)

Companies: PitchBook / Backpack Healthcare / Huntress / Delfi Diagnostics / National Venture Capital Association

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