Innovation
HSBC venture healthcare 1H 2023: mid-year insights
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HSBC venture healthcare 1H 2023: mid-year insights
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Executive summary
In the first half of 2023, as valuations underwent a necessary reset, Venture Capitalists ("VCs") emerged from their cautious stance and embarked on a fresh wave of investments. These VCs, buoyed by recently raised funds in 2021–2022, assumed the role of leading laterstage rounds, as crossover/hedge funds retreated.
Despite this encouraging development, the pace of new investments remained measured, with approximately 50% of the deals in 2023 consisting of add-on or insider rounds. While top deals continue to secure valuation step-ups, the current landscape sets the stage for laterstage valuation re-sets and presents both management and investors with challenging decisions in the second half of 2023 and into 2024.
Key findings
Healthtech
The strongest companies, who demonstrated smart growth and value creation (clinical and economic), found new investment, many at stepups. However, funding dropped off significantly in Q2, and many companies extended runway with insider rounds in the face of a difficult financing environment.
Med Device
First financing activity in this sector was stronger than anticipated. Overall, neuro saw an uptick in investor activity, adding to the broader upswing in VC-led pivotal trial funding. However, development-stage PMA companies seeking Series B were stymied. Valuations appear to have re-set. Secondary interest (investors selling portfolio ownership) was on the rise.
Biopharma
VCs returned to leading new Series B deals (at varying step-ups and downs), but 40–50% of early-stage deals will need more insider support, a BD deal with big pharma, or will seek consolidation or M&A. Laterstage deals received more VC-led financings, as crossover investors focused on public markets.
Dx/Tools
Overall investment in dx/tools continued its slump, however first financing investment was a bright spot. More than 50% of financings in 1H 2023 were insider-rounds, especially among highly valued companies that raised large rounds in 2020–2021. Strong new investor interest focused on R&D tools in gene therapy manufacturing and anti-infective dx tests.
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