For many years, the fundraising environment for MedTech companies has been exceedingly difficult. Venture firms that were historically active in MedTech shifted their investment allocations to other areas of life sciences and capital became constrained. New entrants emerged to fill the void, including European and Asian venture firms, sovereign wealth funds, family offices and high net worth individuals. Investment stage became considerably important in mitigating risk as investors looked to (1) early stage technology development or (2) early commercial companies with demonstration of market adoption.
Early stage technology development and early commercial companies have had access to a broader set of funding options, but companies in the chasm between the two struggled to find the right investors as well as sufficient capital required to meet meaningful milestones.
Although the fundraising environment has been challenging, it is important to note that more than 70 Late Stage and Expansion Growth Capital Venture Financings greater than $25M were completed from January 1, 2016 through June 30, 2017 with an average deal size of $42M. Select transactions:
|Completed Year||Issuer||Deal Type||Deal value
(US $ M)
|2017||Venus Concept||Growth Capital /Expansion||37.49||Undisclosed Investor(s)|
|2017||Vertos Medical Inc||Growth Capital/Expansion||28.00||Aweida Venture Partners, Leerink Revelation Partners, MVM Life Science Partners LLP, Onset Ventures, Pitango Venture Capital|
|2017||Monteris Medical Inc||Growth Capital/Expansion||26.60||BDC Capital Healthcare Fund; Birchview Capital, LP; SightLine Partners; Versant Venture Management, LLC.|
|2017||Vital Connect, Inc||Growth Capital/Expansion||33.00||Baxter Ventures, MVM Life Science Partners LLP|
|2017||Intrinsic Therapeutics Inc||Growth Capital/Expansion||28.00||Delos Capital, LLC; Greenspring Associates, Inc; New Enterprise Associates Inc; Quadrille Capital SAS; Undisclosed Investor(s)|
|2017||AliveCor Inc||Growth Capital/Expansion||30.00||Mayo Clinic, Omron Healthcare Inc, Undisclosed Investor(s)|
|2017||VertiFlex Inc||Growth Capital/Expansion||40.00||Alta Partners; Endeavour Vision SA; H.I.G. BioHealth Partners; New Enterprise Associates Inc; Thomas, McNerney & Partners LLC|
|2016||Femasys Inc||Growth Capital/Expansion||40.00||Salem Partners, LLC; Undisclosed Investor(s)|
|2016||ReVision Optics Inc||Later Stage||32.00||Canaan Partners; Domain Associates LLC; Interwest Partners LLC; Johnson & Johnson Innovation – JJDC Inc; Proquest Investments LP|
|2016||Relievant MedSystems, Inc||Growth Capital/Expansion||36.00||Canaan Partners, Emergent Medical Partners, Morgenthaler Ventures, New Enterprise Associates Inc|
|2016||CVRx Inc||Later Stage||57.70||Action Potential Venture Capital Limited; Gilde Healthcare Partners BV; Johnson & Johnson Innovation – JJDC Inc; New Enterprise Associates Inc; Windham Venture Partners; Ysios Capital Partners|
|2016||Torax Medical Inc||Growth Capital/Expansion||25.00||Accuitive Medical Ventures; Johnson & Johnson Innovation – JJDC Inc; Kaiser Permanente Ventures; Mayo Clinic Ventures; Piper Jaffray Companies; Sanderling Ventures; Thomas, McNerney & Partners LLC|
|2016||Endotronix Inc||Growth Capital/Expansion||32.00||Aperture Venture Partners, LLC; BioVentures Investors LLC; Lumira Capital Investment Management Inc; OSF Ventures; Seroba Life Sciences Ltd; SV Health Investors LLP; Undisclosed Investor(s)|
|2016||EarLens Corporation||Growth Capital/Expansion||34.00||Aisling Capital; Cochlear Ltd; LSV Capital Management, LLC; Medtronic Plc; New Enterprise Associates Inc; Vertex Ventures|
|2016||Micell Technologies Inc||Growth Capital/Expansion||25.77||Undisclosed Investor(s)|
|2016||EndoStim Inc||Growth Capital/Expansion||25.00||Endeavour Vision SA; Gimv NV; Sante Ventures, LLC; Wellington Partners Venture Capital GmbH|
|2016||Svelte Medical Systems, Inc||Growth Capital/Expansion||44.40||CNF Investments LLC, New Science Ventures LLC, Undisclosed Investor(s)|
|2016||Benvenue Medical, Inc||Growth Capital/Expansion||60.00||Capital Royalty Partners L.P.; De Novo Ventures; Domain Associates LLC; Interwest Partners LLC; Technology Partners; Versant Venture Management, LLC|
¹ Source: Global Data Medical Device
In the healthcare sector, there are still many unmet clinical needs for which MedTech solutions can provide significant value to payers, providers and patients. There are significant pools of capital available from a variety of venture capital, venture debt, corporate venture capital, crossover, private equity, sovereign wealth funds, high net worth individuals and family offices.
Any fundraising process hinges upon a company’s story at a given point in time, starting with the origins of the technology and flowing through to a vision for the product or service and its value add within the healthcare system. In telling their unique story, MedTech entrepreneurs should always ensure the clear and concise articulation of the following:
- Product Market Fit: Novel technologies are interesting but interesting is not sufficient in the current healthcare environment. New products must fulfill an unmet need of physicians, patients or payers. Entrepreneurs should focus on backing up claims with independent market research, physician surveys, patient testimonials, case studies, market models, etc.
- Use of Proceeds: Fundraising should be driven by the capital required to meet future development, clinical, regulatory or commercial milestones that are deemed critical in driving the business forward. Companies and entrepreneurs should be prepared to present detailed financials with sensitivity analysis illuminating cash runway under different a variety of potential scenarios. Financials should also illuminate the key levers that can be managed by the leadership team if certain goals are delayed or if the company needs to pivot. Delineating personnel, consultant and program costs in addition to CapEx can be an easy way to identify financial levers.
- Relevance of Risks: As investors progress through diligence, there will be occasions in which entrepreneurs need to focus investors on the key issue at hand. It is irrelevant if a company is going after a $15.0 billion total addressable market or a $15.5 billion total addressable market. What is important is how the company’s product is a better fit for that market, why the company’s commercial strategy will provide a strategic advantage in the market and why the company’s team is poised to capture the market opportunity. Due diligence can become tedious at times, but ensure investors are focused on the elements of the business that move the needle.
- Team Capabilities: There are many unknowns when launching a new product and at the end of the day, investors must get comfortable with the team they are investing in. They must be comfortable that the team will rapidly experiment, adjust and dynamically change to meet deadlines and achieve milestones. Ensure potential investors spend enough time with key team members to feel comfortable with the leadership team that is driving the business forward.
Although the MedTech fundraising environment has been challenging for several years there is capital available for novel technologies that are shaping and changing the healthcare landscape across a variety of applications. Entrepreneurs are best served to commence their process early and to be prepared to speak with a wide variety of investor types throughout the process. Additionally, product market fit, use of proceeds, relevance of risks and team capabilities should be highlighted consistently throughout the process and infused throughout the management presentation. Investors are always looking for interesting opportunities and it is up to entrepreneurs and leadership teams to illuminate the possibilities for any new MedTech product.
Please contact firstname.lastname@example.org to learn more about our medical technology practice and our transaction advisory capabilities focused on assisting entrepreneurs in sell-side, buy-side, private placements and strategic advisory engagements.