Venture capital funding surged in Minnesota during the third quarter as investors continued to back medical device companies already in their portfolios, according to a report released Wednesday.
Investments totaled nearly $96 million in the third quarter, compared with $34.7 million a year ago, according to the MoneyTree Report from PricewaterhouseCoopers (PwC) and the National Venture Capital Association, which uses data from Thomson Reuters. The majority of the state's dollars went to medical device companies.
Venture capitalists continue to fund medical device companies already in their portfolios. These businesses have yet to be sold or go public on the stock market, making it difficult for venture firms to invest money into new companies.
But this reveals the underlying weakness in the industry. Investors have been reluctant to put more money in new medical device start-ups because of concerns about the cost and time it takes to bring a product to market.
In the third quarter, several medical device companies that received money were later-stage, which boosted the state's investment dollars. Total venture capital investments in medical devices and equipment nationally declined 18 percent, to $728 million in the third quarter, compared with the previous quarter.
Mark Scholtes, a partner at PwC, said he's concerned that not enough new early-stage medical device firms are being supported in Minnesota. Medical device start-ups help provide innovative treatments and devices, create jobs and keep the country in a leading position globally in biotech.
"If there is a continuing lack of investment in start-up companies, those areas are at risk," Scholtes said.
Fargo, N.D.-based Arthur Ventures, which manages a venture fund just over $11 million, had looked at potentially investing in some medical device companies. So far, it hasn't invested the money in part due to concerns over how the industry is regulated and the cost involved.
