A large number of medical device companies, especially startups, had a difficult time finding funding in 2011—with the problem growing worse later in the year. Many fault FDA for the trend. “We are seeing the lack of transparency on the regulatory pathway through the FDA impacting these companies’ ability to raise money,” says Tracy Lefteroff, global managing partner with PricewaterhouseCoopers, life sciences industry services (PwC; San Jose). “They’ve tried to do drastic change on the way that they allow medical devices to be cleared under 510(k)s. They are much more conservative on which device companies need a PMA.”

Another recent trend to emerge is large medical device companies establishing their own venture capital arms. While this will almost certainly increase funding opportunities for the industry, Lefteroff says these venture arms are unlikely to fund early-stage ventures— which is where, perhaps, the most funding is needed.

For overall funding conditions to improve, the public markets must become healthier, Lefteroff stresses. The volatility in the stock markets has resulted in a negative sentiment about the profitability of smaller-cap medical device companies. “You need to see, globally, business pick up for a lot of these companies, so that sales continue to increase, profits increase, which will then attract later-stage M&A activity, which all trickles down from there,” Lefteroff says.