Venture Capital-Led Entrepreneurship in Health Care

We provide a detailed picture of early-stage innovation in healthcare as measured by the investment decisions of venture capitalists (VCs), whose investment decisions profoundly shape the quality of patient care. Among VC investments, 60 percent of all money was invested in firms working on drugs, another 20 percent was invested in firms working on a project related to medical devices, and 20 percent was given to firms working on health care delivery. We also find enormous geographic concentration of healthcare deals which motivates us to explore the ‘valley of death’ hypothesis (the idea that many useful inventions are not explored because VCs may not know about them), and find some preliminary support for this hypothesis.