Venture capital investments in health care slow in first quarter

Venture capitalists tightened the hold on their purse strings during the first quarter, pushing investment activity in health care companies to its lowest level since 2003, according to a Dow Jones VentureSource report.

Continuing a contraction begun in the fourth quarter, the U.S. venture capital industry invested $3.9 billion in the nation’s companies, overall, in the latest quarter. That was down 50 percent from a year ago, VentureSource said.

It was the smallest dollar amount of quarterly venture investing since 1998. Venture capitalists did only 477 deals in the first quarter, down from 706 deals a year ago, VentureSource said.

“Over the past several quarters, VCs have pulled back significantly on early stage investments in the U.S., across all industries,” Jessica Canning, director of global research for Dow Jones VentureSource, said in a Saturday release. “During the economic downturn, investors will continue to focus on nurturing their strongest, existing portfolio companies, and keep their eyes open for the next set of opportunities.”

Health care venture investing fell the least of several sectors – 34 percent to $1.35 billion in 118 deals — in the quarter ended March 31 from the year-ago quarter, according to VentureSource. A year ago, venture capitalists invested $2.04 billion in 162 deals.

Of health care deals in the just-ended quarter, biopharmaceutical investment slipped 21 percent from a year ago to $723 million in 56 deals, VentureSource said. Medical device companies saw 51 percent less investment — $477 million in 42 deals – than last year’s first quarter.