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’.
Booth’s post Venture Debt: Under-Appreciated Tool for Building Biotechs teaches similarly valuable lessons. He suggest that the “the debt market in the life sciences is about 10% of the equity market,” and that:
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.
The debt funding sources are pretty straightforward – two banks and twelve speciality finance companies. For medical device companies with significant capital equipment, an equipment-based lease from your bank makes a lot of sense. More generally, I encourage you to read the following before considering venture debt:
Corporate funding sources fall into two categories: product companies (device and pharma) and provider funds (hospital systems). Like traditional venture funds, corporate venture funds want to make a good return on their investments. Unlike traditional venture funds, corporate venture funds typically also want to make investments that support their broader corporate mission. Well-structured deals can align the incentives of the corporate investors with those of the venture investors and management. I encourage you to read the following before considering corporate strategic investors:
http://bijansabet.com/post/831552371/should-a-startup-bring-on-a-strategic-investor (make sure to read the comments too)
Still interested in venture debt or corporate investors? Check out my list here: Healthcare Venture Debt and Corporate Funding Sources 2012.