Medtech Startups Reinventing How They Get Funding

With declining venture capital for medical device companies, many entrepreneurs are looking for non-traditional ways to raise funds for medical technologies. In part, medtech entrepreneurs are reaching out to potential acquirers earlier in the game than usual and seeking to develop technologies that can extend or improve the functionality of existing medical devices.In total, medtech investments are predicted to have a total value of $2.1 billion in 2013, representing a decrease of 40% from 2007. In the same time frame, young software developers saw a 75% increase. The lower investment capital in hasn't dampened the launch of medtech startups. To get these new projects funded, many startups are offering acquisition rights and board seats in exchange for liquid capital. While some have expressed concern that this method of generating capital sacrifices future opportunities for immediate cash, this new fundraising method has seem some success.One company that has used this strategy is California-based Nanostim. After agreeing to an acquisition option from St. Jude Medical, Nanostim received cash from the Minnesota medical device company. When the company's flagship pacemaker landed a CE Mark last month, St. Jude exercised its acquisition rights in a deal worth approximately $188.5 million.While this arrangement gave Nanostim access to early capital, it did rob the company of a competitive bidding process that could have driven up the price of its company even higher.Another strategy is for medical device startups to pursue crowdfunding. Indiegogo has provided a substantial amount of funding to the startups Misfit Wearables and Scanadu. In addition, HealthFundr and MedStartr were recently launched to help medtch entrepreneurs find capital. HealthFundr enables investors to buy shares in medtech startups.