Healthcare-related venture capital investments last year continued the record-level pace of 1996, a recent survey shows.
Biotechnology, healthcare services, pharmaceutical, and medical instrument and device companies netted 22% of venture capitalists' total investments in 1997, according to the latest quarterly venture capital survey by Price Waterhouse.
"1997 was the Year of the Entrepreneur," says Donald Almeida, managing partner for the Price Waterhouse Technology Industry Group.
Total venture capital investments in U.S. companies in all industries soared 34% to $12.8 billion in 1997, eclipsing 1996's record-setting $9.5 billion. The number of companies that received financing also increased about one-third to 2,691, Almeida says.
And healthcare companies didn't miss out on the trend. Last year 581 companies netted $2.7 billion in venture capital financing. That's a 42% increase over $1.9 billion in financing for 1996.
"The strong, steady investment that we saw through the first three quarters of 1997 continued in the fourth quarter," says Todd Hall, marketing director for Price Waterhouse in New York.
Healthcare-related investments jumped 64% to $928.9 million in the fourth quarter of 1997, compared with investments of $566.4 million in the year-ago quarter, the survey found.
Venture capitalists invested in 180 healthcare companies in fourth-quarter 1997 compared with 132 in the year-ago quarter.
Total venture capital spending in all industries jumped 50% to $3.7 billion in the fourth quarter.
Healthcare services companies raked in the lion's share of healthcare-related venture capital in the fourth quarter. Price Waterhouse found 73 companies received $423.1 million, which accounted for 46% of overall fourth-quarter healthcare investments.
Physician practice management, disease management, managed-care, long-term-care and information technology companies continued to receive millions of investment dollars.
The largest single healthcare investment was Chicago-based Willis Stein & Partners' $26.9 million buyout of Franklin Health of Upper Saddle River, N.J., which provides healthcare management services.
Healthcare start-ups also continued to net major financing. One of the largest was $9.9 million in first-round financing for Oncology Affiliates of McLean, Va., a start-up PPM.
Although the investment growth has been steady thus far, Price Waterhouse is cautiously optimistic about the future. Growth will depend on new opportunities and later-round funding of the nearly 5,000 companies that received venture capital in the past two years, Almeida says.