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Venture capitalists bet big on biotechnology

Jul 2008
Charley Troy

Venture capitalists invested $29.4 billion last year, with biotechnology and medical devices grabbing a $9.1 billion share of the pie, according to the MoneyTree Report by PricewaterhouseCoopers International Ltd. of New York and the National Venture Capital Association of Arlington, Va. The report is based on data from Thomson Financial New York.

The total 2007 investment represents a 10.8 percent increase in dollars and a 5 percent increase in deal volume over 2006. Investments in all four quarters of 2007 totaled more than $7 billion.

Much of the increase can be attributed to record investment levels in the clean technology and life sciences sectors as well as to strong investment levels in Internet-specific companies. Seed/early-stage companies received more dollars in 2007, but later-stage investments experienced the most dramatic increase. At the same time, first-time financings reached a six-year high as venture capitalists placed more initial bets on companies across multiple sectors.

Despite the capital needs of industries such as clean technology and life sciences, there was only a single-digit increase in deal volume, which Mark Heesen, president of the National Venture Capital Association, said suggests that a fair amount of discipline is going into investment decisions.

Biotechnology and medical device industries reached an all-time record for venture capital investing with $9.1 billion in 862 deals, compared with $7.6 billion going into 786 deals in 2006. Although both industries experienced double-digit increases over the prior year, the most significant growth was in the medical device industry, which rose 40 percent in 2007 to $3.9 billion going into 385 deals. For the year, life sciences accounted for 31 percent of all venture capital invested, which also represents an all-time high. Life sciences also retained its position as the No. 1 investment sector for 2007. Telecom companies saw a decrease in investment in 2007, with 290 deals receiving $2.1 billion, a drop from the $2.6 billion in 301 deals they captured in 2006. Other industries that experienced declines in deals and dollars in 2007 included health care services, semiconductors and electronics/instrumentation.

In 2007, US-based venture capitalists invested $1.1 billion in 91 deals in India and $1.4 billion in 133 deals in China, representing all-time highs for US investments in each country. These figures are reported separately and are not included in the aggregate totals above.

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