Health Tech: Memora Raises $30 Million

raising venture capital funds; Deal rates and number of deals are down in health tech, but the Pitchbook report suggests the signs aren’t all bleak. Aaron wrote.

Why is it important? The market’s current uncertainty is clear, but investors can see where opportunities lie.

Details: According to the report, VC activity in the first quarter of 2023 has declined across all levels and sectors.

• Compared to other investment rounds, the angel and seed rounds are significantly underperforming.
• Angel and seed activity usually hovers around 47% but fell to 34% of all deals made in Q1. This follows a low, but unprecedented 38.4% in Q4 2022.

Context: It’s because no investor wants to feel like they’re paying too much for a company or taking on risks at an inappropriate time, says one early stage health tech investor.

• “Also, many of the strongest private companies are well-capitalized and/or have completed internal rounds to bridge the gap to the next phase of refinancing,” says Yaniv Sadka, investment partner at aMoon Fund.
• “Therefore, many investors are expecting those blue chip companies to return to the private equity market in late 2023 and 2024,” says Sadka.

Meanwhile, 2023 fundraising was the worst, with $11.7 billion raised in Q1.

• “These quarterly and year-over-year declines are sufficiently large that it is difficult to contextualize. Whether the trend will continue or reverse soon remains to be seen,” the report said.

Yes, but: There are opportunities.

• “Increased real estate valuations, potential market efficiencies and new government programs designed to support company formation in high-growth strategic industries are all positive signs,” the report’s authors wrote.

In numbers: Backstage deal value declined in Q1, falling to $11.6 billion for the seventh straight quarter.

• “As investors grapple with liquidity crunches due to the blizzard environment, they’ve shied away from larger deals in an effort to preserve capital.”
• 19 late-mega-rounds occurred in the first quarter of 2023, compared to 98 in Q1 2022.

what’s happening: “A lot of growth investors are nervous about writing down a lot of investments in 2022 and 2023 and have to answer to LPs now,” says Sadka.

Note: This has not only widened the financial gap between those seeking startup capital and investors willing to give, but has also put downward pressure on deal prices.

• In Q1 2023, the median late-stage VC pre-fund estimate fell 16.9% to $54.0 million from the full-year 2022 figure.
• The average pre-money price dropped more than $120 million to $159.1 million.

What they say: “Startups looking to exit through M&A are getting a strong initial reception. But given the challenging market environment, these companies bear the burden of proving why they want to exit at this time,” he said in the report.

• “The companies that drive investor interest are the ones that solve tough problems in unique and innovative ways,” says one VC investor against this macroeconomic backdrop.
• “Historically, times like these have been very good for founders and investors,” said Amber Bhattacharya, managing director of Maverick Ventures.
• Sadka says the R&D and commercial time horizons are years long, and investors understand that VC investments are illiquid.