By Marie Daghlian
Venture capitalists funded more U.S. companies in earlier stage rounds during the first quarter 2010 compared with the same period last year. Nevertheless, total dollars invested during the first quarter dropped 15.5 percent with $1.5 billion invested in 148 companies, compared to $1.7 billion invested in 114 companies during first quarter 2009.
The good news is that venture capitalists have gone back to doing what they are supposed to do—funding innovation. It also shows that the capital markets have opened up to finance later-stage companies.
The number of early stage—seed and series A and B—rounds increased 43 percent over the same quarter last year when many VCs were busy helping their portfolio companies ride the financial downturn with later-stage financings. The number of series C and later rounds dropped to 27 percent of all disclosed life sciences deals in the first quarter of 2010, from 37 percent in the same period a year ago.
Investment in therapeutic and diagnostic companies fell 29 percent to $743.6 million, but 85 companies attracted funding, up from 69 companies during the first quarter of 2009. In order to attract significant capital, companies need to stand out from the pack with either first in class or best in class technologies and therapies. For instance, Cambridge, Massachusetts-based Eleven Biotherapeutics emerged from stealth mode in February after raising $35 million in its series A round with the goal of using a variety of protein engineering technologies to assemble a portfolio of novel best-in-class drugs to treat autoimmune diseases.
The total amounts being raised today are not always what they seem. In an effort to reduce risk, VCs are increasingly turning to tranched financings based on their portfolio companies meeting specific development milestones. For instance, South San Francisco based NGM Biopharmaceuticals scored the first tranche of a $51 million series B round to advance its drug discovery platform and established portfolio of novel targets and factors that restore glucose balance in preclinical models of type 2 diabetes. The specific size of the tranche was not disclosed.
The greater Boston area received the lion’s share of venture financing during the first quarter of 2010 with 37 deals bringing in $482 million of new capital, a 36 percent increase over the $354 million raised in the first quarter of 2009.
Companies in the San Francisco Bay Area raised $306 million in 312 deals, nearly a 50 percent drop in the total amount raised in the first quarter a year ago. Greater San Diego companies raised $267 million in 23 deals, a modest increase from a year ago.
| U.S. Life Sciences Venture Capital Financings (USD M) | |||
| By Region | Q1 2009 | Q1 2010 | Change |
| Greater Boston | 354.1 | 482 | 36.10% |
| New England (includes Greater Boston) | 415.1 | 520 | 25.30% |
| San Francisco Bay Area | 600.6 | 305.6 | -49.10% |
| Greater San Diego | 253.5 | 267.2 | 5.40% |
| All of California (Includes San Diego and San Francisco) | 899.1 | 592.8 | -34.10% |
| Southwest (AZ, CO, TX, UT) | 83.3 | 151.5 | 81.90% |
| Mid-Atlantic (NY, NJ, PA, DE, MD, VA) | 196.2 | 143.6 | -26.80% |
| Carolinas | 4 | 67.1 | 1577.50% |
| Central States (OH, IN, IL, KS, MI, MN, MO, WI, SD) | 63.4 | 61.5 | -3.00% |
| South (FL, GA, KY, LA, TN) | 8 | 25.3 | 216.30% |
| Greater Seattle | 59.5 | 22 | -63.00% |
US Life Sciences Venture Capital Financings Total | 1728.6 | 1461.2 | -15.50% |
| Number of Deals | 114 | 148 | 29.80% |
| Average Deal Value | 15.2 | 9.9 | -34.90% |
Biotech only deals (Therapeutics, Dx, Tools/Technology) | 1050.1 | 743.6 | -29.20% |
| Number of Deals | 69 | 85 | 23.20% |
| Average Deal Value | 15.2 | 8.75 | -42.40% |
Disclosed deals in Biotech | Q1 2009 | Q1 2010 | |
| Seed, A-B rounds | 28 | 40 | 42.90% |
| C and later rounds | 12 | 10 | -16.70% |
Disclosed deals in Life Sciences | |||
| Seed, A-B rounds | 44 | 51 | 15.90% |
| C and later rounds | 26 | 19 | -26.90% |
