It’s been about a year since I published a list of newly venture-funded New England medical device companies, so it’s time for an update (see below). The Series A rate continues to trend at two-per-quarter, despite the purported decrease in the number of active VC’s.
Last year I noted the surprising proportion of diagnostic technologies in the startup list. Over the last four quarters, only one of eight newly-funded startups is developing a diagnostic. That’s more in line with expectations.
This year I’m taking the opportunity to respond to a question from a colleague: Should I syndicate my Series A round or raise funds from a single venture investor?
Before looking at the data, my gut answer was that syndication is not what matters. When I looked at the last three years of Series A rounds, the data matched my gut feeling: about 40% of Series A are syndicated (two or more institutional investors) and the rest raised money from a single VC firm.
Why syndicate your Series A? Syndication can increase the amount of funds that can be raised in the Series A. Syndication can increase the amount of funds that can be available over the lifetime of the company, as each venture firm has its own reserve for future investments. Syndicates might have enough reserve to do an internal Series B, thus avoiding the distraction of outside fundraising. Syndication can bring in additional board members who can add value to the company.
Why not syndicate your Series A? Syndication might require you to sell more shares, diluting your ownership at a low price. Syndication may bring a bigger board, which may be harder to manage.
My advice to entrepreneurs is to find really great VC’s who complement your skill sets and will help make your company more successful. You will be working closely with your VCs for the life of your company, so spend the effort to get this right. Reference check your potential investors, like you would for any key hire. If you close your Series A deal with the right VC’s, syndication will work itself out.
Here’s the updated list of Massachusetts medical device companies receiving Series A venture investments for the last seven years:
|2012Q1||2||Solace Therapeutics, Alcyone Lifesciences|
|2011Q4||2||EndoEvolution, Convergent Dental|
|2011Q3||2||Beacon Endoscopic, Inc, Precision Biopsy|
|2011Q2||2||MoMelan Technologies, , PolyRemedy|
|2010Q3||5||Lantos Technologies, Bio2 Technologies, Advanced Dx (FKA Eyetel Imaging), Affinimark Technologies, DiagnosisONE|
|2010Q2||3||SynapDx, MedMinder Systems, Foundation Medicine|
|2009Q3||3||CardioRobotics (now MedRobotics), Augmenix, Daktari Diagnostics|
|2009Q2||3||CardiAQ Valve Technologies (now in CA), DC Devices, Taris Biomedical|
|2008Q4||3||Seventh Sense Biosystems, Semprus Biosciences, Lumicell Diagnostics|
|2008Q1||3||I-Therapeutix (Ocular Therapeutix), Allegro Diagnostics, Vortex Medical|
|2007Q3||4||Cardiosolutions, Still River Systems, iWalk, WMR Biomedical(Arsenal Medical)|
|2007Q2||2||Fluidnet, Innovative Metabolics (now Setpoint Medical)|
|2007Q1||7||SmoothShapes/Eleme, Serica, Hypermed, Soteira, IlluminOss Medical, Claros Diagnostics, Neuroptix|
|2006Q4||4||Biobehavioral Diagnostics, Cambridge Devices (now Sierra Molecular in CA), Gelesis, T2 Biosystems|
|2006Q3||3||Tremont Medical(Interlace), Living Microsystems (now in CA), Histogenics|
|2005Q4||4||Spirus Medical, Rhythmia Medical, Tomophase Corp, Avedro|
- Top Questions to Ask a Venture Capitalist in the First Pitch (cleantechies.com)