Venture Capital Dollars Disappearing in Life Sciences

Venture Capital Dollars Disappearing in Life Sciences

July 25th, 2012 // 11:47 am @


File this under ‘some things never change.’ Venture capital investments may be increasing in many sectors, but not in life sciences. Defined as biotechs and medical devices, venture investing fell 9 percent in dollars and 6 percent in the number of deals in the second quarter of the year with $1.4 billion funneled into 174 transactions, compared with the first quarter of 2012, according to PricewaterhouseCoopers and the National Venture Capital Association.

In fact, venture investments in life sciences declined for the fourth consecutive quarter, notably in biotechs, where $697 million went into 90 deals, which amounted to the lowest quarterly total for the industry since the first quarter of 2003. Devices received the third-highest amount of investment in the second quarter with $700 million going into 84 deals, an 11 percent increase while the dollars remained relatively flat compared to the prior quarter.

The life sciences sector accounted for 20 percent of all venture capital dollars invested for the quarter, down from 29 percent in 2011. “The concentration of venture capital dollars in the hands of fewer firms will increasingly dictate the flow of investment,” NVCA president Mark Heesen says in a statement. “Currently, this translates into more funding for IT start-ups and less capital available for life sciences and clean technology.”

For instance, the software industry garnered the highest level of funding with $2.3 billion invested during the second quarter of 2012, which was the highest total since the second quarter of 2001 and represented a 38 percent increase in dollars, compared to $1.7 billion invested in the first quarter. The sector also notched the most deals completed in the second quarter with 290 rounds, a 16 percent increase from 251 rounds completed in the first quarter of 2012.

Internet-specific companies received the second highest level of investment in more than a decade with $1.8 billion going into 261 deals, a 22 percent increase in dollars and a 31 percent increase in deals from the first quarter when $1.5 billion went into 199 deals, NVCA writes. Investment in Internet companies surpassed the $1 billion dollar mark each quarter for the past two years, and two of the top 10 deals in the quarter were in this category.

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