First quarter sees few big venture capital deals in Indiana

Indiana companies grabbed $27.3 million in venture capital in the first quarter, a relatively healthy showing compared with previous quarters. But, as has been the case in Indiana lately, most of the deals were in the low-seven-figure range.

The total came through 11 deals, according to the quarterly MoneyTree Report by PwC and CB Insights published Wednesday. It's fairly in line with 2016's best quarter (13 deals worth $28.8 million) and a far cry from the funk the state was in 2013, when the entire year saw only $27.6 million in deals.

But Indiana only pulled in about $2.5 million per deal in 2017's first quarter, which ranked it 33rd out of the 41 states that saw VC activity. Indiana had the same average in 2016, while many of the surrounding Midwestern states had deal averages above $5 million.

The Hoosier state has been struggling with low deal averages for the past few years following a multiyear stretch in the late 2000s when firms such as ExactTarget and Angie's List were pulling in tens of millions of dollars in venture capital. Tech leaders and other observers say the recent showing reflects the lack of homegrown, readily accessible capital for scale-up companies, which are further along than startups.

"When I think about what's going well and what's not going well," High Alpha Partner Kristian Anderson said about the local tech landscape, "what's going well is new business starts, the growth in the talent base … the amount of attention we're getting around the country … the latest stats on pay equality."

"But the one part of the story that stinks, and it has stunk for a long time—I believe it's going to change—but it is the dearth of scale-up capital."

Indianapolis marketing-software firm SmarterHQ Inc. closed the biggest investment deal in the first quarter, a $13 million round of financing by investors including Battery Ventures, Simon Venture Group, and Spring Lake Equity Partners.

The next single biggest deal was a $3 million round by Indianapolis-based IT-services firm Kinney Group, MoneyTree said.

Music-marketing startup Fuzic, customer-success-management company Bolstra and and health-tech firm Diagnotes also closed investment rounds.

The first quarter also marked the last investment—at least in the near term—for Carmel-based Allos Ventures. The highly active firm, which participated in Bolstra's $1.5 million round, has effectively deployed its four-year-old $40 million fund and is not making any new investments until it raises another fund. 

Managing Partner Don Aquilano said that could take at least nine months.