Giving Device PIPEs A Good Twist

When calamity struck the global economy two years ago, venture capitalists naturally looked for the silver lining in the same storm clouds that obliterated the market for initial public offerings and swamped – temporarily at least – the opportunities for exits through mergers and acquisitions. Venture investors identified one of those potential bright sides as the chance to make private investments in publicly traded medical companies, presumably buying into a more developed company at a bargain rate that bested the prices sought by privately held device companies. But medical device VCs apparently haven't found a deep enough vein of silver in the public markets. According to Elsevier's Strategic Transactions, VCs participated in 11 private investments in public entities (PIPEs) in the two years prior to the economic collapse versus making 12 PIPEs in the two years that followed.

Although it's too early to judge, hesitation may be warranted. Venture investors saw gains in only seven of the 12...