Spinouts have defied the slump in the rest of the market, with deal numbers up 10% from last year. The average size of seed and series B rounds has actually increased.

Photo by Francesco Califano on Unsplash The market may have cooled elsewhere, but spinouts enjoyed their best quarter for fundraising in Q3 — with the number of deals up more than 10% from the same quarter last year. There were 330 investments in spinouts in the third quarter of 2022. That is up from 294 in the second quarter of this year and, more notably, up year-on-year from 299. It’s also the best quarter of the year so far, with the first quarter having seen 299 investments. It is a case of less money going into more deals, however. The amount of capital going into deals fell to $7.1bn in Q3, compared to $11bn in the same period last year, when July and September saw more than $4bn invested. But the Q3 amount is showing an upward trend, from $6.8bn in the first quarter and $5.9bn invested in Q2. The rise in deal numbers may be modest, but it is remarkable that this group of startups is bucking the general slump. A recent analysis by Global Corporate Venturing found that CVC-backed deals fell 11% quarter-on-quarter and more than 16% year-on-year. It could be a sign that investors subscribe to the theory that spinouts are a safer bet than startups more generally and become particularly attractive when venture capital is in a slump. Research by law firm Anderson Law in 2019 found that nine out of 10 spinouts in the UK survive longer than five years, compared with just two out of 10 of other startups.   Investments from January 2021 to September 2022 click on the charts to see larger versions It is also interesting to note that healthcare made up a larger percentage of deals in Q3 2022 than in 2021: 48.2% (159 deals) compared to 40.5% (121 deals). Some of these are obvious technologies — they range from cancer diagnostics to remote patient monitoring platforms — others are more futuristic-sounding, such as ForSight Robotics, linked to Technion – Israel Institute of Technology, which is developing a platform for fully robotic cataract surgery and raised $55m in its series A round led by Adani in July. ForSight’s raise was large for series A. In general, the average size of these rounds decreased year-on-year from an average $26.5m to $25.3m. The average seed round, however, was worth considerably more in the third quarter of 2022 than 2021: $6.2m versus $3.8m, and just as notably more than the average for any quarter…

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Thierry Heles

Thierry Heles is the editor of Global University Venturing, host of the Beyond the Breakthrough interview podcast and responsible for the monthly GUV Gazette (sign up here for free).