Ebb & Flow
Healthcare VCs put on an enthusiastic face last week, as one blue chip fund pulled out of IT investing to sock its money solely into healthcare. Another blue chip firm finished raising a fund that will have a heavier weighting toward life sciences. And a leading European VC declared the winds have shifted for European private equity investing.
One can only hope that the group is a leading, not a lagging indicator. It wasn't too long ago that the blush was on the IT rose, and life science investing for so called "diversified funds" became almost an afterthought. Soon thereafter, the internet bubble popped and so did many of the funds that threw most of their dollars into IT.
Perhaps the most dramatic move came from The Sprout Group, which restructured to focus exclusively on healthcare.
Citing a slower than expected investment pace on the IT side, Sprout no longer will source IT investments from its ninth fund, and in fact will reduce the size of the fund by 25% to $1.08 billion from $1.44 billion. Sprout's healthcare team will form a new entity, Sprout Healthcare Ventures, to manage the firm's existing and future healthcare investments.
The new team will continue Sprout's sector allocation of 50% into later-stage biopharmaceutical investments, 25% early-stage medical devices, and 25% laboratory technologies and services. The new entity plans to raise a $350-$400 million fund in the near future.
While Sprout 's private equity will look a bit leaner, the firm feels it will gain an edge by focusing solely on healthcare. General Partner Philippe Chambon said the market is demanding more focus. "There's a need for greater specialization," he noted, and these moves "create funds that are clearly