The Maryland Technology Development Corporation invested in more early-stage and seed companies last year than any other venture capital firm in the nation, according to a recent ranking by Entrepreneur magazine. The state-sponsored venture fund invested a total of about $1.5 million in 23 companies — all of them in Maryland — in 2005. This is the third consecutive year TEDCO ranked No. 1.
The Maryland Department of Business and Economic Development, which is a similar state-sponsored venture fund, ranked No. 3 on the Entrepreneur list with 14 deals last year. Virginia’s Center For Innovative Technology came in at No. 13. It’s state-sponsored fund made seven deals in 2005.
The Technology Development Corporation’s emphasis on early-stage companies is unusual in a time when most VCs are shying away from those deals, opting for more later-stage, sure-thing investments. During the second quarter of this year, only 22.5 percent of local venture funding went to seed and early-stage companies, according to figures from PricewaterhouseCoopers and the National Venture Capital Association. More than half went to fund company expansions and 24.4 percent went to later-stage firms.
“That is precisely why we are” focusing on early-stage investments, said Steven Fritz, director of technology transfer for the Development Corporation. “Our hope is that we will provide seed funding to all of these early stage companies so they can attract bigger investments from [mainstream] venture capitalists.”
Though the investments are relatively small by venture capital standards, about half of the start-up firms have gone on to score additional venture funding since the fund was launched in 2002.
“When we first started [investing], people asked, ‘How much can you do with that much money?’ ” Fritz said. “And the answer is apparently a lot.”
