Venture Funding Fell In 2012

The prospect of federal government belt-tightening dampened venture capitalists’ enthusiasm for investing in new biotechnology and cleantech start-ups in 2012, according to the latest MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association. Investments in biotech companies declined 15% compared with 2011 to $4.1 billion, and the number of deals stayed flat. Tighter reimbursements from Medicare, along with lengthy and complicated FDA approval procedures, suppressed investment, says NVCA President Mark G. Heesen. Similarly, cleantech investors began moving toward more capital-efficient deals that are less dependent on government support. The sector saw investment drop 28% in 2012, with a corresponding 23% decline in deal volume. The fourth quarter was particularly weak as cleantech backing sank 36% from the third quarter. Brand-new start-ups in all sectors had a difficult time getting investors to part with funds; seed-stage funding decreased 31% in 2012. “As the number of new funds being raised continues to shrink, venture capitalists are being more discriminating with where they’re willing to place new bets,” explains Tracy T. Lefteroff, global managing partner at PwC.