Investments

Midwest life science companies capture 3% of VC investments in Q.2

Bank Of America Investment By Michael Rosen • 08/16/04 CHICAGOEarlier this summer, we looked at venture capital funding in the U.S. during the first quarter of 2004, which reached about $5 billion in investments in small companies.

According to the MoneyTree report, the life science sector in total had investments in 155 companies in the third quarter for an average investment size of $10.1 million per company versus total VC average investment of $7.4 million per company. Another area of interest to us is the investment by stage of development.

Investment Opportunity While promising, this level was lower than the $5.4 billion invested during the fourth quarter of 2003, according to PricewaterhouseCooper's MoneyTree analysis.

date results (nine months) for the U.S. for total VC investment were $16.3 billion versus $15.9 billion last year or a growth rate of 3 percent. For the life science sector, VC investment levels were $4.2 billion or about 26 percent of the total investment. This level compares to $4.1 billion for last year or a growth of about 2 percent. It appears that life science venture investing is picking up in the last part of 2005.

Banc Of America Investment The results for the second quarter of 2004 were a bit of a positive shocker as venture capital investments achieved a two-year high of $5.6 billion invested in 761 companies.

In our next edition, we will take a look at Midwest VC investment. See you next week! Michael S. Rosen is president of Rosen Bioscience Management, a company that provides CEO services including financing, up and early stage life science companies such as Renovar and Immune Cell Therapy. Rosen is also a founder and board member of the Illinois Biotechnology Industry Organization. He can be reached at rosenmichaels@aol.com.

Banking Investment Within this large chunk of change, the life science industry (biotechnology and medical devices) represented 25 percent of the total VC kitty (or a total of $1.4 billion). Investments went into 155 life science companies (or 20 percent of the total).

According to the report, ever round of institutional VC investment during the third quarter (a total of $1.1 billion or an average investment of $5.1 million per company). month basis, 653 companies received their first VC money in 2005 (a total of $4.0 billion or an average of $6.1 million per company).

Investment Solution Strategic The Midwest garnered only about $169 million (or 3 percent of the total VC kitty) with investments in 48 companies. The Midwest had an average investment of $3.5 million per company versus $7.4 million in the U.S. As always, this reflected the earlier stage of Midwest companies.

Visit Greylock Partners Index Ventures Index Ventures class technology companies that can become global players in their market. Based in Geneva, Switzerland, with additional offices in London, Index focuses on initial stage investments in information technology and life sciences companies. Since the early 1990's, class information technology and life sciences companies. As one of the early venture firms in Europe, we are committed to the development of the venture capital industry across the continent and UK.

Investment Banking Services Life science investments in the Midwest totaled $41 million (or 24 percent of the total Midwest VC money) with deals in 10 companies. These investments averaged about $4.1 million per company. In comparison, the highly concentrated Silicon Valley achieved funding of $2.1 billion (or 38 percent of the total) with 230 deals.

Bank Investment The Silicon Valley life science industry captured $528 million with 42 deals (or more than 12 times the amount of money invested in the Midwest) with each investment per company more than doubling the amount in the Midwest. Let's take a look at how the Midwest fared against other regions for life science VC activity:

Alternative Investment The impact of VC activity in the California life science industry is without a doubt far beyond that of the rest of the U.S. If you sum up total California activity in the three intrastate regions, the $688 million represents 49 percent of the total U.S. life science VC investment with 59 out of the 155 deals done (or 38 percent of the actual deals).

Online Investment Services In this context, it's not surprising that the Midwest lags behind other well-known biotech clusters. Even the southeast region is ahead of the Midwest. This region includes not only Florida and Atlanta but also Birmingham, Ala., which is a growing cluster. It also includes the Research Triangle in North Carolina.

Accompany Essential Investment The bad news is that Midwest life science funding was better in the first quarter than the second quarter ($54 million in eight companies versus $41 million in 10 companies). Overall VC activity in the Midwest (not just life science activity) also suffered with the second quarter producing only $169 million in investments versus $273 million in the first quarter.

Investment Company Another measure of where the VC money was spent during the second quarter is the MoneyTree's analysis by stage of development:

Investment Management Solution As could be expected, $2.8 billion of the $5.6 billion invested during the second quarter (or 50 percent) was spent in expansion-stage deals (also known as mezzanine or late-stage deals).

Investment Management Services Another $1.6 billion (or 28 percent) was spent in late-stage deals. This means that 78 percent of the total went to well-developed private companies.

Guide Investment Stock About $1.2 billion (or 21 percent) was spent on early stage companies.

Investment Manual Solution Finally, only $83 million was spent on start-up or seed-stage companies throughout the entire U.S. for the quarter (or less than 2 percent).

Investment Stock While the overall VC investing news for the second quarter is good, the trickle-down impact has really hit the Midwest, which is lagging in overall VC investment and particularly in the life science arena. See you next week!

Essential Investment Solution __________
Michael S. Rosen is president and CEO of Barbeau Pharma and a founder and board member of the Illinois Biotechnology Industry Organization (IBIO). He can be reached at rosenmichaels@aol.com. This article has been syndicated on the Wisconsin Technology Network courtesy of ePrairie, a user-driven business and technology news community distributed via the Web, the wireless Web and free daily e-mail newsletters. They can be found at www.eprairie.com.

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The opinions expressed herein or statements made in the above column are solely those of the author, & do not necessarily reflect the views of The Wisconsin Technology Network, LLC. (WTN). WTN, LLC accepts no legal liability or responsibility for any claims made or opinions expressed herein.

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