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BioEnterprise

Record Number of Midwest Healthcare Startups Raise $1.7 Billion in 2016

February 28, 2017

Aram Nerpouni, President and CEO, BioEnterprise

As a sign of the Midwest’s continued growth as an engine of biomedical commercialization, a record 375 Midwest healthcare companies raised $1.7 billion in 2016, the second largest amount recorded.  Our just-released BioEnterprise Midwest Healthcare Growth Capital Report shows that Minnesota ($424 million), Illinois ($327 million), and Ohio ($291 million) led Midwestern states in attracting investment dollars, with Minneapolis ($422 million), Chicago ($324 million), St. Louis ($242 million), and Cleveland ($198 million) as the regional leaders.

Midwest healthcare continues to perform at historic levels.  From 2015 to 2016 we saw an 11% increase in investment and a 19% increase in companies raising those funds. Within the past five years (2011-2016), the number of companies raising money, and the amount raised, has more than doubled.

By sector, the 2016 Midwest healthcare growth capital funding is allocated as follows:

  • Medical Device companies: $696 million (40.3%)
  • Healthcare IT and Software and Services companies: $679 million (39.3%)
  • Biotech and Pharmaceutical companies: $353 million (20.4%)

Trending in the Midwest, as with the whole of the US, is investor interest in health IT and services. Although the Midwest continues to be a stronghold for medical devices, investment in health IT and services increased 34% from 2015 (to $450 million). Health IT and services is now on par with medical devices in the Midwest.

Within the Midwest, the three largest deals came from the health IT and services sector: Accretive Health in Chicago secured a $200 million PIPE; Minneapolis-based Bright Health raised $80 million; and Centene, located in St. Louis, raised nearly $70 million in a private placement.

I am encouraged that Cleveland, again, ranks near the top of Midwest regions in both measures – number of companies and investment attracted. Forty to fifty Cleveland region companies now raise an average of $245 million annually in private investment capital.

Across the Cleveland region, 2016 year-end healthcare growth capital funding was allocated as follows:

  • Medical Device companies: $89 million (45%)
  • Biotech and Pharmaceutical companies: $58 million (30%)
  • Healthcare IT and Software and Services companies: $50 million (25%)

Historically Cleveland is strongest in the medical device sector, and 2016 was no exception. However, the increase in fundraising from 2015 to 2016 was strongest in the health IT and services sector. Funding in this sector more than doubled, from $20 million to $50 million.

The largest Cleveland deal came from the biopharmaceutical sector, where drug development company, BioMotiv, raised $37.5 million. OnShift, a developer of human capital management software for post-acute care and senior living, raised $18 million. ViewRay, makers of a clinical MRI-guided radiation therapy system, raised $13.75 million.

The Midwest Healthcare Growth Capital Report includes medical device and diagnostics, biotechnology and pharmaceutical, and healthcare IT software and service investments, specifically seed, venture, individual and group angel funding, private equity, bridge funding, convertible debt, foundation funding with equity component, strategic and corporate investment, secondary offerings and PIPEs. The Report is funded, in part, by philanthropic support from the Fund for Our Economic Future and the Burton D. Morgan Foundation.

To view the full report with company financings go to:  Midwest Healthcare Growth Capital Report

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