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Venture Activity Slows Down in the Third Quarter

By October 29, 2015Commentary

We like to periodically check in on venture capital activity, which is critical to the formation and growth of new health care companies.  The National Venture Capital Association, with help from other groups, compiles these statistics.   (NVCA Reports)  Starting at the front end, the 3rd quarter of 2015 was a weak one for fundraising, although overall 2015 looks like it could match 2014 in amount raised.  53 funds got commitments of $4.4 billion in the third quarter.  A very low number of new venture funds received financing.  In terms of investing by venture funds in the quarter, $16.3 billion was provided to 1070 companies, both down from the 2nd quarter.  Life sciences firms got $2.9 billion in 194 transactions, basically flat from the earlier quarter.  On the positive side, health care services companies saw a 178% increase in funding amount.  Most investment is still going to later stage companies, although seed and early-stage financing remains respectible, with first-time fundings going up 7% to $2.5 billion.  On the back end, exits also slowed, with both merger and acquisition and IPO activity on track to be down significantly in 2015 compared to 2014.  For the third quarter of 2015, there were 90 merger and acquisition transactions involving venture-backed companies, with 20 of those having an announced value of $5.1 billion.  There were 14 health care deals among these, and the of those had a reported value of $1.654 billion.  The IPO market has definitely slowed, with 13 initial public offerings in the quarter raising $1.7 billion.  10 of these were life sciences IPOs.  Venture activity hasn’t cratered by any means, but does seem to be slowing, which is not surprising given its strength for so long.

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