1. More reliance on grants amid tight funding for young companies
Eric Geismar of EPG Consulting has spent time working with the trade association SoCalBio to advise young medtech companies, including on how to pitch to investors. “My experience has been that money’s very tight and maybe getting tighter,” Geismar said.
When it comes to winning investments from large, legacy medical device companies, the accounting laws have changed so that the investing companies have to write up or down the value of their equity investments at the end of every year, according to Geismar. Medtech companies used to make investments in startups just to make contact with them and get on their boards. “Now it’s tougher for them, and they really want to see results before they’ll put significant money in – mostly human results. Animal results might not even be enough.”
There are also simply fewer medical device companies to go to for money because the industry is consolidating so much amid mega deals running into the hundreds of millions of dollars.
So where do medical device startups go to bridge the gap before a Series A round or a corporate investment? One answer has been grants, including from the highly competitive Small Business Innovation Research (SBIR) program run out of the U.S. Small Business Administration. “They actually look good because you have third-party review to take a look at your science. … That gives you a little more of the, ‘Wow, there must be something here,’” said Richard Yoon, senior director of intellectual property at Terumo’s MicroVention.