Devices & Diagnostics, Startups

Six year slump: WSJ gets into nitty gritty of medical device funding drought

While it’s no secret venture capital for the medical device industry is drying up, The […]

While it’s no secret venture capital for the medical device industry is drying up, The Wall Street Journal takes a look at how to fund a medical device in the face of such a rough market. Unfortunately they don’t come up with any new ideas: family investments, corporate venture capital, debt, you know the drill. But what starts out as an article taking an over-trodden path becomes an interesting look into just how far funding for medtech has fallen pre-recession to now. Here are the highlights (or, I guess, low lights):

  • The contraction of the venture industry after the 2008 financial crisis dovetailed with new pressures in the device industry, from declines in the rate of medical procedures, to increasingly tightfisted health insurers and a more stringent regulatory approval process.

  • First-round financing is on pace to reach $259.73 million this year, less than half the amount in 2007 and down 21 percent from last year, according to an analysis of data compiled by VentureSource, which is owned by Dow Jones, publisher of The Wall Street Journal.

  • The total number of investment deals in med-tech is projected to fall by a third this year from 2007, the data from PwC and the National Venture Capital Association show.

  • Had venture investment not been cratering in 2011, (Allan) May said, Nanostim probably would have sought a more traditional financing deal that would have kept the door open for a higher takeout price in the future. (Nanostim is the company St. Jude Medical (STJ) recently acquired for $188.5 million.)

And perhaps most interesting of all:

Medtronic (MDT), an aggressive corporate investor, is making earlier-stage bets than before but hasn’t increased its total spend, said Geoff Martha, senior vice president, strategy and business development.
“We’re putting more at risk at an earlier stage because no one else is,” said Mr. Martha.

That’s right, the world’s most famous medtech company is looking at earlier-stage medical device companies and writing them checks, but they’re not upping spending overall.

For more and for a chart that details the newspaper’s findings, read the full article here.

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