Private Placements: Venture Capital

“Healthcare investment into companies grew significantly, reaching $8.6 billion in 2014. Biopharma companies had the major share of that total, at $6 billion – the highest level since SVB started tracking the data in 2005.”

Healthcare as a Percentage of Total Venture Investment

“We expect increases in fundraising and investment levels will lead to a very active 2015, with a note of caution, however. When the window closes, and non-VC investors pull back, the industry could be left with a crowded private market and lack of investors” — Source: Jonathan Norris, Kristina Peralta, “Trends in Healthcare Investments and Exits 2015” Silicon Valley Bank

However:

“….difference between then (1998-2002) and now (2009-2013): in 2000, the number of early-stage investors spiked 75% as the IPO window for biotech began to open up, and stayed high through the collapse of the bubble in 2012. By contrast, the last few years – even with one of the biggest/longest IPO windows in biotech history, have been defined by restraint and constraint in terms of early stage biotech venture and startup formation.”

Then & Now: First/Seed Round BioPharma Investors

“With only ~100 new biotech startups being formed each year, and only a few dozen firms actively doing it, there’s a tiny universe of players responsible for creating the next wave of biotech’s likely to mature in the second half of this decade.”

“Investors participating in BioPharma venture deals declined by ~40%, and never recovered those numbers. This represents a major culling of the herd.”

Total Venture Round Investors; First/Seed Round Investors
“The take home message from these data is clear: there’s a huge influx of capital into venture, mostly into technology, and there remains a limited pool of capital flowing into life science venture, and even smaller into early-stage funds – despite the IPO and M&A markets.”

Venure Capital Funding

“Active life science investor numbers (including BioPharma and MedTech) dropped by 25% since 2007, and haven’t rebounded… FLAG Capital Management did a further refinement of “active” investors filtering for only investors that had made at least four new investments with at least $4M in aggregate during 2013, they identified only ~25 active healthcare venture capital investors, and only a subset of those VC’s actually help start or back drug discovery and research stage biotechs – probably only a dozen firms regularly start or fund more than 4-6 new biotech companies a year.”

Number of "Active" Investors

Sources: Bruce Booth “Early Stage Biotech Venture Scarcity: Fitness, Fear, and Greed,” Forbes, 9/22/2014 – Data: Dow Jones Venture Source, Franklin Park Associates, NVCA