Study: MN Life Science Startups Raised $339M In 2013
Minnesota life science startups raised $339 million in investments in 2013—an approximately 80 percent increase from last year—according to a recent report from LifeScience Alley.
The St. Louis Park-based medical trade association’s report contains investment information from 2009 through 2013, which was collected from the U.S. Securities & Exchange Commission, PricewaterhouseCoopers’ “MoneyTree Report,” the National Venture Capital Association, Thomson Reuters, company press releases, and other sources.
The association—which defined “life science” firms as those providing medical device, pharmaceutical, biotechnology, and diagnostic and information technologies (IT) in human health applications—determined that 92 startups in Minnesota raised money in 2013, compared to 85 in 2012. Of the 92 startups, 64 were medical device firms, 14 were pharmaceutical or biotech firms, and 14 were in the health information technology industry.
According to the report, the 92 life science startups raised $151 million more than last year. LifeScience Alley said 2013 represented the best year for life science startup investments since 2009.
Median investment size in 2013 totaled $500,000—a 2.4 percent decrease from $512,000 in 2012—which remains at half of the five-year median of $1 million. The LifeScience Alley researchers said that those figures indicate a larger amount of early-stage deals.
Additionally, the Angel Investor Tax Credit (credit equal to 25 percent of any new investment in a qualified business) played a large role in life science investment deals, representing $15 million of the capital that 37 firms raised in 2013. In other words, the Angel Investor Tax Credit represented less than 5 percent of the total amount raised, but covered 40 percent of the startups that raised money.
The Minnesota startups to raise the most money in 2013 were Minneapolis-based CVRx, Inc., which developed an implantable therapy for hypertension treatment, and Eden Prairie-based Sunshine Heart, Inc., which developed an implantable, non-blood contacting heart assist therapy. Both raised approximately $42 million in one round of investing, according to LifeScience Alley.
Frank Jaskulke, the director of membership for LifeScience Alley and researcher for the report, told Twin Cities Business that he and other LifeScience Alley researchers actually expected the total amount of money raised by life science startups in 2013 to be higher, but that regulatory and policy-based challenges hindered some businesses.
Particularly, Jaskulke mentioned medical device startups facing challenges in the form of device taxes, which he argued lowers the potential return for new ventures and causes “companies to have less capital to deploy” for fundraising efforts.
Despite regulatory and policy challenges, however, Jaskulke said that the report indicates a strong life science industry in Minnesota and that those startups are “better understanding the evolving health care environment.”
“The number of companies [in this industry] is increasing and these companies are maturing—there are more high-quality firms,” he added.
Jaskulke also mentioned that an overall improving economy in the state is contributing to a growing number of investment deals. “There is more confidence, and with that, companies are more likely to get more deals,” he said.
Meanwhile, Cleantech Group, Inc.—a San Francisco-based consulting services company—recently announced clean technology investments in Minnesota totaled approximately $95.6 million in 2013.
The clean tech companies to raise that money included biofuels company BioAmber, Inc., whose R&D facility is based in Plymouth ($25 million raised); Shakopee-based recycling and waste removal company Recovery Technology Solutions ($16.5 million); and Elk River-based energy storage company Cymbet Corporation ($13.4 million); among others.
Earlier this year, BioAmber lowered the amount it hoped to raise through its initial public offering. The company first announced its plan to go public in 2011.
Meanwhile, Recovery Technology Solutions was one of roughly 40 companies that recently announced plans to expand and add jobs. The company said that developing its new headquarters and flagship manufacturing facility would bring 47 jobs to Shakopee.