Source

Tech Firms Pacing IPO Rebound
Source: Contra Costa Times (Walnut Creek, Calif.)
Publication date: 2005-02-13

Feb. 13--The Bay Area's software and biotech fledglings are sitting pretty these days.

Privately held companies in the tech and life sciences arena captured the largest shares of financing from venture capitalists during the final three months of 2004. The private software and biotech industries in the Bay Area also posted huge gains in fourth-quarter funding compared with the previous year, according to the latest MoneyTree report.

The surge in financing seems to be a solid trend and not a blip, venture capitalists say. Chris Hollenbeck, managing director with San Francisco-based Granite Ventures LLC, which is active in funding early-stage tech firms, said the tech industry is in far better shape than it was a few years ago.

"We are seeing a lot more interesting ideas and people," Hollenbeck said. "It's a lot more fun to come to work today than it was in 2002."

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The second-largest industry share in the fourth quarter went to biotech companies, which bounced back after a slump in the third quarter. Private biotech firms attracted $289 million in financing, or 17 percent of the total Bay Area venture funding in the fourth quarter.

Several trends have propelled the recent rise of biotech companies, said William Gerber, a partner with Bay City Capital. While software and biotech are completely different industries, they currently share a surge in innovation. And in life sciences, the boom has come in the study of genes and proteins.

"You have the whole genomics and proteomics revolution," Gerber said. "You also have an explosion in activity in areas that previously had a lot of difficulty, including central nervous system diseases."

The potential for billions to bankroll stem cell research in California alone, resulting from the passage of Proposition 71, also has bolstered interest in the broad field of biotech and medicine, Gerber said.

"There is always a halo effect from activities that become newsworthy, like stem cells," Gerber said. "But we are a long way from seeing real therapeutic breakthroughs related to stem cell technology."

Although the gene therapy industry struggles with ups and downs at present, Gerberg pointed out that another life sciences field that is now viewed as a success also had its woes in years past.

"Monoclonal antibodies had its skeptics, and people weren't sure they would be therapeutic," Gerber said. "But over time, they proved to be very good therapeutic agents. Similarly, gene therapy will overcome some of the technological hurdles that have limited their use."