Print
Email
Print Edition Stories
UMass Boston launches Entrepreneurship Center
MHT's Galen Moore: Tech sector lags in promoting women execs
MHT's Jackie Noblett: VC funds run short in 2009
In 2009, venture capital’s slowest year on record since 1997, one Boston firm increased its investment activity and put more dollars to work than it had the previous year.
Among 23 firms who responded to the annual survey of venture capital and private equity firms, conducted by the Boston Business Journal, in both 2008 and 2009, all but one reported investing fewer dollars in 2009 than in the previous year.
Firms that supplied data to in both 2008 and 2009 dropped their investments by an average of 33 percent.
Meanwhile, SV Life Sciences Advisers LLC — a firm with offices in Boston, London and San Francisco — increased its deal volume by 31 percent, putting $161 million to work over 46 financing deals.
All but 10 of those deals were follow-on financing for existing portfolio companies, said Boston-based Chairman James Garvey. Although the firm dialed back activity on new deals — it did 12 in 2008 — in many cases, SVLS spent more than it would have otherwise in follow-on financings, as it bought out partners who were failing or running dry of funds.
“Probably half of the deals, we picked up other people’s positions,” Garvey said. “The technology had developed on or ahead of plan. We took that as an advantage to dial up the dollars, and in many cases got more favorable terms.”
SVLS also increased its average deal size by 19 percent, to $3.5 million, a step counter to an industrywide trend toward more parsimonious deals, which Boston VCs reflected in 2009. VCs are holding more in reserve, staving off the need to fundraise until prospects for profitable portfolio exits are more certain, said Margo Doyle, managing director at institutional investment consultants Cambridge Associates LLC.
“Every dollar is more valuable before they have to go out and fundraise again,” Doyle said. “There’s more competing for each dollar, especially as they are nearing the end of a fund.”
Garvey said SVLS had historically taken a conservative approach, reserving $2 for every $1 invested.
“We believe the venture industry will shrink in size by a third to a half,” he said. “That means in the deals we’re in we have to cover some of the people’s bets who are in the deal with us.” SVLS’ average deal has three to five syndicated partners, he said.
Founded in 1995, SVLS currently has $2 billion under management across four funds. The firm has not had to worry about fundraising during the current downturn. SVLS is in the process of reaching a final close on its fifth fund, which is oversubscribed at about $500 million.
Venture capital firms like SVLS that focus exclusively on life sciences investments have managed to stay relatively active compared with their brethren in other sectors, said National Venture Capital Association President Mark Heesen. In 2009, for the first time ever, health care surpassed information technology as the most active category of VC investment.
“The life science sector has continued to remain strong through the entire health care debate and through an increasingly uncertain FDA approval process,” Heesen said. “It’s been interesting to see that that is a sector that has really weathered some very significant obstacles.”
Comments
If you are commenting using a Facebook account, your profile information may be displayed with your comment depending on your privacy settings. By leaving the 'Post to Facebook' box selected, your comment will be published to your Facebook profile in addition to the space below.
RSS Feeds
