Earlier this year, PricewaterhouseCoopers reported that companies active in life sciences attracted $2.1 billion of venture capital (VC) in the second quarter of 2011. Of that total, $841 million was invested in medical device applications, which was 26% more than where it was in the first quarter.

October 10, 2011

2 Min Read
Evidence Builds that VCs Are Leaving Medtech

venture-capital-funding-trap.jpgEarlier this year, PricewaterhouseCoopers reported that companies active in life sciences attracted $2.1 billion of venture capital (VC) in the second quarter of 2011. Of that total, $841 million was invested in medical device applications, which was 26% more than where it was in the first quarter. After that report was released, there has been a growing amount of evidence that VC funding is trending downward for medtech companies.

Just recently, a survey released by the National Venture Capitalists Association’s Medical Innovation & Competitiveness Coalition surveyed 156 venture capital firms, and reported that 39% of respondents reported decreased medtech funding over the past three years.


The problem isn’t likely to be fixed any time soon. The same percentage of respondents—39% reported that they planned on curbing life science investments in years to come.

 

The primary reasons for the funding decrease? What you might expect: Regulatory concerns, reimbursement issues, and the down economy. FDA was singled out as being so cautious that many manufacturers have simply given up trying to get their products to the market in the United States.

 

Update:

 

I recently asked Chris Thierfelder, who is the director of product development at ValenTx, for his take on the downward trend in medtech VC funding. Over Twitter, he explains:  "Medtech is higher risk, period. Regulatory issues aside, it's higher risk, and the reward it mitigated by the distaste for charging too much to capitalize on people's bad luck or badhealth," he adds.
"That doesn't stop us from charging higher than 80% mark-ups though."

 

He goes on to add that, for VCs, there are a simply too many other opportunities that represent a low initial investment and provide a big return on investment in the end. "Medtech is a tough racket," he surmises.

 

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Brian Buntz

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