To understand why Indiana’s life sciences entrepreneurs are frustrated with the flow of venture capital, look no further than this statistic from a recent PricewaterhouseCoopers report: 2012 was the slowest year for first-time life sciences investment since 1995.

Nationwide, venture capital deals for life sciences companies totaled 779 last year, down 7 percent from 2011. Total investment came to $6.6 billion, a 14-percent decline from the year before. That was the lowest level of life sciences investment since 1998.

Indiana generally followed those trends, with life sciences deals falling to five in 2012 from six the year before. Total life sciences investment in the state fell 11 percent, to $24.2 million.

“As the number of new funds being raised continues to shrink, venture capitalists are being more discriminating with where they’re willing to place new bets,” Tracy T. Lefteroff, global managing partner of the venture capital practice at Pricewaterhouse, said in a report issued this month. “At the same time, they’re holding on to reserves to continue to support the companies already in their portfolio. Both factors are taking a toll on the amount of capital available for young startups, which is reflected in a 38-percent drop in the number of seed-stage companies receiving VC dollars in 2012.” 

Steve Hourigan, president of Elevate Ventures in Indianapolis, said those trends have made it nearly impossible for his organization to find co-investment partners on early-stage life sciences companies.

Elevate manages the Indiana 21st Century Research & Technology Fund on contract with the state. The organization has been criticized by life sciences entrepreneurs for backing away from life sciences companies in favor of IT and other kinds of businesses.

Indiana continues to run significantly behind its Midwestern neighbors in total life sciences venture capital raised.

Minnesota, typically the Midwest’s behemoth for life sciences companies, recorded 14 deals last year for a total of $138.9 million. Those totals were well below the state’s 2011 performance, when 28 companies attracted $220.8 million in life sciences venture capital.

The number of deals also slipped in Ohio, to 31 last year from 35 the year before. But total life sciences venture capital shot up 97 percent to $181.9 million.

Michigan also saw big gains, with 27 companies attracting $97.7 million last year, up from 11 deals the previous year that attracted $27.9 million.

In Illinois, the number of deals dropped to 10 last year from 15 the previous year. But those 10 deals brought in $165.8 million, a 17-percent increase from 2011.