Venture capital investing’s status report (Morning Read)

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MoneyTree’s good and bad news. Good news: Venture capitalists invested 19 percent more in 2010 than last year — the highest since 2007, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association (NVCA), based on data from Thomson Reuters.

But the money, it seems, is going away from key medical sectors.

• Overall, biotech investing increased by only 3 percent ($3.7 billion) and deals were up only 8 percent (460). In the fourth quarter investing declined 24 percent and deals were down 15 percent compared to the third quarter.
• Medical device investing for the year fell 9 percent ($2.3 billion) and deals were essentially the same (324) compared to 2009. In the fourth quarter, device investing dropped 31 percent and there were 15 percent fewer deals compared to the previous quarter.
• Life Sciences used to account for one-third of all venture dollars invested. That’s down to 28 percent.
• It was a mixed bag for key medical markets: Philadelphia and Cleveland were promising. But Minnesota and the Northwest struggled.

A couple caveats. Biotech and device are No. 2 and No. 3 in the amount of money invested (software is a runaway first). Also, health services increased dramatically this year, fueled in part by a 128 million third quarter that was larger than all of 2009 combined.

Early analysis says the slow resurrection of IPOs is funneling some later-stage life science companies away from the venture capital markets, which means the decrease in such an up year wouldn’t be so ominous. Others, though, see high growth markets like cleantech as the new favorite.

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