Midwest Healthcare Start-Ups Attract Record Level of Venture Investment

October 1, 2008

2 Min Read
Midwest Healthcare Start-Ups Attract Record Level of Venture Investment

In spite of the spreading financial crisis affecting economies around the world, venture capital firms are still finding attractive investment targets among early-stage medical device companies in America's heartland. During the third quarter of 2008, in fact, medtech companies captured more than half of the venture dollars invested in Midwest life sciences start-ups.

During the quarter, Midwest healthcare start-ups reported a record-breaking $455 million in new investments, according to the Midwest Health Care Venture Investment Report. The report was released earlier this month by BioEnterprise (Cleveland),a business formation, recruitment, and acceleration initiative designed to grow healthcare companies and commercialize bioscience technologies in the Midwest.

The previous quarterly record for VC investment in the region's healthcare firms was $418 million, in the second quarter of 2007. Year-to-date, 113 Midwest healthcare start-ups have attracted nearly $900 million in venture investments.

Shah: Record levels.

“Despite the broader economic downturn, Midwestern healthcare start-ups continue to attract record levels of venture,” said Baiju R. Shah, president of BioEnterprise. “The Midwest continues to thrive because the region has a strong healthcare technology and talent base that is just starting to be discovered by national investors. In addition, the healthcare sector is seen as recession-proof.”

Minnesota and Ohio led all Midwestern states in healthcare investment, followed by Western Pennsylvania and Michigan (see Table I). Among the Midwest's metropolitan regions, Minneapolis, Cleveland, and Pittsburgh received the greatest amounts of investment (see Table II).

Table II. Midwest healthcare venture investment for the first three quarters of 2006–2008, by metropolitan region. Source: BioEnterprise.(click to enlarge)

“States that have made substantial investments in growing their biomedical clusters are, not surprisingly, attracting the highest level of venture investments,” said Shah. “ Ohio, Michigan, and Pennsylvania have each invested several hundred millions in funding and plan to continue investing the same again to seed, build, and attract biomedical businesses.”

By industry subsector, the investment funding for the third quarter of 2008 breaks down as follows.

  • Medical device companies: $462 million (52%)

  • Biopharmaceutical companies: $272 million (30%)

  • Healthcare software and service companies: $163 million (18%)

The Midwest Health Care Venture Investment Report includes all reported numbers. Information for the quarterly report is compiled by BioEnterprise from a wide variety of sources, including Dow Jones's VentureWire and VentureSource, Thomson Reuters's Private Equity Week, the Wall Street Journal, SEC filings, company press releases, www.biospace.com, and Midwest bioscience organizations and institutions.

To view additional data about Midwest healthcare business activity, visit the reports section of the BioEnterprise Web site at www.bioenterprise.com/reports/index.html.

© 2008 Canon Communications LLC

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