Article preview reprinted from Start-Up - November 2008
Find out how 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).
Medtech Venture Capital Heads into Unfamiliar Terrain
Over the last four years the amount of capital flowing into the health care sector has remained robust—in fact, it's at an all time high, and that has many venture capitalists feeling both optimistic and concerned. The concerns are well founded, and not just because of the recent financial meltdown. 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).
Many venture funds are raising ever larger funds in excess of $300 million. This buildup of cash has served to increase valuations and support a multitude of interesting but not well differentiated technologies. These phenomena were troublesome in and of themselves, but now, in a market in crisis, an even larger concern looms over venture capital investments: to what level will valuations be reset? This is an alarming concern for the venture-backed and public companies that need to raise money because they're at a stage where they still need to run and complete clinical trials or because they're preparing for initial product launch without much trend data. With public equity valuations crushed recently (Xtent Inc., Thermage Inc., Insulet Corp., Northstar Neuroscience Inc., and the list goes on) venture capitalists are naturally concerned that the values of many private companies will follow.
Article preview reprinted from Start-Up - November 2008
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Companies mentioned in this article:
Accuray Inc.
Align Technology Inc.
CTI Molecular Imaging Inc.
Insulet Corp.
Intuitive Surgical Inc.
MAKO Surgical Corp.
Medtronic Inc.
Restore Medical Inc.
Northstar Neuroscience Inc.
NxStage Medical Inc.
Siemens AG Smith & Nephew
PLC Oratec Interventions Inc.
Thermage Inc.
Wright Medical Group Inc.
Xtent Inc.
ev3 Inc.
FoxHollow Technologies Inc.
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