Healthcare Venture Capital Fundraising List 2012 Q2

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.

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Healthcare Corporate and Debt Funding Sources

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.

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Reference Checking Your Prospective New Boss

Medical device employment and compensation have been frequent topics of mine over the past couple of years (see list below). It’s an important theme.

Today I’d like to talk about reference checking your prospective new boss. As a senior executive in the industry, I’ve hired many people for my companies – some more than once. As part of the hiring process, I always try to find colleagues in my network to provide references on the prospective hire. My goal is to build an outstanding team, and mistakes are costly. While I always ask candidates to provide references, I also like to check with colleagues not on that list.

Turnabout is fair play. Yet I’ve never had a prospective employee ask me for references. Why not? I’m happy to provide them.

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Getting the deal done

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.

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New England Medical Device Series A Syndication

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?

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Healthcare Venture Capital Fundraising List 2011 Q4

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.

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Lean Medical Device Startup: Independent Directors

Great independent board members add tremendous value to a startup. I want to share two recent blog posts on the subject that I found really helpful. Enjoy.

First Mike Travis answers the question Why Startups Need Outside Directors.

Second, Elad Gil explains How To Choose A Board Member.

Update 4 Mar 2012: Bruce Booth of Atlas Venture just wrote a great post on “High-Performing Boards in Early Stage Biotech.” Well worth reading.

Update 28 May 2012: local entrepreneur and angel Ty Danco posted “Everything You Wanted to Know About Boards: Touring the Blogoverse” an awesome compilation of the best advice on startup boards. Definitely check it out.

What Makes An Awesome Board Member? (feld.com)

Everything You Never Wanted To Know About The Medical Device Excise Tax

As the January 1st 2013 start-date approaches, the medical device excise tax is back in the news. Here’s the latest:

On Jan 25th Minn Representative Eric Paulsen and 225 cosponsors introduced H.R. 436: Protect Medical Innovation Act of 2011, which aims to repeal the tax. Despite congressional support, Minnesota Public Radio states that the bill is unlikely to make it through the Democrat-controlled US Senate.

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New England Medical Device Entrepreneurs and Exits

Bijan Salehizadeh of NaviMed Capital recently presented more statistics on the great returns that VC investors have realized in the life science industry over the past decade. Life Science investing has outperformed IT over the past 10 years. Really.

You might be surprised to learn that quite of few of those successful investments were New England medical device startups.

In the last half-dozen years, there have been more successful exits than you may think. While a handful have exited in the hundreds of millions, success for many was defined as a solid return on a less-than-$20M total investment.

Somehow these exits have managed to stay under the radar screen. Until now.

Who are these New England medical device startups? Who are the entrepreneurs who led their companies to success?

Read on.

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Lean Medical Device Startup: Test Driven Development

Lean manufacturing, now common in the medical device industry, originated in the automotive industry. Companies that truly embrace lean practices dramatically reduce costs and inventory levels while improving product product quality.

Stage-gate and requirements-driven product development, pervasive due to FDA’s QSR, has roots in PRTM’s PACE process and Robert Cooper’s Winning at New Products. A well-designed product development process shortens new product development timelines and improves the likelihood of product success.

Medical device companies reap tremendous benefits from borrowing the best practices of other industries. Unfortunately, most of us spend our whole careers in medical devices with limited knowledge of other industry practices. Meanwhile, as Marc Andreesen wrote last summer, “Software is eating the world.”

It’s not just the dramatic decline in the costs of memory, processing and communications that is fueling the software revolution. Key to software success is a radically new approach to product development best summarized in Eric Ries’ fantastic book, The Lean Startup and Kent Beck’s classic Extreme Programming Explained.

While I don’t expect scalpels to be replaced with software anytime soon, we in medical devices can learn a lot from Lean Startup software practices. Today’s topic: test-driven development (TDD).

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