October 20, 2014
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
The parade of initial public offerings from biotech firms this fall are a sign that investors are getting better at tolerating risk and finding new growth opportunities, venture capitalist Deepa Pakianathan, general partner Delphi Ventures, told BioSpace this week.
New data released by based by Thomson Reuters in the MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association (NVCA) found that $33 billion was invested through the first three quarters. Those numbers meant that total venture investing in 2014 has eclipsed total venture investing in all of 2013, which saw only $30 billion from VCs in four quarters.
Those numbers are good signs that IPOs this fall for companies like Viking Therapeutics , Foamix Pharmaceuticals, Ltd. , ProQR Therapeutics B.V. and Tokai Pharmaceuticals are benefitting from the most vibrant investor climate in decades.
“We haven’t seen an IPO window like this since the late nineties and early 2000s, which means companies are getting funded and venture capital firms can raise funds,” said Pakianathan. “ It’s all part of the process of attracting money to the sector. The IPO market is largely being driven by public market investors interest in new growth opportunities and a higher risk tolerance.
Despite the rash of IPOs, some VCs are remaining cautious going as deeply into the sector as they did the quarter prior. Deals in biotech fell 6 percent in when compared to when compared to the previous quarter. Overall, the biotechnology industry captured the third largest total during the quarter with $1.1 billion going into 110 deals, down 43 percent in dollars invested and 10 percent in deals from the prior quarter.
Much of that movement can be put down to a flight from risk after choppy summer in the capital markets. But there is still plenty of room for innovation and incentive for new startups to aim for solid exits or IPOs in coming months, said Pakianathan.
“By definition, earlier stage companies are riskier investments. There were a lot of generalist funds that participated in IPO’s, in addition to the specialist funds,” said Pakianathan. “The good news for venture funds is that as companies grow and go public, they can return capital to their investors and they can continue to invest in newer startups. All of this positive activity in biotech keeps the innovation cycle going.”
