Healthcare Venture Capital Fundraising List 2011 Q3

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.

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Manufacturing Matters

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Look around the parking lots of medical device companies, and you’ll find that most engineers drive Japanese cars. Even those who drive something else acknowledge the manufacturing prowess of Toyota, Honda, Nissan, Subaru and Mazda. When it comes to cars, we all know that manufacturing matters. Look inside the buildings of medical device companies though, and it’s often a different story. Most product development engineers have little understanding of the discipline of medical device manufacturing, other than a required familiarity with good manufacturing practices. It’s the rare medical device product developer who understands single-piece flow, 7 wastes, line-balancing, cell-based manufacturing, theory of constraints, poka-yoke, kanban design, kaizen events, six sigma, zero defects and the many other buzzwords/elements of lean manufacturing. It’s a real problem.

The best development engineers know that manufacturing matters, and engineers who “get” manufacturing create significantly better product designs and significantly more value. No great medical device designs make it to the end customer without being manufactured. I could even argue that medical device product development is all about manufacturing. Here’s what I mean.

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Why You Should Join a Medical Device Startup

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.

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WSGR View on Medical Device Corporate Strategic Investments

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.

How to Avoid a Bad Strategic Partnership for Your Startup (readwriteweb.com)

Massachusetts Medical Device Events Calendar

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Massachusetts Medical Device Events Calendar

Want to learn more about the medical device industry and its key issues? The greater Boston area hosts a ton of medical device events, but it has always been a pain to try to find them. So, I’ve added a new page to my blog, a Medical Device Events Calendar. Check it out here.

If you have an event that you’d like me to add, leave me a comment at the bottom of the calendar page.

Bringing your medical device to the U.S.? Start in Massachusetts

I’m fortunate to live in one of world’s great medical device hubs, so I hope you’ll forgive this unabashed promotion. Massachusetts is home to hundreds of innovative medical device companies, and we are well known as a source of med-tech start-ups. What’s less known is that Massachusetts is the best place for European and Israeli companies to set up their US operations.

Andover Massachusetts (population 33,201) is practically the United Nations of medical devices, hosting Switzerland-based Straumann, Netherlands-based Philips, Germany’s Draeger Medical, and UK’s Smith & Nephew.

Last year, Syneron merged with Candela in Wayland MA, becoming the largest Israeli medical device company in New England. Israeli start-up Odin Medical located its US HQ in MA prior to its acquisition by Medtronic, and Israeli start-up rcadia has their HQ in Newton, MA. EarlySense is the most recent Israeli company to locate here.

Ireland-based Creganna, a leading provider of medical device contract R&D, set up its first US location in Massachusetts and later expanded to locations in California and Cleveland. Ireland’s Shimmer Research, designer of new devices for wearable health sensing, set up their US operations in Boston.

I’d love to see more European and Israeli companies set up shop here. If you are developing a great new medical device outside the US, and thinking about entering the US market, you should be thinking about Massachusetts. Here’s why.

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Life Science Venture Capital Fundraising List

Every venture firm claims to be looking for great companies to support. The reality is that many have no money for new investments, having reserved their remaining cash for their current portfolio.

How can a medical device entrepreneur find the firms that have the capacity for new investments? How can an entrepreneur find fresh money? Wouldn’t it be great if someone created a list of life science venture capital firms that have recently raised money?

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The lean medical device startup compensation policy

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A great coder with a great idea can start an amazing web 2.0 business. In the web startup world, college dropouts create billion dollar businesses by their mid-20’s. In the medical device industry though, experience counts. You’ll need a VP Regulatory Affairs that has several FDA approvals in the last 10 years. Your head of product development should have driven several products successfully to market. Your head of marketing should be a creative product launch veteran. I hope your manufacturing team has built many medical device products before.

“Ramen profitable” doesn’t work for medical device companies. Medical device companies need experienced talent. Experienced talent deserves fair compensation.

What’s the right compensation policy?

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A Tale of Two Specialties

If you haven’t already heard the big news from last week, Johnson and Johnson’s Cordis subsidiary announced its withdrawal from the drug-eluting (DES) stent market, a momentous event for the firm that launched the first DES and created a new multi-billion-dollar medical device sector. Cordis is also shutting down its Conor MedSystems DES business, which it acquired for $1.4 billion in 2007. My reaction: Wow!

Meanwhile, the same week, the NY Times reported that metal-on-metal hip implants may become “the largest product liability cases of this decade.” The FDA website states that “on May 6, 2011 the FDA issued orders for postmarket surveillance studies to manufacturers of metal-on-metal hip systems. The FDA sent 145 orders to 21 manufacturers.”

Two long-term implants. Two medical device sectors. One critical difference.

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The Looming Impact of Healthcare Service Consolidation

St. James' and Murray Hospitals, Butte (1915) — Image by Butte-Silver Bow Public Library via Flickr

Last week, the Boston Globe reported that Lahey Clinic and Beth Israel Deaconess Medical Center held early discussions on a possible merger.

Last November, Cereberus Capital, a private equity firm, bought Caritas Christi, a group of six hospitals in the Boston area. In December the newly named Steward Health Care System bought two more hospitals in the region. This April, Steward added its ninth local hospital. In June, Steward offered to purchase Landmark Medical Center in Rhode Island. More acquisitions are planned.

In January, Northeast Hospital Corp (owner of Beverly Hospital, Addison Gilbert Hospital in Gloucester, BayRidge psychiatric hospital in Lynn, and a Danvers outpatient clinic) began exploring a merger or sale to a larger regional player. By June, Lahey Clinic, Beth Israel Deaconess, Steward Health Care System, and Vanguard Health Systems had all made offers to buy.

In April, Beth Israel Deaconess Medical Center and Milton Hospital announced plans to merge in six months.

Provider consolidation isn’t just a Boston phenomenon. Healthcare services M&A is heating up all across the US. What’s going on, and what does consolidation mean for medical device companies?

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