Healthcare venture fundraising and investments reached record-highs in 2017

Healthcare venture fundraising hit a record-high of $9.1 billion in 2017, and venture investments in the sector are projected to hit a record of $15.5 billion in 2017, once the final numbers are tallied.

That’s according to Silicon Valley Bank’s annual Trends in Healthcare Investments and Exits Report.

Fundraising in 2017 increased 26 percent over 2016, boosted partly by a few large funds like those raised by New Enterprise Associates, which closed a $3.3 billion fund to invest in healthcare and IT deals, and Clarus Ventures, which raised a $910 million fund for life science deals, according to Jonathan Norris, managing director of Silicon Valley Bank.

Healthcare Life Sceinces Report VC
Jonathan Norris, managing director of Silicon Valley Bank’s Life Science and Healthcare Practice. Photo courtesy of SVB.

Healthcare venture investments in venture-backed biopharma, medical device and diagnostics and tools companies in 2017 are projected to reach $15.5 billion, growing 31 percent over investments in 2016, Norris said, with companies like early-stage cancer detection company Grail and genomic cancer test developer Guardant Health raising large rounds in 2017.

“We’re not necessarily seeing a huge increase in the number of deals,” Norris said, “but the financings are bigger.”

To gain an accurate sense for how much venture funding is dedicated to the healthcare sector, Norris looked not only at dedicated healthcare funds, but also technology and diversified funds larger than $25 million. He then approximated the amount of funding he expects to go into healthcare based on the venture firm’s portfolio.

“This is a true look at the dollars that are going to be invested in healthcare companies,” he said. “Other folks will look at healthcare-only funds, but NEA, for example, has a huge fund and a significant amount of that will be invested into healthcare. We’re trying to capture all of that.”

The biopharma sector saw a wave of IPOs, with 12 companies raising more than $100 million in their offerings.

That’s proven to be attractive for crossover investors, Norris said, with the top 15 healthcare crossover investors participating in 10 of the 12 IPOs in 2017 that raised more than $100 million.

Norris expects venture fundraising to decline to the $6 billion to $7 billion range in 2018, as firms that raised large funds in 2017 will be out of the market. “It’s not a major falling off the cliff,” Norris said. “It’s right in the middle of what we saw in the last three years.”

Action Item: Silicon Valley Bank’s report on Trends in Healthcare Investments and Exits Report can be downloaded at http://bit.ly/2qJjbzP.

Photo of medical professional holding moneybag courtesy of hidesy/iStock/Getty Images.