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.
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.
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.
My list of ‘healthcare VC’s with money to invest’ has become increasingly popular, and today I’m very happy to say that I’ve reached an important milestone: three years of data.
In total, my list now includes about 250 VC fund raising announcements from January 2009 to February 2012. Considering that VC’s typically make their new investments within three years of the fund’s raise, I suspect that the list includes the vast majority of healthcare VC’s that are actively making new investments in startups today.
For medical device startups, raising venture capital is a challenge that seems to keep getting harder. For healthcare VC’s, raising money from limited partners is just as challenging. Despite the reality that some VC’s are exiting the healthcare investment business, the good news for entrepreneurs is that there are still many healthcare VC’s raising new funds, even in today’s less-than-stellar economic environment.
Who are these VC’s? For almost 3 years I’ve been tracking the fundraising activity of venture funds that focus on healthcare, and generalist firms that make some healthcare investments. My goal is to create a reasonably comprehensive and current resource for life science entrepreneurs, and make it available here.
I recently co-founded a medical device startup, and I’m loving every minute.
Two years ago, as COO of Candela (one of Massachusetts’ largest medical device companies), I had one of best jobs in the industry. When we merged with Syneron, I was in a great position to move to a senior role at another big company. Instead, I was determined to join a startup. I know lots of big company execs who can’t envision joining a startup, and lots of big company engineers who feel the same way. The medical device industry doesn’t have the same sexy startup culture as the software industry, where two or three coders can get together and start the next cloud-based phone service, social network, mobile photo-sharing app , or cloud-based note-taking tool. In Massachusetts, only a handful of new medical device startups get VC funded each year (see prior post).
Yet I was determined to go early-stage. Very early stage. Not only is a startup absolutely the right path for me, it’s probably the right path for you. I can’t believe that everyone doesn’t want to work in a startup. Here’s why.
Wilson Sonsini Goodrich & Rosati is one of the top life science law firms on the left coast, with a strong focus on start-ups. Their “Life Sciences Report” is required reading for start-up medical device execs. This quarter’s report includes a great article on Negotiating Corporate Strategic Investments. Well worth reading. Check it out here.