Medical device angel investments jump in 2012

January 18, 2013 by MassDevice staff

The medical device industry isn't being left behind when it comes to angel investing, according to data provided to MassDevice.com from the investment data firm CB Insights.

Angel- and seed-round financing (typically $1.5 million or less) jumped dramatically in 2012, accounting for about 27% of all investment in the medical device industry. That's a 50% increase compared with 2011.

In 2012 there were 457 medtech angel- and seed-round deals worth a total of more than $187 million, for an average deal size of about $1.1 million. The year-over-year increase in the number of deals is a positive sign, easing away fears that early investors had fled medtech since the economic collapse of late 2008.

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The medical device industry's gains come amid an overall uptick in seed rounds in the broader technology sector, where angel investments were up 65% from 2011.

The good news was, somewhat, tempered by slides in later-round investments. Series B, C and E rounds all declined in medtech, according to CB Insights. The number of Series E rounds, or mega-deals for medtech companies, fell by 7% during 2012.

We asked Anand Sanwal, CEO of CB Insights, about the trend and what it means for the health of the industry.

"If there is only activity in the early rounds and fewer mega-deals, [Series D and E], then you can start seeing some problems with orphan startups," Sanwal told us.

Orphan startups are companies that raise money initially but eventually die on the vine when they're unable to raise follow-on cash.

A December CB Insights report on all seed round investments in technology companies from 2009-2012 showed that only about 4 of 10 startups raise follow-on cash.

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