Venture funding for Sonoma County technology startups fell sharply in the first half of 2011, as investors lost their appetite for early-stage companies.
It's another sign of a shaky economic recovery underway in Sonoma County.
"Venture investors and entrepreneurs are adjusting to a new reality," said Jessica Canning, research director for Dow Jones VentureSource, which tracks private equity deals.
Venture funds are looking to cash out of their investments, letting startups go public or get acquired, she said. As a result, many early-stage tech companies have been forced to turn to corporations and government grants for support.
Sonoma County companies raised $44 million in venture funding during the first six months, compared to $158 million for the same period last year.
Petaluma solar startup Enphase Energy scored one of the biggest venture deals, raising $14 million in June. It still wants to raise another $37.5 million during the offering.
Enphase, founded in 2006, makes microinverter technology that increases the output of solar energy systems. Microinverters attach to individual solar modules and convert DC to AC power. They're more efficient than conventional inverters, which manage power from hundreds or thousands of solar panels at a time.
Low-performing panels hurt the output of an entire system controlled by a common inverter. Microinverters control each panel independently, increasing output up to 25 percent, according to Enphase.
"We've grown rapidly since our first commercial shipment in mid-2008," said Raghu Belur, Enphase co-founder. "Given significant advantages over traditional central inverters, we believe that microinverter solutions will become the standard for residential and commercial solar."
Enphase also makes software for web-based monitoring and management of solar installations.
Since 2008, Enphase has sold more than 750,000 units and now has about 20 percent of the residential solar inverter market in California, it said.
Enphase has more than 200 employees, mostly at its headquarters in Petaluma. It has raised more than $100 million in venture funding to date.
In June, Enphase announced plans to go public with a stock sale worth up to $100 million. No date or share price has been set for the initial public offering.
The startup lost nearly $22 million on $62 million in sales last year.
The other large venture deal in this year's first half was scored by Sonoma Orthopedic Products, a Santa Rosa medical device startup.
Sonoma Orthopedic, which developed two implant devices for repairing fractures of the wrist and collarbone, raised $22 million in fresh venture capital in February.
The implants are inserted into the bone by a surgeon through a small incision. The flexible device conforms to the curvature of the bone and provides rigid support while the fracture heals, according to the company.
The treatment offers faster healing and is less painful than traditional surgery, according to the company, which was founded in 2005.
Petaluma laser startup Raydiance raised $3.8 million in May. Raydiance has developed a high-power, ultra-fast laser platform that vaporizes matter without generating heat, creating new ways to fashion exotic materials.
The technology has applications for electronics, research, automotive, clean energy, medical devices and defense, the company said.
Sapheon, a Santa Rosa medical device startup, raised $2.4 million in March. Sapheon has developed a minimally-invasive vein closure system for treating vascular disease.
Last month, Sapheon said early clinical trials show its system works. The company is now trying to get European regulatory approval to sell the technology outside the U.S.
Several other Sonoma County tech companies reported private equity deals of less than $1 million.
U.S. venture funding grew in the first quarter, as the economic recovery seemed to take hold, according to VentureSource. But activity fell in the second quarter, with investment down 5 percent from the same period last year.
Renewable energy — a traditional hot spot for investors — saw the steepest decline.
"Venture capitalists have a steady appetite for energy startups but are looking to share the cost of growing these companies," Canning said. "As fewer venture dollars are committed, we see energy companies raising funding from corporations, the government and other types of investors."
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