Indiana life science companies raise $74 million in venture capital, down 36%

After raking in record amounts of venture capital funding in 2017 and 2018, Indiana life science companies saw funding drop last year by double-digits, while the average deal amount dipped sharply as well.

Thirty-six Indiana companies signed deals last year totaling $74 million, for an average deal amount of $2.1 million. A year earlier, 34 Indiana companies signed deals totaling $115 million, for an average deal amount of $3.4 million.

The total amount raised is the lowest since 2015, when companies raised just $49 million.

The decrease in funding and average deal size last year suggests that Indiana life science companies are struggling to find funding after several years of notching up higher amounts.

But some officials say the dip is nothing to be alarmed about, and that the amount of funding is often “lumpy” from year to year, depending on how many young companies are in the expensive, latter stages of clinical testing or product development.

“We’re not worried about it,” said Brian Stemme, who tracks venture deals for BioCrossroads, an Indianapolis-based group that promotes and invests in the sector. “The companies are only going to raise the money they absolutely need, because venture funding can dilute a company’s ownership.”

On the bright side, he added, the number of deals increased, from 37 in 2018 to 39 last year, and the products under development represent a wide range of therapeutics, devices and information technology, from cancer drugs to medication-reminder systems.

Venture capital is a critical source of funding for early-stage and mid-stage companies that are too young or too untested to go public or merge with a larger company. Companies often use the venture funds to pay for expensive clinical trials and to develop and test prototypes. Investors give the companies money in exchange for partial ownership in the growing companies.

The size of last year’s deals ranged from $20,000 to $17 million, and covered a wide range of companies—roughly one-third each for pharmaceuticals, medical devices and health information technology.

“They’re not all in one segment,” said Stemme, senior vice president at BioCrossroads. “We have a lot of different things going on.”

The top two fundraisers accounted for $17 million, or about one-third of the total amount. The top company, Indianapolis-based health analytics software maker Springbuk, raised $17 million from undisclosed investors. Recovery Force, a Fishers company developing compression products to help people recover from injuries, among other products, raised $10 million from Indiana Spine Ventures and angel investors.

Indiana companies winning the funding stretched from South Bend to Evansville.

Rounding out the top 10 startups winning venture funding last year:

• Sexton Biotechnologies of Indianapolis, developing tools for cell and gene therapy: $5 million from Casdin Capital, Cook Regentec, BioLife Solutions and BioCrossroads.
• Arizona Isotopes Science and Research Corp. of Bunker Hill, conducting scientific research on isotopes: $4.6 million from undisclosed investors.
• Gate Pharmaceuticals of Indianapolis, developing neuroscience therapies: $4.5 million from BioCrossroads and angel investors.
• Innovative Health Solutions of Versailles, developing neuromodulation devices for pain relief: $4 million from undisclosed investors.
• AIT Bioscience of Indianapolis, developing bioanalytical data: $2.9 million from Elevate Ventures.
• MBX Biosciences of Indianapolis, developing therapeutics for endocrine disorders: $2.5 million from BioCrossroads and angel investors.
• com of Indianapolis, provider of cloud-based health management software: $2.5 million from undisclosed investors.
• Olio Health of Indianapolis, developing digital communications platforms: $2.5 million from undisclosed investors.