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Health care companies still attracting venture capital

If you have a big idea and a business track record -- or an alliance with someone who does -- there is funding out there.

By Mike Norbut, amednews staff. March 10, 2003.

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While the common perception may be that venture capital funding faded with the implosion of countless dot-com firms, there still are plenty of willing investors out there, particularly in the health care industry.

If you have a brilliant idea, big dreams and a business plan to match your ambition, you could secure the funding to give your new company a proper liftoff. With $4.5 billion in funding in 2002, health care companies were the top venture capital performers, capturing more than 20% of the overall investment share, according to the Jenks Healthcare Business Report, a newsletter published by Irving Levin Associates Inc., a health care research firm based in New Canaan, Conn.

Biotechnology firms and medical device companies are the investment leaders in the health care sector, but service businesses -- such as specialty hospitals and freestanding surgical centers -- do capture a significant portion of the investments, said Mary Hunt, the newsletter's editor. A recent trend among physicians has been to invest in their own specialty facilities as a way to gain clinical and financial control over their work.

"That's an area where we've been seeing more VC funding," Hunt said. "Somebody will have one or two centers, and if they have a good business plan, maybe they can get the funding to expand to five, and later, they can get more funding to expand to 10."

But homegrown businesses with eyes on staying small probably will not attract the eyes of large venture capital firms, the ones with billion-dollar portfolios.