Guest Post by:
Mike Schmitt, MD
Ok, enough already! Amidst all the economic “doom and gloom” from the daily news feeds—I actually do have something encouraging to share (well, at least for the moment until the Dow plunges another 10%).
The National Venture Capital Association along with Pricewaterhouse Coopers released their VC funding update in its recent Moneytree Report for Q3 2008. PWC's MoneyTree is a great site for info on VC investing trends on the national as well as regional levels with the capability to search by industry. Even better yet—it’s free with a simple registration.
It seems that on a national level, VC investments have remained relatively stable (naysayers look out!) through the 3Q of this year at $7.1B. The biotech industry, which had fallen to 3rd place in the 2Q (first time that had happened since 2003) once again reclaimed its top position inching out software by a narrow margin of $1.35B to $1.34B. The medical device segment placed 4th at $864M, giving the overall life science sector (biotechnology and med device combined) a relatively strong $2.21B (and represented a 10% increase from the 2Q). This brings the 2008 total for all categories (through 3Q) to $21.6B and is on track to be in the same ballpark as 2007 when VC investments were $29.4B for the year.
The life science industries do tend to be more resilient in difficult economic conditions—after all, people don’t stop getting sick and we still need to treat their illnesses. But in this market—anything can happen. When the ultra-conservative stock of Berkshire Hathaway moves up or down by more than 25% in a single day—you know we are not in ordinary times—and no company is immune to the current market conditions.
Can we expect more good news or will VC investing get hammered by year end? PricewaterhouseCooper’s managing partner, Tracy Lefteroff does not expect funding to dry up. “VCs have slugged through difficult times before and this one should be no different.” Personally, I’m not so sure. Stay tuned for the 4Q follow up in February 2009. It's difficult to predict at this point, but I’m putting my bets on a tough market ahead.
Dan's Note: Short answer, if you can avoid raising a VC round in 2009, do so. Good deals will get funded, but given the increased macroeconomic and financing risks, valuations will take a hit -- particularly during the next 6 months of uncertainty. The added creative innovation to bootstrap your runway to 2010 will also pay long-term dividends for your business.
Labels: guest posts, life science, mike schmitt, moneytree
Comments (3)
Dan/Mike, I don't see how someone can realistically say funding isn't drying up. They might not have data to show it, but there's quite a lag in data reporting in the VC space. However, I believe we will see an increase in life science deals. On the downside, you'll probably see more traditional tech VCs dabble in this space, but I believe with little sucess. I commented about it a few weeks ago here (shameless plug): http://reiboldt.com/?p=13
@Mark: Good observations...I specifically added my $.02 to Mike's post because I believe 2009 will be tough for all. I wouldn't recommend Q3 numbers lulling anyone into complacency about extending runway thru 2009.
Mark/Dan--Thanks for your thoughts. I was quite surprised to see 2008 Q3 funding in the Life Science space (as reported by NVCA) was down ony slightly compared with Q3 in 2007. In fact Florida has experienced a dramatic downturn in VC placements in Life Sciences for 2008. I plan to do a detailed post on this in early 2009 when all the current year data has been collected.
Post a Comment
<< Home