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Evolution of an Industry

Great post at Xconomy.com from Clif Alferness on the evolution of how medical device start-ups find funding. His basic premise is that as devices began to be more profitable, venture capitalists replaced the home garage shops and angel investors early in the process.

Now, those VCs are becoming more conservative, engaging only in those devices that present low economic risk (i.e., those that are already on the books or have a short road to market). Start-ups are historically thought of as the lifeblood of industry. Without the strong core of passionate people whose ideas are bigger than their pocketbooks, this industry may lose its next embolectomy catheterâEUR"and not even know it. But Alferness hasn't lost hope. He sees a return to work on device innovations during evenings and weekends from the home office, taken forward by small investors. I'd like to see that, but I don't think its likely. The difference is that medical device industry has changed and has gotten exponentially more complex, even in the last 10 years. As the industry moves to nanotechnology and drug-device combinations, innovations are more likely to come from universities and (surprise) from large firms that have the equipment and drive to fund new technology. I wouldn't be surprised to see the latest and greatest come not from a garage but from the (hypothetical) whiz kids just hired by J&J or St. Jude Medical. The truth, however, is that big innovations are simply less likelyâEUR"even with generous VC fundingâEUR"than incremental improvements. This is not to say such improvements are unnecessary; it's quite the opposite. Incremental improvements are not sexy, but they often prove to be great value to end users and patients. Now may be the time to take a look at what we have and make it better. Heather Thompson

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