Funding roundup: Health care startups lead smallest Baltimore venture capital quarter since 2020

See Correction/Clarification at end of article

Baltimore-area venture capital deals in the third quarter were down by nearly a fifth compared to last year, a drop that came as deal value across the country hit its lowest quarterly total since 2018.

Greater Baltimore companies raised $78.05 million from 23 deals in the third quarter, according to Pitchbook-NVCA Venture Monitor’s report released Thursday. However, that total includes a $17.7 million raise for Catalyte which the company says never took place; their most recent raise was for $1.5 million with Green Street Impact Partners.

Removing the Catalyte number from the bunch, that brings Baltimore's total to $60.35 million. That’s $35 million less than the $95.84 million raised in the third quarter last year, though last year's report also excluded a $225 million raise by Baltimore's Delfi Diagnostics, which juiced the otherwise meager total. It's the lowest quarterly total for the region since the $30.85 million raised in Q4 of 2020.

While health care devices and pharmaceutical startups dominated funding in the third quarter, Xcision Medical Systems in Columbia recorded the biggest raise at $13.3 million. Neither Baltimore nor Maryland saw a mega-deal, or a deal worth $100 million or more in that span, with Gaithersburg biotech Georgiamune Inc. taking home the state's largest raise of $75 million. The drought is a sign of statewide deal activity slowing to $238.53 million from $249.01 million in the third quarter of 2022.

Venture capital is hitting a steep decline as "the market remains under serious stress," Pitchbook's report reads. Deal value for the third quarter across the country totaled $32.7 billion, down from $46.4 billion in the same quarter last year, almost a 30% drop. That's the lowest nationwide mark since the second quarter of 2018, which notched $32 billion in deal value. Mega-deal activity also remained low nationwide, making up less than half of Q3 deal volume after accounting for a high of 60% of deal value in Q4 2021, according to Pitchbook's data.

The report identifies high-interest rates, geopolitical conflict and rulemaking from the Federal Trade Commission and other agencies as barriers to investment, but sees development in artificial intelligence and life sciences as potential keys to a turnaround.

After Columbia-based Xcision Medical Systems' $13.3 million raise, CoapTech raised the second-largest sum with $12.3 million. Other health and biotech firms round out the biggest deals in the third quarter, in addition to software firm EcoMap and finance tech startup Cerebro Capital.

The 9 largest rounds in Greater Baltimore in the third quarter, according to Pitchbook (excludes Catalyte, which Pitchbook data incorrectly showed had the largest raise of the quarter):

Baltimore tech ecosystem builder UpSurge also compiled a list of the third quarter’s top deals, including multiple deals the Pitchbook data exclude like Baltimore decarbonization company ETCH's $7.5 million raise and IT firm Fearless' $17 million debt raise. The UpSurge roundup counts funding sources like debt and grants that Pitchbook does not include, and only counts deals at companies within a 15-mile radius of downtown, which is a smaller area than Pitchbook covers.

The 10 largest rounds in Greater Baltimore, according to UpSurge (excluding the Catalyte raise):

Upsurge data show Baltimore raised almost $101.3 million across 28 deals in the third quarter, down from $267.43 million in the same quarter last year, which was bolstered by the Delfi Diagnostics mega-deal. Remove the Catalyte raise from that total, and the number shrinks to $83.6 million, an even sharper decrease. UpSurge CEO Jamie McDonald said mega-deals are welcome but can make quarterly comparisons difficult.

"It's great that we increasingly have some of those big wins, but it also means quarter-by-quarter comparisons can swing widely."

Instead, McDonald focuses more on yearly numbers and how those compare to the national scene. Baltimore logged $513.3 million in deals this year so far, down from $629.76 million through the first three quarters of 2022, according to UpSurge data. That's an 18.5% drop, but compares favorably to a roughly 40% drop for the country as a whole, McDonald said.

"We try to look at the bigger picture. When you look at this year, we are very favorably comparing to the national trend. We are down less than the country overall," she said

Despite this quarter's heavy health funding, McDonald says Baltimore's overall balanced startup scene will allow the region to weather national downturns when they come, as one has over the past two years.

"To see Baltimore in this strong outperformance trend two years in a row should give us lots of confidence for our market," she said.