Despite a decrease in venture capital (VC) funding in the second quarter of 2016, interest in the industry among investors is still strong. The Biotechnology industry received the second largest amount of VC funding for the quarter with $1.7 billion invested into 100 deals, according to the MoneyTree™ Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), based on data provided by Thomson Reuters. However, that represents a 14% decrease in dollars and a 19% decrease in deals, compared with the previous quarter.
Meanwhile, investments in the Life Sciences sector (which is the Biotechnology and Medical Device industries combined) accounted for $2.2 billion going into 161 deals, decreasing 10% in dollars and 12% in deals. And yet, investments in Life Sciences companies accounted for 15% of all venture capital deployed to the startup ecosystem in the second quarter.
Overall, venture capitalists invested $15.3 billion in 961 deals in the second quarter of 2016, which is a 20% increase in total dollars invested, but a 5% decrease in deals compared to the previous quarter. Compared with Q2 2015, dollars and deals are down 12% and 22% percent, respectively.
“For the 10th consecutive quarter, venture investment into innovative startups companies has surpassed the $10 billion threshold, helped in part by the fact that we hit our ninth straight quarter in which 10 or more companies raised mega rounds of $100 million or more. At the same time, we’ve also witnessed a decline in deal count on a quarter over quarter basis for the last year,” Bobby Franklin, President and CEO of NVCA, said in a statement. “This divergence has resulted in a high concentration of dollars invested into a handful of late-stage companies with the top 10 deals for the quarter accounting for almost 40% of venture dollars deployed and one single deal totaling $3.5 billion from a non-traditional investor. The second quarter data confirms what we’ve heard anecdotally from our members, which is that venture investors remain active through a string of strong fundraising periods, but are becoming more selective in where they deploy capital.”
In fact, companies receiving VC capital for the first time decreased from the previous quarter. First-time financing dollars dropped 8% to $1.7 billion in the second quarter as the number of deals declined by 14% to 267. In terms of the Life Sciences sector specifically, first-time financing was down 27% in dollars and was flat in deals, dropping to $372 million going into 34 deals. However, companies receiving funding for the first time, on average got more than first-time companies in Q1. Overall, the average first-time deal in the second quarter was $6.3 million, up from $5.9 million in the prior quarter.