Pain At The Pump: For Some VCs, Filling Up On Cash Is Easier Than For Others

Article preview from Start-Up - July, 2012

Who has recently topped up, and who’s running on empty? START-UP’s annual gas-tank review of venture fundraising shows how consolidation has hit the sector hard in the past twelve months, as limited partners concentrate their money in specialized funds that have demonstrated an ability to deliver returns.

 

Pain At The Pump: For Some VCs, Filling Up On Cash Is Easier Than For Others

Article preview from Start-Up - July, 2012

The past three years, we’ve tracked which life sciences venture firms have nearly tapped out their older funds and which have fresh cash to invest in young start-ups. Our chart only shows funds that focus on health care and does not include regional funds, although we discuss that trend below. We base the numbers on SEC filings, firm announcements, Elsevier’s Strategic Transactions data, and fresh reporting.

The backdrop of this year’s gas-tank review is no secret: venture firms of all stripes have had great difficulty raising funds lately. VCs raised 182 new funds, totaling $18.6 billion in 2011, a far cry from the 237 funds that added up to $31.1 billion in 2007, according to data from Thomson Reuters and the National Venture Capital Association. It’s a sign that the contraction of the venture industry, predicted as the US economy entered a downturn late in 2008, continues apace. Life sciences investors have been among the hardest hit, in large part because a string of eye-popping exits in high-tech have led VCs and their limited partners to shift resources in that direction and away from health care.

Yet for a few firms, fundraising has been easier than one might expect. Buoyed by a series of positive exits, Sofinnova Ventures closed its $440 million eighth fund, well above its initial $325 million target, while H.I.G. BioVentures’ second fund came in at $268 million, exceeding its $250 million goal. Indeed, while the $18.6 billion raised in 2011 was a 37% jump over the especially dismal 2010, that money was concentrated in just 5% more funds than in the previous year. That means the average fund size was 30% larger in 2011 than in 2010.

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No publication reviews leading edge companies and technology better than Start-Up. Each issue of Start-Up profiles the most important new product companies, identifies the hottest technology areas, reviews funds flowing into private companies and investment trends, and reports on university tech transfer licensing. Industries covered: pharmaceuticals, biotechnology, medical equipment & devices, and in vitro diagnostics.

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