Venture-backed healthcare IPOs caught fire in Q1 2014, but it appears the exit momentum did not carry over to financing side.
While healthcare IPOs captured 63% of all VC-backed IPO activity in Q1, venture capital deal activity to the healthcare sector (medical devices, biotech, drug & pharma) declined 16% on a sequential basis while funding dropped by 25%. In aggregate, the U.S. healthcare sector saw VCs complete 125 financing deals totaling $1.48B in funding over the three-month period.
Below are a cross-section investment trends including the top states, industries and stages observed across the healthcare VC ecosystem in Q1. For more VC financing and exit data across all sectors and U.S. tech hubs, see the full Q1 2014 Venture Capital Activity and Exits Report.
Medical devices and biotech lead healthcare VC by deal volume
Medical devices and biotech tied for the most healthcare VC deals in Q1, with each industry notching 27% of all healthcare VC deals. The top 3 industries by deal share was rounded out by drug development which notched 13% of all healthcare VC deals over the period.
Series A healthcare deals and dollars drop
Peeling back Q1 deal activity in the healthcare sector highlights that healthcare Series A deal activity fell off on a sequential basis and declined to a five-quarter low. Late-stage deals saw a small uptick, as Series E+ deals took 15% of all healthcare VC deals in Q1, a five-quarter high.
After taking 24% of all healthcare VC dollars in Q4 2013, late-stage funding share (Series D+) jumped to its highest amount since Q1 2013, taking 39% of all funding. Along with the drop in deals, Series A healthcare funding share in Q1 2014 dropped to 19% after hitting a five-quarter high in Q4 2013.
California and Massachusetts continued to dominate healthcare deal activity in Q1, taking over 45% of all deals in the sector for the fourth-straight quarter. But between the two, California took 37% of all healthcare VC deals in Q1, more than double the amount of the next largest healthcare VC hub, Massachusetts.
After dropping to 35% in Q4’13, California’s share of healthcare VC dollars jumped to a five-quarter high in Q1 at 47%. Texas also jumped to a five-quarter funding high behind some sizable biotech/pharma investments.
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