Amid declining venture-capital activity, investors flock to health care

Deals included a $33 million investment into Sibel Health, a Chicago medical device startup making wireless and wearable sensors to monitor patients’ vitals, and Cour Pharmaceuticals’ $30 million deal to develop therapies for autoimmune disorders. Additionally, local startup KeyCare was among the group for its $24 million deal to expand its virtual care network business.

While health care is a popular sector in Illinois VC this year, activity is down across the board as investors pull back amid a rocky public market and recession fears. The amount invested in Illinois companies during the third quarter fell 27% from the second quarter to $801.6 million, which is down 37% from the third quarter a year ago.

A similar trend is taking place nationwide. About $43 billion was invested in U.S. companies in the third quarter, a nine-quarter low, according to PitchBook. While deal activity this year is considerably behind 2021 levels, which saw a record $343.6 billion invested across more than 17,800 deals, the amount of funding going to companies in 2022 is still above 2020 and all years before that. As of Sept. 30, about $194.9 billion has been invested across 11,871 deals this year, PitchBook says.

Like in Illinois, PitchBook says the health care sector was among those attracting the most capital this year. Others include clean tech, energy and transportation industries. U.S. deal counts across the four sectors at the end of the third quarter are close to or above full-year figures for 2020, PitchBook says.

Unlike other industries, health care is typically more resilient to macroeconomic conditions, like inflation and recession, says John Conrad, CEO of the Illinois Biotechnology Innovation Organization, or iBio.

“Even when you’re seeing downturns in other industries, health care tends to be a little bit more stable,” Conrad says. “We’ve seen this in years past.”

Conrad added that health care companies could also make up most of the largest deals because pharmaceutical and medical device businesses tend to require more capital than business software and other purely digital products.

Though health care companies have remained attractive bets for investors, Conrad says iBio members have faced more challenges during the fundraising process this year. In an interview with Crain’s at the time of its funding announcement in September, Cour Pharmaceuticals CEO John Puisis said the fundraising market was “terrible.”

Conrad said: “The right companies with the right leadership will get the funding. They may have to work a little bit harder than they had to work a couple years ago . . . but that funding is available.”