By Donald Zuhn --
Last week, the National Venture Capital Association (NVCA), a trade association representing the U.S. venture capital industry, released the results of its MoneyTree Report on venture funding for the third quarter of 2011. The NVCA quarterly study, which the group conducts with PriceWaterhouseCoopers using data from Thomson Reuters, indicates that venture capitalists invested $6.95 billion in 876 deals during the third quarter, which constituted a 12% decrease in dollars and a 14% decrease in deals as compared with the second quarter of 2011 when $7.9 billion was invested in 1,015 deals (the NVCA revised its second quarter numbers, adding $400 million in funding and 49 deals to the totals for the last quarter). Although venture funding and the number of deals dropped in the third quarter, the NVCA noted that the totals for the first three quarters of 2011 ($21.2 billion invested in 2,725 deals) represented a 20% increase in dollars and a 3% increase in deals over the first three quarters of 2010.
The Life Sciences sector (biotechnology and medical devices) saw an 18% decrease in dollars and a 21% decrease in deals in the third quarter -- the sector's worst showing since the first quarter of 2005. The biotech industry alone received $1.1 billion via 96 deals, which marked an 18% decrease in dollars and a 20% decrease in deals as compared to the second quarter of 2011. In terms of dollars invested, the biotechnology industry placed second (to the software industry, which collected $2.0 billion for its best quarter since the fourth quarter of 2001) among the industries tracked by the NVCA. The Life Sciences sector was not alone, as the NVCA report noted that of the seventeen sectors its tracks, fourteen experienced decreases in dollars invested in the third quarter.
Tracy Lefteroff, the global managing partner of the venture capital practice at PwC US noted that "[c]hallenges in the regulatory environment for Life Sciences companies are prompting VCs to look to other industries to put their money to work for a faster return on their investment," and as a result, "over the past two quarters, we've seen a clear shift in Life Sciences investments from Seed/Early Stage companies over to more Later Stage companies." While "VCs are continuing to support the companies in their pipeline," Ms. Lefteroff noted that they "appear to be curbing their investments in new Life Sciences companies." NVCA president Mark Heesen, stated that "[p]ublic policy challenges in the life sciences and clean technology sectors are impacting investment levels this quarter as is the IPO market that basically came to a screeching halt in August." Noting that "[v]enture fundraising levels are the lowest they have been in nearly a decade," Mr. Heesen suggested that "it is reasonable to expect investment levels to decline in the coming years."
For additional information regarding this and other related topics, please see:
• "Life Sciences Venture Funding up 37% in Second Quarter," August 1, 2011
• "VentureSource Reports 35% Increase in 1Q Venture Funding," April 26, 2011
• "NVCA Reports Modest Gains in First Quarter Venture Funding," April 19, 2011
• "NVCA Reports 31% Drop in Venture Funding for Third Quarter," October 17, 2010
• "NVCA Reports 34% Increase in Venture Funding for Second Quarter," July 22, 2010
• "NVCA Report Shows First Quarter Drop in Venture Funding," April 20, 2010
• "Biotech/Pharma Financing Improving, R&D Spending Up," August 31, 2009
• "NVCA Study Shows Increase in Third Quarter Venture Funding," October 23, 2009
• "First Quarter Venture Capital Funding at 12-Year Low," April 23, 2009
• "NVCA Study Shows Decline in 2008 Investment; BIO Study Predicts Biotech Rebound in 2009," February 16, 2009
• "NVCA Predicts Another Slow Year for Venture-backed Businesses in 2009," December 18, 2008