Start-ups get more venture capital in '07
That's an 11 percent total dollar rise from 2006, reports the MoneyTree Report by PricewaterhouseCoopers, for the National Venture Capital Association (NVCA).
Venture capital is far short of the all-time high of $110 billion during the Internet boom in 2000. However, the report shows they're bullish on new start-ups from California to Connecticut, especially in the fastest-growing sectors of life sciences and clean-tech energy.
Tracy Lefteroff, managing partner at PricewaterhouseCoopers, called 2007 "a good year to be an entrepreneur," because of "an encouraging mergers-and-acquisitions market and the most venture-backed (initial public offerings) seen in several years."
Life sciences - medical devices and biotechnology - set a record $9.1 billion for 862 deals in 2007. That was up from $7.6 billion and 786 deals the year before. Observers expect that sector to keep growing, as research focuses on diseases and the aging U.S. and global population.
Sherrill Neff, founding partner of Quaker BioVentures, a venture-capital firm in Philadelphia, says that young biotech firms, with innovative technology, and pharmaceutical giants, boasting capital and large business infrastructures, are "a natural match."
One example: Optherion, a company in New Haven, Conn., making medical treatments for macular degeneration, an eye disease that causes blindness in people over 60. Quaker BioVentures, Johnson & Johnson and other investors raised $37 million last fall for Optherion.
Deepak Kamra, general partner at the Canaan Partners venture-capital firm in Menlo Park, Calif., expects demand to keep growing for clean-tech energy firms. Clean-tech investments are long-term projects that target the vast U.S. and global energy markets, and start-ups will need venture capital and money raised from IPOs, Kamra says.
Wary of failed start-ups from the dot-com bust, venture capitalists today make sure that young firms have profit-driven business plans, strong potential markets and savvy management. Start-ups also must have solid "exit strategies" for when they're ready to sell stock or get acquired. Venture firms often set aside millions of dollars as a financial cushion for the start-ups.
In the health sciences, Sherrill says that more venture-capital and pharmaceutical companies are joining forces early to invest more money in start-ups.
Venture firms accepted and funded more than 1,300 new business plans last year, says John Taylor, the NVCA's research and financial affairs executive.
"Venture capitalists," he says, "would not be putting money in this if they were not optimistic about what lies ahead."
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