I’ve again included some non-VC firms in the list, as financing can sometimes come as debt, private equity and/or sales-of-future-royalties. I’ve also included some announcements from firms that are no longer investing, as it’s best to identify those firms early.
According to PWC’s recent quarterly MoneyTree report, no new medical device companies achieved Series A fundings in New England in either Q2 or Q3 2013. Zilch, zip, zero, nothin’, no, nada.
I’ve been tracking first-time venture financing of medical device companies in Nw England since 2005. You’ll find the link to my latest list of these companies at the bottom of this post. I wish I had a better update to offer.
Pitchbook released their “Second Quarter 2013 U.S. Venture Capital Data” last week, and the outlook for medical device venture deals continues to be difficult. Based on first half actual data, Pitchbook forecasts that the total number of early stage device deals in 2013 will hit a six-year low – a steep drop from 2012 and about half of the 2008 peak. Pitchbook forecasts that the number of late stage deals will drop, but not as far – slightly down from 2012 and only at a five-year low. Unfortunately, I can’t say I’m surprised.
The latest quarterly MoneyTree Report was just released, providing some insight into the state of medical device venture funding in the US. I downloaded and plotted the historical trend data for medical device VC investments in the U.S. from Q1 1995 to Q1 2013. Click on the thumbnails for larger images.
In the eight years of data I’ve collected on New England medical device company venture funding, I’ve never seen it this tough. Only four new companies were funded in 2012 (see my complete list below).
You might be tempted to blame VC belt-tightening or the “Patient Protection and Affordable Care Act.” You’d be wrong. While the macro environment has its challenges, four new NorCal medical device startups were funded in Q4 alone.
The glass is half full. I’ve been tracking the fundraising activity of healthcare venture firms for the last few years, and I estimate that there are about 250 VC firms actively investing in healthcare innovation worldwide. In contrast, a list I created ten years ago, at InfraReDx, included about 500 healthcare VC firms. Times are tight in 2013.
I’ve written about unusual deal terms before (here and here), but Bruce Booth’s awesome blog Life Sci VC just introduced me to a great new report on typical life science deal terms. While the big headline is that 83% of life science deals include earn-outs, I was surprised to learn that the average amount of equity invested in medical device companies prior to exit was $60M (median $44M). Senior medical device startup execs should definitely read Booth’s article and download the full report.
It’s been several months since I’ve updated my list of “Healthcare VC’s with money to invest,” so I have plenty to report.
I’ve added about 35 new announcements of firms that successfully raised new funds or are actively raising new funds. Most VC firms that are actively raising new funds are simultaneously looking for investment opportunities, so they will be positioned to put their new money to work right away. Definitely consider pitching them.
While there are a few really small funds (under $100M), the majority of healthcare-focused firms seem to target a$150M to $300M fund sizes. A handful of diversified firms have also raised new funds. While diversified firms are typically larger, it’s important to remember that the healthcare portion is just one piece, and may not be bigger than the healthcare-focused funds.
If you don’t follow Bruce Booth’s blog Life Sci VC you should.
Booth, a biotech partner at Atlas Ventures, posted recently on both corporate funding and venture debt. While medical device startups typically think of corporate investors coming in to Series C or later stage deals, Booth wrote that “Corporate VCs are now truly ‘preferred partners’ for [Atlas's] early stage deals.” Booth also pointed out that “Corporate VC funds have very large implied ‘assets under management’.” He estimated that the fifteen top biotech corporate investors “represent about $2.5B+ worth of ‘traditional’ venture funds by conventional measures of fund ‘size’.
Companies use this debt financing for a variety of things: extend visibility to reach key value inflection (e.g., completion of a clinical study); purchase expense capital equipment; strengthen their balance sheet prior to deal negotiations or IPO; or, expand the pipeline by purchasing new assets or advancing secondary programs, among other things.
If you’ve been following my blog, you know that I try to make it easy for medical device startups to identify potential sources of funding. My list of ‘healthcare venture capitalists with money‘ has been really popular. So today I put together a list of healthcare corporate and debt funding sources.
Cameron Health’s March acquisition by Boston Scientific for $1.3B was the subject of some Monday morning quarterbacking by stock analysts.
Leerink Swan Analyst Rick Wise was quoted in Mass High Tech saying “the purchase of Cameron is a major positive for Boston Scientific, ‘with the potential to transform the longer-term outlook for BSX’s lagging CRM business.'”
The Wall Street Journal quoted Citigroup as saying “the dated deal structure … looks too rich and risky” for Boston Scientific.
Whatever the analyst opinions, the striking aspect of the Boston Sci/Cameron deal is the imbalance between the $150M upfront price and the $1.2B in milestone-based payments.