"Funding has dried up over the last three years, especially for early stage companies--even later stage companies are getting hammered," said Mir Imran, a serial entrepreneur and chief executive of Modulus Inc. (San Jose), a contract medical design and manufacturing company. "Meanwhile, the regulatory process has become so convoluted it requires more funds to get products through it, so many of us have gone to Europe," he added.
As many as 40% of venture capitalists in medtech have been unable to raise new funds since the 2008 recession and are now holding money to keep their existing portfolio companies alive, said Imran who has started or funded dozens of medical electronics companies. Meanwhile deals are available to invest in late-stage companies at early-stage prices, he added.
"Our small fund has done two or three deals in the last year, but some have not done a single early-stage deal in the last year," Imran said. "Things are grim, and probably won't change for another year or two until things flush out," he said.
Long term prospects should improve. Big medtrech corporations such as Medtronic depend on acquiring startups as part of their product development process. A scarcity of early-stage startups now could lead to higher valuations for the few who make it to be acquisition targets in four or five years, said Imran...
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Rick Merrit is editor at large for EE Times