23. May 2011 by admin.

Panel: Investing in device start-ups has gotten riskier

By ejones

Created 05/23/2011 - 08:32

During a discussion at the MedTech Investing Conference in Minneapolis, venture capitalists told attendees that the cost and risk of bringing medical device start-ups to market is going up. In fact, the environment has changed a great deal from just a few years ago. Now, as one panelist noted, it takes about $20 million to get enough clinical data needed to satisfy a strategic partner.

Jan Garfinkle, managing director of Ann Arbor-based Arboretum Ventures, told the audience that her firm used to be 75 percent focused on medical devices and diagnostics. But, as the Star Tribune notes, she predicts that will be modified to 60 percent, with the remaining going toward healthcare services and life science tools.

However, Eric Simso, former VP of strategic alliances for Boston Scientific, said it’s possible for start-ups to build products and sell them to strategic partners, i.e., larger companies that may one day end up buying them. He added that companies need to consider whether the product is easy to integrate into the strategic partner’s business and if clinical data is at hand, as the Star Tribune’s Wendy Lee notes.

Back in January [1], PricewaterhouseCoopers and the National Venture Capital Association released a report that showed venture capital investment in the medical device industry fell 9 percent in 2010, ending the year as the fourth largest investment sector with $2.3 billion going into 324 deals. That’s slightly more deals than in 2009, when medical devices ranked third among all industries.

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