Third-quarter investment in medical device companies by venture capital shops was down, but the value of the deals rose, according to the PricewaterhouseCoopers/National Venture Capital Assn. MoneyTree report.
The report, which uses data compiled by Thompson Reuters, found that the 65 medtech deals inked by VCs during the 3 months ended Sept. 30 was down 8% compared with the 2nd quarter. But the value of those deals, pegged at $566 million, rose 12% compared with Q2, according to the report.
Software companies enjoyed the most attention from venture capitalists during the quarter, with total investment reaching $3.6 billion – its highest mark in 12 years – in 420 deals, the report found.
"It’s an exciting time to be an entrepreneur with a software company," Mark McCaffrey, global technology partner and software leader at PwC US, said in prepared remarks. "More venture capital dollars are going into more software deals than we’ve seen in the past decade. The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space. And, at the current pace of investing, we should see total venture capital investments in 2013 exceed the annual total from 2012."
"With more than half of this quarter’s deals coming from early and seed stage deals, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem. Software is a natural increased area of focus given that many tech deals are less capital intensive to get to proof of concept," added NVCA head of research John Taylor. "We are balancing this optimism, however, against the recognition that VCs are still trying to gain exits for the previous generation of companies. There is some improvement on that front but we would like to see it strengthen even further."
Biotech was the 2nd-largest sector to attract VC dollars, with 123 deals reaping $852 million. But investment in the life sciences sector "remains depressed," according to the report, with only 541 deals reported during the 1st 3 quarters of 2013 – a low-water mark that hasn’t been seen since 2005.
