The pipeline of healthcare venture capital continues to flow freely.
Just ask the folks at Maternicare, a Laguna Hills, Calif.-based physician practice management company specializing in managing obstetric and gynecological practices and providing network management services. The OB/GYN PPM received $5 million in a third round of financing from a group of venture capitalists in August. The company says its women's health focus has attracted venture capitalists' interest. The funding will be used to continue partnering with physician practices.
Maternicare is one of 143 healthcare companies that received $632 million of venture capital financing in the quarter ended Sept. 30. Volume is up 92% from the year-ago quarter, when venture capitalists gave $329 million to 96 companies.
Price Waterhouse released a special report of its latest venture capital survey results to MODERN HEALTHCARE. The survey tracks quarterly venture capital investments in U.S. companies in all industries.
Total venture capital spending in all industries jumped 75% to nearly $3.6 billion in the July-to-September period. A total of 675 companies received financing, compared with 443 in the year-ago period.
"This may be the best time in history to be an entrepreneur," says Donald Almeida, head of Price Waterhouse's audit and business advisory service. Total venture capital spending -- $9 billion in the first nine months of 1997 -- stands to set an annual record, eclipsing last year's $9.5 billion watermark.
Healthcare service companies grabbed the largest share of healthcare-related venture capital dollars in the third quarter. Price Waterhouse said 68 companies received $336.6 million. A $31 million buyout of a psychiatric clinic business in Austin, Texas, ranked as the largest single investment of the quarter.
Within the service sector, a dozen PPMs as well as a number of disease-management, managed-care, long-term-care and information technology companies received venture capital.
One fledgling company, Birmingham, Ala.-based Momentum Health Services, was conceived by its venture capital backer to take advantage of opportunities in the burgeoning field of Medicare provider-sponsored organizations. Birmingham-based Private Capital Corp. invested $5.5 million of equity in the start-up and expects to put in another $4.5 million before turning to other financing sources.
Private Capital hand-picked Momentum's management team and came up with the company's business strategy: providing capital and management expertise to provider groups that want to establish PSOs.
"We sort of find an area that we think holds promise and spend an extended period of time, maybe a year or more, studying the industry," says Bill Acker, a principal with Private Capital. So far, Momentum has completed or nearly completed joint venture agreements with a handful of provider groups, he says.