Investment in healthcare companies fell 7 percent in 2010 to $7.4 billion for 702 deals, according to Dow Jones VentureSource. The industry's smallest sector, Healthcare Services, saw the strongest growth, tripling the capital raised in 2009.
Fifty-four healthcare services companies raised $1.2 billion, a 29 percent increase in deal activity.
[See also: "Capital crunch" forces hospitals to delay facility and tech upgrades.]
Investments in health IT companies rose 19 percent, spurred by a growing market. Healthcare IT companies garnered $460 million in venture capital in 2010, up from $388 million in 2009, driven in part by the increase in electronic health records and other healthcare IT supported by government incentives.
[See also: Healthcare investment outpaces IT investment for the first time .]
In 2010, growth in venture capital investment was driven by capital commitments outside of the information technology and healthcare industries, which are traditionally venture capitalists' comfort zones, said Jessica Canning, global research director for Dow Jones VentureSource.
"The healthcare and IT industries accounted for more than half of venture investment in 2010 but are not currently driving the growth," she said. "Investment in business technologies, consumer solutions and energy companies gained the most traction in the last year."
As usual, Canning said, biopharmaceutical companies claimed the largest proportion of investment in the healthcare industry, with 317 deals raising $3.4 billion.
Throughout the year, 2,799 venture deals raised $26.2 billion, a 6 percent increase in deals and an 11 percent increase in capital invested over 2009, when 2,636 deals raised $23.6 billion, according to Dow Jones VentureSource.
The median deal size for 2010 was $4.4 million, down from the $5 million median in 2009.