Most of the $25.5 million in venture capital pumped into Maryland businesses in the second quarter went to just two companies and was primarily focused on later-stage firms, according to a new report.

The $25.5 million total, which was split among eight companies, was the smallest quarterly total in almost 16 years, according to the new MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, based on data from Thomson Reuters.

About $19.2 million went to just two companies.

Straighterline, a Baltimore online distance-learning company, raised the lion’s share, $10.5 million, to help fund an expansion. Zephyr Technology, an Annapolis developer of physiological and biomechanical monitoring technology, claimed $8.7 million. Both companies were supported by numerous investors.

Representatives of the companies were not available for comment.

“It’s a very challenging market,” said Brian Razzaque, CEO of Social Toaster of Baltimore, one of the companies to receive funding last quarter.

Biotechs landed two deals, while three investments were in the media/entertainment category. Of the eight deals, five were to later-stage companies, two were early-stage and one was an expansion.

“Investors in this region are focusing on traditional business ideals, like revenue, a clear path to profitability and known client lists,” Razzaque said. “In other areas, such as Silicon Valley, investors are more likely to give credit to an idea or an opportunity.”

None of the state’s nine venture capital firms that invested last quarter gave money to a Maryland business, according to the report. Almost all of their investments went toward later-stage or expansion funding. An outlier was Vital Financial of Bethesda, which joined a group to invest in an early-stage biotech, NovaTract Surgical in New Haven, Conn.

All told, Maryland investors contributed to 18 deals in the second quarter.

Investor behavior is being affected by the closing up of the exit market, which usually consists of companies going public, being acquired or merging, said Janet Yang, a partner with Novak Biddle Venture Partners in Bethesda.

“Now, we have to hold onto our investors longer,” she said, adding that the people who fund venture capital firms are also wary about investing in too many early-stage companies.

Novak Biddle, which focuses on education, data analytics and security funding, contributed to a $26 million investment for 2tor, a Landover online learning company, in April.

Potential Maryland recipients also face the obstacle of having limited funding sources when the majority are early-stage, Razzaque said.

“It’s an extremely competitive landscape,” he said.

Social Toaster was the only Maryland business to definitively receive early-stage funding at $2 million, although GiveLink, a Baltimore social enterprise, reported an undisclosed amount of funding.

“At times like this, the state can really help by filling the gap,” said Yang, referring to the state’s InvestMaryland initiative to pour $80 million into the venture capital market. “I hope that program gets started and moves quickly.”

Maryland’s early-stage investment troubles strayed from the national numbers, which showed the highest quarterly total for such companies since the first quarter of 2001, according to a PricewaterhouseCoopers news release. About $2.1 billion was poured into early-stage investments in 410 deals in the nation.

“The concentration of venture capital dollars in the hands of fewer firms will increasingly dictate the flow of investment,” Mark Heesen, president of the National Venture Capital Association, said in a statement. “Currently, this translates into more funding for [information technology] start-ups and less capital available for life sciences and clean technology.”

He said the association continues to watch the early-stage and first-time financing numbers, emphasizing they are “critical to the U.S. innovation pipeline.”

Social Toaster, which leverages social media for businesses, was able to secure its $2 million investment through its client list, which includes the Baltimore Ravens, and its growth, Razzaque said. The company has 22 employees and hopes to use most of the money to grow that to 30 by the end of the year and 80 by the end of 2013, he said. Razzaque said the rest of the money will go toward improving Social Toaster’s marketing and infrastructure.

“The biggest challenge for us was getting those flagship clients and case studies to bolster our credibility,” he said of Social Toaster, which launched in May 2010. “Once we landed those, we started to see more business.”

Social Toaster produces a platform to leverage a client’s existing supporters to promote its social media and provide a way of monetizing that online presence, Razzaque said.

“We’re glad to be leading the charge in this region, to demonstrate that it’s possible and that people are out there looking to invest. It just takes work to find them,” he said.

lrobbins@gazette.net