2. Foreign stock exchanges
For a number of early-stage medtech companies, foreign exchanges have proven to be a successful funding avenue, particularly the Australian Securities Exchange.
In 2010, bioresorbable stent maker Reva raised $85 million in an initial public offering on the ASX. Last year, breast tissue expansion device maker AirXpanders raised $28.3 million Down Under, and sleep disorder device maker Oventus raised $12 million in its Aussie IPO. And just this year, ophthalmic device maker Visioneering Technologies closed a $26 million flotation on the ASX.
“Foreign exchanges are becoming a more popular option for startup and early stage companies,” Medical Alley’s Jaskulke said. “For the Australian stock exchange, they have a set of market and regulatory conditions that make it favorable for a medtech company. Among those are a very large capital market. So there’s a pool of money to draw from.”
The investment community in Australia is also more comfortable backing higher-risk early-stage ventures, he added, noting that the region has a regulatory environment that’s “very manageable.”
“It’s very transparent, investors are protected, but it’s very scalable for small companies. If you were a pre-revenue company and you tried to list on a U.S. exchange, your compliance costs are going to be incredibly expensive. It’s one of the reasons companies don’t list until they’re pretty large. In Australia, those are more manageable,” Jaskulke said.
And although traditional VC avenues may be scarce right now, that could change, Jaskulke said. Traditional VC funds follow a cycle of raising cash, investing then exiting, and they seem to be coming back around to the investing portion of the cycle.
“It seems like a lot of the venture capital funds that focused on medical devices, or had a large share in devices, started at roughly the same time, and as a result they matured around the same time. A couple of years ago you had this big group of VC funds that were hitting their end of life and exiting the market, and going on to raise new funds,” Jaskulke said. “The flip side of that, especially in the last couple of years, is that VCs have raised funds again. Big investors are getting capital back in. You have improvements in the FDA process, and I think we’re starting to see new ventures that started in today’s reality, post-healthcare reform.”
No matter the strategy, medtech startups still face an uphill battle when it comes to raising cash. But despite the rough environment, it’s important for the entrepreneurs and executives leading those companies to stay positive. For his part, Leach said that optimism was always essential for their game plan, both through the easiest and the hardest of times.
“You’ve got to stay optimistic. Oh my God, you’ve got to be delusionally optimistic. Make no mistake: It’s not for the faint of heart. Nothing is like this process, and I’ve experienced a lot. It can suck the life out of you, and you’ve got to have the ability to recharge your batteries without being able to recharge your balance sheet,” he counseled. “If you don’t have that, you’re not going to make it. If you don’t stay optimistic, you’re not going to make it.”