Healthcare services companies raised more venture capital in the first nine months of 1995 than in all of 1994, a new study shows.
VentureOne, a San Francisco-based research firm, reported this month that 1995 venture capital investments in all industry segments, most notably information technology, likely will shatter records. Year-end figures are expected in March.
Through Sept. 30, 1995, venture capitalists had invested $261.7 million in 51 healthcare services deals. That represented 5.2% of all venture capital invested in the nine-month period. In comparison, healthcare services companies raised $241.1 million in 45 deals in 1994, VentureOne said. That was down from $330.6 million in 52 deals the previous year.
"Medical devices that reduce a hospital stay and healthcare management systems that lower medical costs are likely to remain attractive investment opportunities for venture capitalists," VentureOne said.
The firm reported that the medical devices and equipment segment attracted $457.3 million through 82 deals.
VentureOne also reported year-end figures for initial public stock offerings by venture-capital-backed start-up healthcare companies.
Four healthcare services companies financed with venture capital completed IPOs in 1995, raising $215 million. That compares with $216.3 million in five IPOs the previous year.
In 1995, the largest venture-capital-backed IPO was Netscape Communications, an Internet software company that raised $140 million and has a post-IPO valuation of $1 billion.
Ironically, 1994's largest IPO was a healthcare company-Apogee, a King of Prussia, Pa.-based provider that specializes in outpatient mental healthcare. Apogee raised $76.5 million in its June 1994 IPO.
However, Apogee's shining star has dimmed somewhat. Last November, the company said it was downsizing its long-term-care division, which provides mental health services to residents of nursing homes. Its stock, which traded near $22 in the past year, last week was at less than $5.
In 1995, healthcare services was the smallest of nine industry segments-based on venture-capital-backed IPOs-reported by VentureOne, and was dwarfed by technology firms. For example, software and information services companies financed by venture capital raised $1.7 billion through IPOs last year.