[author: Donald Zuhn]
Last month, 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 first quarter of 2012. The report, which is prepared by NVCA and PriceWaterhouseCoopers LLP using data from Thomson Reuters, indicates that venture capitalists invested $5.8 billion in 758 deals in the first quarter, which constituted a 19% decrease in dollars and a 15% decrease in deals as compared with the fourth quarter of 2011, when $7.1 billion was invested in 889 deals.
The report notes that the Life Sciences sector (biotechnology and medical device industries) and the Clean Technology sector saw marked decreases in both dollars and deals in the first quarter, with the drop in Life Sciences funding mostly due to decreased funding for the biotech industry. While the biotechnology industry still managed to place second among the industries tracked by the NVCA in terms of dollars invested in the first quarter, with $780 million invested in 99 deals, this constituted a 43% drop in dollars and a 14% drop in deals over the fourth quarter. The medical device industry picked up some of the slack for the Life Sciences sector, with $687 million invested in 72 deals, which constituted a 33% increase in dollars and a 6% drop in deals. The number of deals in the Life Sciences sector dipped to its lowest point since the first quarter of 2009. Overall, eleven of the seventeen sectors tracked by the NVCA saw decreases in dollars invested in the first quarter.
Tracy Lefteroff, the global managing partner of the venture capital practice at PricewaterhouseCoopers noted that "[v]enture capitalists remained cautious during the first quarter after a lackluster fourth quarter in the public markets, as evidenced by the shift from investing in earlier stage companies to a focus on later stage companies in Q1," but suggested that given the improvement in the public markets in the first quarter, "we could see VCs return to placing their bets on seed stage companies in the coming quarters." She also indicated that "[a] more active M&A market may be the reason that the Biotech industry experienced a decline in investing in Q1." NVCA president Mark Heesen pointed out that "[t]he industry continues to contract and consolidate which is beginning to manifest itself in fewer dollars being invested in fewer deals," but added that "[a]s innovation continues to advance at a very quick pace, we suspect that many seed stage companies are being funded in stealth mode, forming a pipeline that is not yet visible to the public eye."
For additional information regarding this and other related topics, please see:
• "Venture Funding Increased 22% in 2011," February 2, 2012
• "Life Sciences Venture Funding Drops in Third Quarter," October 27, 2011
• "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