We ran across an article in the Wall Street Journal talking about how the medical device industry is being impacted by the continued venture capital drought. A MedCity News article summarized the article this way:
- The contraction of the venture industry after the 2008 financial crisis dovetailed with new pressures in the device industry, from declines in the rate of medical procedures, to increasingly tightfisted health insurers and a more stringent regulatory approval process.
- First-round financing is on pace to reach $259.73 million this year, less than half the amount in 2007 and down 21 percent from last year, according to an analysis of data compiled by VentureSource, which is owned by Dow Jones, publisher of The Wall Street Journal.
- The total number of investment deals in med-tech is projected to fall by a third this year from 2007, the data from PwC and the National Venture Capital Association show.
- Had venture investment not been cratering in 2011, (Allan) May said, Nanostim probably would have sought a more traditional financing deal that would have kept the door open for a higher takeout price in the future. (Nanostim is the company St. Jude Medical (STJ) recently acquired for $188.5 million.)
So what has been the impact on the medical device industry? Entrepreneurs are taking on more debt and looking for cash in unusual places, including family investment funds overseas and high net worth individuals in the U.S., people in the industry say.
As a result, many companies are looking into corporate investment in early stage companies as a viable strategy. Medtronic, an aggressive corporate investor, is making earlier-stage bets than before but hasn't increased its total spend, said Geoff Martha, senior vice president, strategy and business development. "We're putting more at risk at an earlier stage because no one else is," said Mr. Martha.
Do you think the funding slump will continue, or do you see better days ahead? Share your thoughts below.
Photo Credit: Stephan King