With all of the discussion lately about the amount of venture capital deals and VC-based IPO’s declining in the first half of 2008, I started to look deeper and find out exactly what the trends are.  While we indeed are not seeing the same amount of capital being put into some of the web and technology start-ups that have been so freely funded the past few years, which I have previously discussed, I don’t think it’s safe to assume the general amount of VC deals is down.

Indeed, the amount of life sciences deals is still growing at a significant rate.  Just today, the Wall Street Journal reported on the FDA approval of a stent that Abbott has backed and will now start to see to fruition.  This was not the typical start-up to IPO process, but this is becoming more common in today’s marketplace, especially within the life sciences space. 

While many of the traditional tech start-ups of the past few years had their eyes fixed on raising capital in the public markets, the life sciences companies have stuck to efficient and rigid processes that allow them to maximize their value without getting caught up in the sometimes misperceived glamour of public offerings. 

The dynamics of a life sciences venture are different from the typical venture backed technology firm.  It is much more labor intensive to get a drug or a biotech product to market generating revenue than it is getting a piece of software in front of consumers.  However, the market for software is much more competitive when the product actually gets to market (getting it there isn’t the hard part), while a biotech or some other life sciences centered technology faces the “sky is the limit” scenario in terms of demand once they are competitive in the marketplace.  It’s just getting there is the hardest part. 

So, while I believe you will continue to see the demand for some of the venture trends of the last four or five years start to fade as capital is becoming more constrained, I am confident that we will only see increases in the amount of life sciences focused technologies and products.  The economics of this market are so appealing and present so much opportunity from a supply and demand perspective.  This is ultimately why we are seeing more and more of the larger private equity and venture capital funds starting to procure expertise from the healthcare and life sciences sectors.  They realize the demographics and economics are pointing towards these spaces for the future and everyone wants to be well positioned when the market recovers and the opportunity really starts to come in.