As Labor Day memories continue to fade and the air gets a bit colder in the Northeast, summertime venture capital disbursements are beginning to roll in and the results look promising for the health-care sector.
According to our VentureXpert database, venture firms plugged more money into the sector during June, July and August 2000 than they did over similar periods in 1998 or 1999. In fact, entrepreneurs were blessed with 40% more funding this summer than they were two years ago.
In the summer of 1998, total disbursements into health care reached just $709.40 million. And while an additional $71.99 million more was pumped in during summer 1999, the summer of 2000 took those numbers to new heights. Health care companies in June, July and August of 2000 took in a total of $991.99 million, $210.6 million more than the summer of 1999 and $282.59 million more than 1998.
It is important to note that the 2000 numbers may actually continue to rise as not every venture firm surveyed by our VentureXpert database analysts have yet submitted their complete tallies for the month of August.
Tale of 2000: More Cash, Fewer Companies
“The rise in numbers doesn?t surprise me,” said Adele Oliva, a partner with Patricof & Company Ventures. “Rounds are becoming larger as more money is being put to work. What has surprised me was the dip in the amount of companies funded from 1998 to 1999.”
Indeed, the overall number of companies receiving funding has been shrinking since 1998, when 149 companies raised successful rounds. In 1999, however, 138 companies got funded while just 73 companies to date have received a portion of the $991.99 million given out in 2000.
The dip from 1998-1999 “probably has to do with the downturn in the [biotech market],” said Oliva. “Investors needed time to regroup.”
The noticeable drop in funded companies this year probably had to do with the maturation of the funding cycle, she said, arguing that a greater percentage of the funded companies were nearing exits.
And the numbers back up her claim.
In 1999, roughly 40% of health-care venture deals were early-stage funding rounds. According to our VentureXpert database, however, just 20% of funding has gone into first-stage, or seed rounds during the summer of 2000. The rest has largely been distributed toward later-stage rounds or expansion funding.