Healthcare tech investment gone wobbly?

Earlier this month, this Editor riffed on David Shaywitz’s Forbes article lamenting the paucity of life sciences VCs setting their sights and putting their money on the line for digital health. While David Doherty of mHealthInsight differed, pointing out his 16 billionaires making big bets in health tech, VC action in ‘hot’ digital health is underperforming. The ironically-named MoneyTree 2013 First Quarter report from PricewaterhouseCoopers (PWC) and the National Venture Capital Association (NVCA), tracks media, software, clean tech, biotech and medical devices. And the ‘Tree’ is not exactly ‘shaking’:

  • For all surveyed VC investment, 1st Quarter 2013 declined 12 percent in dollars and 15 percent in number of deals, compared to 4th Quarter 2012.
  • Medical devices and equipment are an ‘underperform’: down 20 percent to $509 million, deals dropping 10 percent to 71, 1st Quarter 2013 to the prior quarter.
  • In the prior year (2012) 1st Quarter, over $200 million more had been invested in medical device companies. Similar declines were tracked in biotech.
  • The Life Sciences sector (medical devices + biotech) declined to the fewest number of funding deals since 1st Quarter 2009. Even more shockingly, first time VC financings are at 2nd Quarter 1995 levels.
  • Software and media continued to dominate–and grow in funding.

According to investors queried by FierceMedicalDevices, reasons for weak investment in medical devices were: continued lack of transparency at the FDA about approval process, movement away from first round/early-stage to later-stage companies, a focus on companies with devices not needing FDA approval–or already having it. Unfortunate, but rational. One hopes a change of heart, or a change of cycle.  PwC/NVCA release (in FierceMedicalDevices)

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