The State of Venture Investing, Corporate Innovation and the Fiscal Cliff

DEC 17

Recently I moderated a panel about Mobile’s Impact on Healthcare at the MidAmerica Healthcare Venture Forum.  For a regional event, it drew 300 credible attendees to a compelling agenda…overall a good venue.

While my panel was waiting to step onto the stage, Mark Heesen, President of the National Venture Capital Association (NCVA) was presenting a comprehensive view about the state of venture investing in the U.S.  I’ve summarized some of his points below:

YTD 2012

  • $28B in venture capital has been deployed, while only $21B has been raised (an imbalance)
  • The NCVA has tracked just over 400 venture backed M&A deals…flat Y/Y
  • There have been 50 venture backed IPOs…flat Y/Y
  • Most of the IPO class from 2012 are performing well (above their issuance price)…14 are below
  • Fiscal cliff concerns are dampening IPO and M&A appetites…and will until resolved
  • Historically the top three areas for venture investing have been:
    • IT
    • Clean Tech
    • Life Sciences (Bio Tech, Med Device, HC Services)…but this category is down from 30% of the total invested venture dollars to 25%…roughly $7B of the $28B total.
  • First time financings are happening at the lowest rate since 1995
    • Attributed to alternative sources of capital…incubators and crowd sourcing venture communities (like VenCorps)
  • The venture industry is shrinking
    • The number of VC firms is down
    • The number of professionals leaving the business is down
  • Large global companies are exiting R&D and will be acquisitive based on “needs” versus “wants”.  They have tons of cash and need to deploy it because the trend line for organically grown innovation is flat/down
    • If the fiscal cliff is averted, the NCVA is predicting a strong Q2/Q3 ’13 for M&A
  • As LPs, pension funds are being replaced by family offices and sovereign wealth funds
  • If you’ve raised a fund in this environment…you’re in great shape as it’s become a Darwinian environment  (see deal imbalance point above)
  • The NVCA is hopeful that the FDA will continue to work with venture as a catalyst for supporting innovation, however
    • The med device tax is looming…and while they are hopeful it will be postponed, they are planning for it to take effect Jan 1…and even zero revenue companies will be taxed!

Mark’s comments were well received and I was happy to reference him a few times as our panelists from The Whistle, Healthsense, Asthmapolis and Arthur Ventures discussed the impacts of innovation and convergence in mobile health.

Let us know what you think.

Chris Hoffmann
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