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Following a relatively robust Q2, Baltimore’s venture capital activity in the third quarter of 2024 looked sparse.
Companies from the Baltimore metropolitan statistical area raised $53.4 million across nine deals between July and September, according to the latest quarterly Venture Monitor report released by PitchBook and the National Venture Capital Association.
It’s an over 80% decrease in funds compared to Q2, which saw $371.3 million invested across 16 deals. It’s also a stark contrast to 2023 Q3, which saw $332.2 million in funds across 25 deals. The top raise, a Series D by the downtown/Inner Harbor fintech company Facet (formerly Facet Wealth) valued at $29.6 million, accounted for more than half of the funds. Moreover, an overwhelming majority of the region’s top raises in the region went to later-stage companies.
Baltimore’s numbers align with national trends, said Chris College, a managing partner at local investment firm TCP Venture Capital. Deals are shifting toward larger amounts going to later-stage companies, while early-stage startups — besides AI companies — struggle to get funds, besides AI companies, he explained.
“Venture investors are increasingly focused on lower-risk, higher-quality, more mature businesses,” College told Technical.ly. “Because of this, valuations for these companies are relatively high but fewer companies are getting funded. Perceived high-quality companies can attract venture capital, but less mature companies are struggling.”
Mike Ravenscroft, the managing director at the Maryland Momentum Fund, said he’s “shocked but not surprised” about activity in the region. In his work with the University System of Maryland-affiliated investor, he’s seen a lot of early-stage companies pull back from raising because of the lack of venture capital activity.
“It’s the story everywhere,” Ravenscroft told Technical.ly. “We’re just not seeing a lot of activities right now.”
Baltimore’s biggest VC deals in Q3 2024
Some of the firms with the largest raises are aligned with major industries in the region, like biotech and manufacturing. But Facet rose to the top and nabbed a majority of the cash from this quarter, boosting its valuation to $238.4 million.
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.
- Facet wrapped its Series D raise on July 26. The financial planning tech company raised a $100 million Series C in 2022.
- Medical device manufacturing firm CoapTech, also headquartered in the Inner Harbor area, raised $11.1 million in a later-stage round, which closed on September 4. During last year’s third quarter, the company landed two of the top 10 Baltimore-area VC deals.
- Baltimore’s Synaptic Advisors, a tech and business management consulting firm, raised a later-stage round valued at $3.2 million in mid-July.
- Pixelligent, from Baltimore, also raised $3.2 million in a later-stage round which closed on Sept. 9. The nanotech firm was nominated for Baltiomre’s Tech Company of the Year in 2022.
- Columbia’s Gudea, an AI and machine learning firm aiming to map how information spreads online — and the sole early-stage company in the top five — closed a $2 million raise on August 27.
Gudea’s placement echoes TCP leader College’s view: The one early-stage startup that was able to raise to this top-ranking level focuses on AI.
National venture capital trends
Nationwide, the US saw $37.5 billion across 2,794 deals, per PitchBook. Deal value was the lowest of the year across the US, and more established companies are the ones landing deals, wrote PitchBook lead VC analyst Kyle Stanford.
This year, just $64 billion has been raised across funds in the US, he said.
Stanford attributes this dynamic to low distributions and poor VC returns over the last few years.
From a Baltimore perspective, Ravenscroft noted that limited partners, or LPs, see VCs’ difficulties raising and are now skittish.
“VCs kind of underdelivered in the last few years,” he said. “A lot of private equity just don’t have a whole lot of cash return to their LPs. So a lot of funds that may have been able to raise four or five years ago are struggling now.”
Historic racism under contemporary trends
Paris Dean, founder and CEO of the Baltimore real estate transaction startup Sparen feels this slowdown personally. He’s been struggling to break into the venture world while trying over the last two years to raise a $2 million seed round. The Techstars Equitech alum has been landing about $100,000 at a time and raised $750,000 to date.
He believes a few factors contribute to this obstacle. He’s spoken with and pitched to countless investors but feels like many hesitate and are ultimately unwilling to actually invest.
“They just go around window shopping with all of the local founders who they can get in touch with,” Dean said. “Then they put them on the spreadsheet. … That doesn’t actually help anybody.”
In his experience as a Black founder, he’s found the Baltimore venture capital scene is still rife with racism and discrimination. He’s seen non-Black founders without as much experience or a proven concept land deals.
“We’ve got some of the smartest people in the region on our team,” he said. “We’ve got … partnerships and just all the stuff that investors say that they look for. … And they’re like, ‘We don’t know, it sounds risky.’”
This picture, in a predominantly Black and endemically segregated city, bears out across the country. In 2023, Black-founded startups received less than 0.5% of the $140.4 billion in venture funding in the US. Funding for Black founders dropped 71% between 2022 and 2023, according to Crunchbase.
Between his own experience and the PitchBook data, Dean noted it’s not an attractive representation of Baltimore, and may discourage founders from starting a company in the region. Events and networking opportunities are great and plentiful, but money is necessary, he said.
But despite this quarter’s slowdown, some local leaders are still optimistic funding will bounce back. TCP’s College is optimistic that the region will soon see more money flowing.
“Baltimore is resilient, he said, and I expect capital to start flowing more freely in the first half of 2025.”
Maryland Momentum Fund’s Ravenscroft also anticipates that deals will pick up, and described Baltimore’s founder similarly.
“Just because of one bad quarter doesn’t necessarily mean that the ingredients aren’t there,” he said. “I do think it’s going to be tough in the near term. But we like to invest in resilient founders, and Baltimore is nothing but resilient founders.”