Ask most medical device marketers about market segmentation, and you’ll get an earful about physician specialty (and subspecialty), hospital/facility size or type (academic, ASC, for profit, large system, etc), or adopter type (early adopters, followers, and skeptics). Unfortunately, these approaches rarely help companies identify customer groups that are differentially addressable – i.e. best served by different products or services, different price points, and/or different marketing channels and sales techniques.
Medical device firms can do much, much more to understand and better serve their markets. Even back in the 1980’s much more could be done. Let me explain how I approached market segmentation twenty-something years ago.
The glass is half full. I’ve been tracking the fundraising activity of healthcare venture firms for the last few years, and I estimate that there are about 250 VC firms actively investing in healthcare innovation worldwide. In contrast, a list I created ten years ago, at InfraReDx, included about 500 healthcare VC firms. Times are tight in 2013.
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.
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.
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?
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.
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.