On the surface, the first quarter venture capital funding report by National Venture Capital Association and PriceWaterhouseCoopers looks like another downward trend for venture capital deal flow in the life science sector. But if you dig a little deeper there are some positive trends, too.
Biotechnology companies attracted $1.1 billion across 112 deals, putting the sector second only to software. In a phone interview, Greg Vlahos, a partner with Pwc, observed that the initial public offering window has proved attractive for quite a few biotech companies, but it has also led to a fall-off in the number of later stage venture capital deals.
Quarterly venture capital investment rose 12 percent, but the number of deals sank 14 percent compared to the fourth quarter of 2013 when $8.4 billion was invested in 1,112 deals.
Despite a decline in deal volume, the medical device sector came in for some good news for the first quarter of the year. Sure, volume slackened to the tune of 37 percent over the fourth quarter, but venture investment rose 28 percent to $588 million across 61 deals. That’s the biggest positive change since 2012. Vlahos attributed the increase to greater competition for good deals.
He added that seed funding for medical device companies rose in the first quarter because of the lack of liquidity for these companies in the IPO market. First-time financing in the life sciences sector fell 38 percent in dollars from the prior quarter to $258 million going into 36 companies. Across industries, the average first-time deal in the first quarter was $4.4 million, approximately the same as in the prior quarter.
Mature biotech and medical device companies secured more funding at the later stage. Total deal flow in the life science sector in the first quarter — a combination of biotechnology and medical devices — fell 10 percent in dollars and 28 percent in deal volume compared with the fourth quarter last year.
Stephanie, you are such a "glass is half full" person! The report said that out of $9.5B in VC investments, $588M went to med dev companies. That's about 6% of VC investments in Q1 2014. Software and biopharma were by far the target investment industries. But then again, VC tend of flock together into the same investments and investment areas. Much as it has always been, getting venture money is related to the personal connections you have and the perceived value of your offering.