All about Medtech Funding
Funding is essential part of any start up’s success. After generating seed fund from various portals such as crowd funding, angel investors; medtech start ups look for seeking investors’ approval and money to take their product forward. VC funding is one of the very important channels for cash inflow for these aspiring medtech players. Cash which they can use for:
- Clinical Trials and Regulatory Approval
- Sales and Marketing
- New market venture
- Increasing the volume of production
However unpredictability of funding have made the start ups path quiet complicated, resulting in situations where majority of them do not have long terms goals laid down for their products.
Under these situations it is difficult for medtech start ups to lay down their development strategies, as there ground always gets subjected to various irregularities.
Below are some of the quick view points on facts and figures around medtech funding. We will be answering the subject: Medtech VC funding in the form of question / answer write up so that it is convenient for reader to have structured flow of reading:
- When did VC funding for medical devices see an uptick?
Medical device industry manufactures gamut of technologies ranging from huge imaging devices to tiny implant. Each of these technologies carries enormous potential in terms of what they offer to patients across globe. Funding is direct indication of number of companies that had sufficient cash inflow from investors to materialize their concepts and designs into products. These deals counts and values meagre until 2006 when it witnessed record high USD 2.5 Billion worth of medical device funding. A total of 261 VC-Medtech deals were recorded in the year, a number which was highest in last 8 years. This came as harbinger for start ups who had given up hopes on this sector.
- What are other hurdles that medtech start ups face which make VC funding as must have cushion?
Among the different hurdles that medtech faces namely Regulatory, Taxing and Others; VC funding acts like a cushion to accommodate the challenges and spin them into opportunities. VCs are not just gateway for cash inflow, as in certain cases VCs portfolios < Other companies that VC owns> through their service offerings support start ups at operational level too. In the last year good number of such synergies was witnessed at different levels.
- What was the rational for dip in VC amount focused at medtech?
Though in recent times VC funding is witnessing a sturdy growth it was not the same in 2011, with hurdles like regulatory, tax; unstable funding was becoming an indicator of new worry in the horizon.
Some of the major rationales which drifted leading VCs away from medtech start ups include:
- Inability to convince portfolio holders for funding Medtech start-ups
- More inclination to quick ROI sectors namely Healthcare IT and others.
- Adoption of risk mitigating strategies by supporting late stage medtech start-ups which in turn reduced the overall VC deal size and counts.
One of the other reasons that VC funding has seen a steep decrease in recent times is decrease in number of medical device IPOs. Last year close to 4 companies knocked the doors of Wall Street with medtech tag while biopharma numbers were around 35. This resulted in increased doubts on viability of medtech technologies,
- Exit gateways as a result of backing from leading VCs?
Historically medtech start ups use acquisition as major exit paths, even this path was not that flowery for medtech start ups. 30 companies trailed on acquisition path, a number which was not in par with industries average figures. Yet another bottleneck for industry to justify on their platforms viability and need.
All said and done, we are seeing funding catch up to the lag that it witnessed in past, below mentioned numbers are acknowledgment to same:
Medical device trends ( http://medicaldevicetrend.com/)
Medical Device VC Funding : Click to download PDF