2009 VC investing down, but biotech shines in Q4

There's no doubt about it: Venture capital funding was scarce in 2009. A report released today by the National Venture Capital Association finds that the double digit declines in investments were spread across almost every industry, including the life sciences, which saw a 19 percent decline in both dollars invested and deals. Overall, venture capitalists invested $17.7 billion in 2,795 deals last year, marking the lowest level of dollar investment since 1997.

But there is a silver lining to the otherwise dismal numbers. Despite the investment decline, biotech was the single largest investment area in terms of funding raised ($3.5 billion into 406 deals). And there were signs of recovery at the end of 2009, as biotech fundraising increased 10 percent in Q4 over Q3 levels. In fact, biotech was the only industry to surpass the billion-dollar investing mark in Q4, and finished the year as the largest investment sector. The life sciences sector (biotech and medical devices combined) accounted for 34 percent of all venture capital dollars invested in 2009 compared with 28 percent in 2008.

"The venture capital industry had no choice but to slow the investment pace in 2009," Mark Heesen, president of the NVCA, says in a release. "The weak exit environment resulting from an unstable public market combined with a challenged limited partner base sent a strong message to the venture community to pull back the reins--and the VCs listened." He adds that the economy has begun to show signs of a turn-around, which began in Q4 and will continue into 2010. "VCs continue to place their bets in areas of promising growth especially in the life sciences sector, which accounted for one-fourth of all deals in the fourth quarter of 2009."

- here's the NVCA release
- check out this Bloomberg article for more