Biotech execs get creative as venture cash flow dwindles

Dow Jones' VentureSource helped keep up the drumbeat of bad venture news at the end of last week, offering its own dismal assessment of the investment scene for biotech companies. Following fast on the footsteps of the National Venture Capital Association and PricewaterhouseCoopers, the number crunchers at Dow Jones concluded that biopharmaceuticals amounted to the worst hit sector in the tech crowd, with a 43% drop in cash flow and a 22% shrinkage in the number of deals in the second quarter.

Dow Jones counted 54 deals that raised $570 million in the second quarter. Dow Jones reports that in the first half biopharma gained $1.07 billion in 104 deals, dropping 45.6% and 28.3%, respectively. Medical device companies, meanwhile, raised $653 million for 67 deals, a 33% decline in investment and 22% decline in deals. Those figures track, though don't exactly mirror the NVCA's, which also singled out biotech for a sharp downward trend even as Internet and software startups continued to attract backers. 

Abingworth's Jonathan MacQuitty says it's a natural reflection of the tough fundraising environment for the venture funds. With less cash out there for new investments, he tells Dow Jones, entrepreneurs are scrambling for more deal revenue of their own, counting on partnerships to bring in added money. And they're sticking to programs that have the best shot at surviving hard times.

"I think the fact that there's less capital around [means] entrepreneurs are trying to be enormously clever about the projects they're focusing on," MacQuitty told the news wire. 

For Polaris's Amir Nashat, the venture glass is still half full. "Overall it's a little harder than it used to be, but the ecosystem is still there," Nashat tells Dow Jones. "All of our companies that have gone out fund-raising have gotten new investors to come into their rounds."

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