Healthcare Venture Capital Fundraising and Investment Remained Strong in 2022; SVB Releases Annual Healthcare Investments and Exits Report

Rhea-AI Summary

SVB's annual Healthcare Investments and Exits Report highlights that healthcare venture capital funds raised nearly $22 billion in 2022, the second-largest fundraising year. Despite a decline in investment activity in the second half of 2022, $50 billion in investible capital from prior years indicates potential for future growth. The report anticipates fundraising to drop to $15 billion in 2023, but projects ongoing strong valuations for leading companies across biopharma, healthtech, medical devices, and diagnostics. The trends reflect a cautious but promising outlook.

Positive

• Healthcare venture capital funds raised nearly $22 billion in 2022, second largest on record.
• $50 billion of investible capital raised since 2021 indicates future healthcare investment potential.
• Early-stage clinical results could reinvigorate IPOs in biopharma market.

Negative

• Total healthcare company investment declined throughout 2022 with decreasing deals and dollars.
• Pre-IPO crossover rounds in biopharma dropped to single-digits in 2H 2022.
• No US venture-backed IPOs occurred in 2022, and only five M&A deals were completed.

Healthcare venture capital funds raised nearly $22 billion, marking 2022 the second largest fundraising year on record

SANTA CLARA, Calif., Jan. 6, 2023 /PRNewswire/ -- SVB, the financial partner of the innovation economy and parent of Silicon Valley Bank, today released its 12^th annual Healthcare Investments and Exits Report which shows venture capital fundraising and investment persisted in 2022, remaining at highs second only to 2021's record-setting numbers.

While fundraising activity slowed down in the second half of 2022, a record $50 billion of investible capital raised since 2021 indicates significant potential for future healthcare investment activity. While total healthcare company investment slowed in 2022 -- with successive declines each quarter in both deals and dollars -- it was still the second largest year in healthcare investment on record.

"Many investors were focused on helping existing portfolio companies extend runway and achieve milestones last year," said Jonathan Norris, Managing Director at Silicon Valley Bank and author of the annual Healthcare Investments and Exits report. "Investments were primarily focused on insider rounds while investors sought to buy time during market uncertainty."

The market for IPOs was strained across all sectors in 2022. However, early-stage positive clinical results in 2H redirected some 2021 biopharma IPOs in a positive direction, which could help reinvigorate the public market for the sector.

SVB's annual report analyzes and predicts trends for venture capital investing, fundraising and exits that reflect the biopharma, medical device, diagnostics/tools (dx/tools) and healthtech sectors in the US and Europe.

Notable 2022 Findings:

• In US venture fundraising, traditional tech firms allocated more funds to invest into healthcare. In 2022, there were 70 tech-focused funds that closed with a 5%-15% allocation to healthcare, mostly for healthtech. This was an increase from 54 firms in 2021.
• Biopharma: Early-stage activity continued as valuations appear unaffected by public market turmoil. However, in the later-stage, the number of pre-IPO crossover rounds dropped every quarter, down to single-digits per quarter in 2H 2022.
• Healthtech: While overall alternative care investment was down, provider operations companies, focused on creating workflow efficiencies and using data for clinical decision support, dominated healthtech investment in 2022.
• Medical Device: Valuations stayed steady among device companies, and it was the only sector to keep pace with its record investment in 2021, dropping less than 10% overall. In the exit arena, both recent IPOs and public acquirers faced headwinds in the public market, causing top acquirers to slow their deal-making pace.
• Dx/Tools: Early-stage investment set a record in 2022; however, the sector overall had the biggest drop in investment, specifically in 2H 2022 as investors struggled to reconcile frothy valuations with poor IPO performance. In 2022, there were no US venture-backed IPOs and only five M&A deals.

SVB's outlook on healthcare investment trends for 2023:

"Looking ahead to 2023, while there is still uncertainty in the private investment landscape, the strongest companies will get funded," said Norris.

• SVB expects venture healthcare fundraising to decline to about $15B, as most firms recently raised new funds and the pace of investment to be slower than 2021.
• There is still an unprecedented amount of dedicated venture healthcare capital to be deployed; top healthcare companies are expected to continue to climb to high valuations and foster intense competition among new investors.
• Biopharma: SVB expects investment in biopharma to remain at 2020 levels, but with increased dollars in auto-immune and respiratory companies.
• Healthtech: SVB expects late-stage investment will continue to slow, with lower valuations and fewer mega deals as public markets continue to put pressure on private valuations. These valuation pressures could fuel waves of consolidation. SVB anticipates that healthtech companies will delay IPO plans until at least late 2023.
• Dx/Tools: SVB expects investment in dx/tools to rebound from 2H 2022, to finish 2023 just shy of the 2020 pace, led by early-stage activity.
• Medical Device: Medical Device investment is also expected to closely mirror 2020's pace, with expectations of $6-8B invested in 2023.

Norris will present the key findings from the annual report during a webinar on Jan. 25, 2023 at 9:00AM PT. For additional details and to register click here: Healthcare Investments and Exits Webinar: January 2023 (svb.com)

Read the full annual Healthcare Investments and Exits report here: Healthcare Investments & Exits Report | Silicon Valley Bank (svb.com)

About SVB

SVB is the financial partner of the innovation economy, helping individuals, investors and the world's most innovative companies achieve their ambitious goals. SVB's businesses - Silicon Valley Bank, SVB Capital, SVB Private and SVB Securities - together offer the services that dynamic and fast-growing clients require as they grow, including commercial banking, venture investing, wealth planning and investment banking. Headquartered in Santa Clara, California, SVB operates in centers of innovation around the world. Learn more at svb.com/global.

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SOURCE Silicon Valley Bank

FAQ

What were the key findings from SVB's Healthcare Investments and Exits Report for 2022?

SVB reported that healthcare funds raised nearly $22 billion in 2022, marking a strong fundraising year despite a decline in investment activity in the latter half.

How much investible capital is available for healthcare investments according to SVB?

SVB noted that there is $50 billion of investible capital raised since 2021, indicating significant potential for future investments.

What are the expectations for healthcare venture fundraising in 2023?

SVB expects healthcare venture fundraising to decline to about $15 billion in 2023 due to recent fund raises and slower investment activity.

How did biopharma investments perform in 2022?

While early-stage activity in biopharma remained steady, the number of pre-IPO crossover rounds dropped significantly in the second half of 2022.

What trends did SVB identify for healthtech investments in 2023?

SVB anticipates that healthtech investments will slow, with lower valuations and fewer mega deals due to pressures from public markets.