Second Quarter 2009 MoneyTree Report

The 2009 second quarter MoneyTree™ Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA) came out earlier this week. As expected, the news was generally not good, but there were some rays of hope. Total amount invested nationwide was up some (15%) over last quarter but the number of deals was flat compared to the anemic numbers from the first quarter. In comparing last quarter to the 2008 second quarter figure, the number of deals was down by more than 40%.

Life Science Sector Leading the Way

By sector, life sciences faired the best. The report defines life sciences as biotechnology and medical device. According to PwC, investments in life science companies accounted for the highest percentage of total venture capital investments since the inception of the report. While the figures are not staggering, life science investments are proving to have slow but continuing exits for investors while exits for other industry have mostly stalled. With the increasing number of drugs coming off patent for large, cash rich pharma in the next few years, acquisitions of biotech companies are anticipated to increase. Many drug development companies (and investors) plan to take advantage of this as part of their exit strategy and long-term capitalization plan.

Also in the report, there was an increase in the combined size and number of seed and early stage investments, which coupled with the increasing interest in life sciences, bodes well for the Midwest if the trend continues.

Midwest Figures

In the breakdown of the regional data, the national trends generally hold true here in the Midwest. It is important to remember though that here in the Midwest, the numbers can fluctuate considerably from quarter to quarter because the deal volume is lower. So, an unanticipated quarterly spike of a given statistic (e.g., deal volume, industry investment, deal size, IPOs) in either direction is likely to be an anomaly rather than a material change in the trend line. As an aside, for purposes of the report, Minnesota, Wisconsin, Iowa, North Dakota, South Dakota, and Nebraska make up the “North Central,” while Illinois, Missouri, Indiana, Kentucky, Ohio, Michigan, and western Pennsylvania make up the “Midwest.”

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