Uptick Seen in Life Science Venture Capital

According to a PricewaterhouseCoopers (PwC) LLP report, venture capitalists invested $841 million in 90 deals in the second quarter of 2011, a 26 percent increase in dollars invested compared with the first quarter (the number of deals remained relatively flat). The jump propelled the medical device and equipment industry to place third overall in terms of dollars invested in the second quarter. Venture capitalists invested $7.5 billion in 966 deals this quarter, which is somewhat surprising considering that just $6.3 billion was invested in 814 deals in the first quarter. The report was compiled with the National Venture Capital Association (NCVA) and based on data from Thomson Reuters.

“This level of investment cannot continue if we do not start to see a pick-up in exits and, subsequently, fundraising,” said Mark Heesen, president of the NVCA.

One place the right type of pick-up was seen, however, was the life sciences sector. Venture capitalist dollars totaled $2.1 billion—a 37 percent increase in dollars and 12 percent rise in deal volume compared with the first quarter. The life sciences sector includes both the medical device and biotechnology industries.

Tracy T. Lefteroff, global managing partner of the venture capital practice at PwC U.S., attributed the rise to an increase in exit activity in the life sciences sector.

“This quarter’s increased investment levels signal an incredible opportunity for job creation and innovation, but if current dynamics continue, it will not be sustainable,” Heesen noted. “For the past three years, the venture capitalist industry has been investing significantly more dollars in companies than it has been raising from institutional investors.”

Heesen suggests that venture capitalists shift their focus to the future and make sure there are ways to adequately fund opportunities that will present themselves in the next decade.