Venture capital investment in the medical device & equipment industry rose 9.1 percent during the second quarter, even though there were nearly 17 percent fewer deals than during Q2 2010, according to a PricewaterhouseCoopers report.

The consulting firm’s MoneyTree looks at venture capital investment along a variety of parameters and industries. VCs dropped $841.0 million on the med-tech sector during the three months ended March 31, compared with $771.0 million during the same period last year.

The value of the deals rose as well, because the higher spend went to 18 fewer deals. There were 90 VC deals during Q2 2011, compared with 108 during the prior year’s second quarter. Those investments went to more established operations as well. First-time institutional investment (what the National Venture Capital Assn. calls "first sequence" investment) was down nearly 60 percent to $28.5 million (18 deals), compared with $71.0 million (19 deals) during Q2 2010.

Since 1995, when VC investors spent $582.0 million on 180 deals, through the end of last year ($1.51 billion on 177 deals), VC investment has risen 308.9 percent and the number of deals has risen 93.9 percent.

For the life sciences sector as a whole, which comprises the biotechnology and medical device industries, VC dollars invested rose 37 percent and deal volume rose 12 percent, to $2.1 billion and 206 deal, respectively.

"The rise in venture capital investments going into the Life Sciences and Internet sectors can be attributed to the increase in exit activity in the Life Sciences sector and attractive valuations for Internet companies," PwC US global managing partner of the venture capital practice Tracy Lefteroff said in prepared remarks (PDF). "The exit market for both biotech and medical device companies has been active over the past year, and this has encouraged VCs to put more money back to work in this space."

Total VC spend during the quarter was $7.5 billion in 966 deals, up 19 percent in terms of both dollars and number of deals compared to the first quarter. It’s the highest total in a single quarter since Q2 2008, according to the report.

"This quarter’s increased investment levels signals an incredible opportunity for job creation and innovation, but if current dynamics continue, it will not be sustainable," NVCA president Mark Heesen said. "For the past three years, the venture capital industry has been investing significantly more dollars into companies than it has been raising from institutional investors. This level of investment cannot continue if we do not start to see a pick-up in exits and, subsequently, fundraising. The money simply will not be available to invest. Ironically, our industry should be much less concerned about a bubble and more concerned about being in a position to adequately fund the tremendous opportunities out there in the next decade."

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