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Q1 Innovation Investment Strong; Focus on Medtech

Up-and-coming medtech and life science firms in Orange County outperformed their software, AI and cybersecurity peers during the first quarter of 2020, in terms of investor interest, according to research from commercial brokerage firm JLL.

The first quarter of the year saw area venture capital funding total $292.3 million. The amount was on par with quarterly totals from the previous six years.

The difference was in the recipient base, with medical device makers taking the lion’s share, said JLL Executive Vice President Scott Wetzel.

“When you look at the first quarter of 2019 that quarter of investing was primarily dominated by software companies. When you look at first quarter of 2020 it was really all life sciences. I’m including pharmaceuticals as part of that,” Wetzel told the Business Journal on June 10.

Top 4

The medical device industry accounted for 62% of the total innovation funding in the first quarter.

The quarter’s top VC deals included:

• Sonendo, dental technology, $85 million

• Tarsus, drugmaker, $60 million

• NeuroVasc, stent retrieval technology, $34 million

• Neurolens, eye-strain relieving technology, $23.8 million

Active investors include EW Healthcare Partners, with office locations including New York, which invested in Sonendo, and Palo Alto-based Vivo Capital, which invested in pharmaceutical company Tarsus, according to JLL.

COVID-19 Issues

Orange County kept up the strong pace of technology and life sciences investments in the first three months of the year even as the COVID-19 pandemic was bearing down on the country.

“Pre-COVID there was still a really strong appetite for investors,” said JLL’s Wetzel, whose real estate firm works with numerous area tech and medical firms to find office, manufacturing and distribution space for their operations.

How the rest of the year will look for innovation funding is pretty much anyone’s guess, although there have been a few promising signs of late (see TAE Life Sciences, page 1).

OC’s sole IPO of the year took place in late May, with blood clot-treating device maker Inari Medical Inc. (Nasdaq: NARI) raising more than $150 million (see story, page 1).

“There’s going to be some level of impact,” Wetzel said of innovation investments in the second quarter ending June 30. “The big question mark is what level.”

Looking ahead, Wetzel said that “if we see another strong quarter, it’ll be really the life sciences sector that props it up.”

He assumes that core tech investment will be weaker.

Further, says Wetzel, with debt being as cheap as it is, some companies may turn away from private equity or venture capital money to preserve the equity they have.

So, what is the outlook for the third quarter, when economists are predicting a true rebound from the economic bloodbath?

“If there’s a second wave (of the coronavirus), that would stifle any kind of quick bounce-back. If there isn’t one, I think you’ll see a significant rebound versus the second quarter.”

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Kevin Costelloe
Kevin Costelloe
Tech reporter at Orange County Business Journal
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