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Venture capital investment in Indiana’s technology sector continued to balloon in the second quarter, expanding by 360% even as the national VC market showed signs of struggling.
According to TechPoint’s second-quarter Indiana Tech Venture Report, last quarter’s deal value rose to more than $216 million, towering over the $47 million posted in the second quarter of 2023.
The report follows an unusually strong first quarter of 2024, during which Indiana tech firms landed a jaw-dropping $348.8 million in venture capital. But the number of deals in the second quarter—48—far outpaced the 29 deals in the first quarter of the year.
“This suggests a growing interest and diversification in Indiana’s startup ecosystem despite broader financial headwinds,” according to the report, which was authored by Chelsea Linder, TechPoint’s vice president of innovation and entrepreneurship, and Roger Shuman, director of venture engagement.
“A decline in VC deals and exits nationally indicates a cautious or bearish outlook among investors, influenced by economic factors such as fluctuating interest rates,” the authors said. “The increase in deal numbers within Indiana, however, suggests a potential shift towards exploring more smaller investments and a broader array of sectors than previous years. Indiana’s ability to maintain a vibrant number of deals amidst the nationwide decrease underscores its growing reputation as a nurturing ground for new businesses and innovations.”
Central Indiana firms accounted for 27 of the 48 deals, with the state’s northwestern region in second place with 9 deals. The tech sectors with the most venture capital invested were life sciences (11 deals worth $124.2 million) and artificial intelligence and machine learning (nine deals worth $56.85 million). Seven deals in the software-as-a-service sector accounted for $12.7 million in investment.
More than half of the deals—25—were in the pre-seed stage. Such investments typically come early in a firm’s development and are less than $500,000 each. The 25 pre-seed deals accounted for only $3 million in total investment, according to the report.
On the other end of the spectrum, late-stage VC deals accounted for a whopping $169.6 million in investment but stemmed from only five deals.
According to the report, the biggest VC deals of the quarter included the $58.33 million raised by AZIsotopes, a Bunker Hill-based firm that specializes in nuclear medicine and develops medical isotopes to cure cancer.
Based in Markle, Sortera Technologies raised $44.4 million to expand its first plant and begin developing a second. The first used artificial intelligence to produce low-cost, high-quality metal alloys for domestic manufacturing.
One potentially troubling development for investors: The report’s authors continued to observe a traffic jam of mature companies that haven’t yet exited. In short, a relatively small percentage of investors are reaping the rewards for their risks.
There were only two tech exits in the second quarter, following nine exits in the first quarter.
“This replicates national data where about 7.5% fewer exits took place compared to last quarter,” the authors said. “This limited exit activity will continue to impact investors and make it more difficult for firms to raise new funds.”
The full TechPoint report can be found here.
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