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Medtech Venture Capital Heads into Unfamiliar Terrain

This article was originally published in Start Up

Executive Summary

The landscape in medtech investing is changing, and one need only look at two signposts to see that this is so: the exit values of VC-backed companies over the past eight years (lower than anticipated), and the amount of time required to achieve those exits (longer than ever before). De Novo Ventures' Richard Ferrari presents the trends that emerge from eight years of venture investing in medical technology companies.

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A year and a half after the September 2008 collapse of Lehman Brothers and the official start of the economic recession, a panel of venture capitalists and other financiers in the medical device industry came together at the IN3 meeting in Boston. We asked them if they've had to change the way they look at deals. What is the trade-off between expensive, de-risked later stage deals and the kinds of returns that can be achieved by backing a winning company from start to finish? Where would they place their bets: cost-effective technologies for tried-and-true markets or novel products for unmet clinical needs, the "evolutionary vs. revolutionary" debate? And what can one do about tired syndicates? Our panel lets us in on the kinds of discussions they've been having around the table at weekly partners' meetings.

A New Chapter for Device VCs

This article first appeared in the March 2009 issue of Start-Up. The current economic crisis is hard on everyone, including investors and start-ups. But the news isn't all bad for medical device VCs. Those with capital will find the prices to be right in today's depressed economy. On the flip side, those venture firms without new funds or sufficient reserve capital will get penalized by declining valuations and punitive terms offered up by some new investors in their companies. Medical device companies, meanwhile, face tougher scrutiny from investors. During all this, both VCs and start-ups must answer new questions being posed by regulatory bodies, public investors, corporate acquirers, and potential customers.

A New Chapter for Device VCs

This article first appeared in the March 2009 issue of Start-Up. The current economic crisis is hard on everyone, including investors and start-ups. But the news isn't all bad for medical device VCs. Those with capital will find the prices to be right in today's depressed economy. On the flip side, those venture firms without new funds or sufficient reserve capital will get penalized by declining valuations and punitive terms offered up by some new investors in their companies. Medical device companies, meanwhile, face tougher scrutiny from investors. During all this, both VCs and start-ups must answer new questions being posed by regulatory bodies, public investors, corporate acquirers, and potential customers.

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