The Atlantic has a great piece today about why the medtech and biotech industries are losing the backing of Silicon Valley investors.

September 23, 2011

2 Min Read
Industry Faces Bigger Problems than the Device Tax

The Atlantic has a great piece today about why the medtech and biotech industries are losing the backing of Silicon Valley investors. Money.jpg

The writer, Allan May, who founded and chairs Life Science Angels and serves as chairman of the Kauffman Angel Resource Institute, says the industry receives around a third of all angel and venture capital investments. These funds, he says, are critical to innovation in the industries, but the money is going away.

May cites three reasons:

  1. VC firms and capital are down two-thirds since the 2008 financial crisis.

  2. Those that did survive don’t have the funds to gamble on startups that could take as long as a decade to pay off.

  3. Investors are migrating to Web 2.0, social networking, and software, which require less cash, pay off faster, and don’t face the strict regulatory requirements of healthcare.

Without VC, May says startups are cut off from a vital lifeline. The problem is causing new technologies to languish at the university level, and he also blames the lack of funds for “offshoring our medical device and biotech industries—two of the most successful industries in modern history—faster than we offshored the automotive industry.”

Opponents of the medical device excise tax have been warning that if it goes into effect as expected in 2013, it could send thousands of industry jobs overseas. But if you believe May, that's already happening. While the specter of the tax certainly doesn't make the industry any more attractive to investors, the Atlantic article puts it in perspective. The industry has rallied  around the goal of repeal, but even if the device tax disappears, other problems will remain. 

Jamie Hartford   

Related:

Study Considers How Medical Device Tax Will Affect U.S. Employment

Venture Capitalists Invest More in Device Industry in Second Quarter

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