An all-time-high $86 billion of venture capital investments in the U.S. and Europe last year bested 2020’s record haul by more than 30% and grew more than 150% from 2019, according to a new analysis by Silicon Valley Bank.
After record-setting quarters in the first half, however, VC investment slowed due to poor performing biopharma IPOs that discouraged crossover investors. Despite the slower second-half, every sector — biopharma, healthtech, diagnostics/R&D tools and devices — set fundraising records in 2021.
And while U.S healthcare VC fundraising hit a record $28.3 billion in 2021 (compared to $16.8 billion in 2020), it is expected to drop back down in the $16 billion range this year.
“Most healthcare firms have recently raised new funds and will likely slow their investment pace,” SVB said, projecting a keener focus on readying existing investments for exits.
Non-invasive monitoring led device investment by dollars ($250 million, up from $130 million in 2020) and deals at 46, helping early-stage device investment break $1 billion for the first time.
“A long list of acquirers, including a number of small to mid-cap companies and big company spin-outs, constituted the most diverse acquirer base we have seen,” SVB said.
SVB forecasts more mergers and acquisitions in the area of non-invasive monitoring this year, citing the need for monitoring patients outside of the hospital setting in the COVID-19 pandemic.
In biopharma, private merger and acquisition activity dropped to their lowest levels since 2013 as the number of IPOs continued to grow. SVB said private investment is down due to most early-stage companies choosing mezzanine funding toward an IPO versus early-stage exits. The average post-IPO performance was –21% for companies that went public in 2021.
SVB reported a unicorn explosion in 2021, with 42 companies receiving investments that valued them at more than $1 billion, more than quadrupling the number of these high-valuation startups from 2020.