Report: Are VCs fleeing med-tech?

October 7, 2011 by MassDevice staff

Investors move away from medical devices and into areas less regulated by the FDA, National Venture Capitalists Assn. survey finds.

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Investors are paring their stakes in health care and shifting capital into projects with less regulatory risk, according to a new survey by the National Venture Capitalists Assn.'s Medical Innovation & Competitiveness Coalition.

Investors are running away from med-tech and pharma in particular, with 61 of the VCs pointing to regulatory challenges as the prime reason for the shift, the survey found.

Nearly 40 percent of venture capitalists firms surveyed said they had decreased their investments in med-tech in the past 3 years, and they expected the slide to continue for another 3 years.

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Within the health care arena, medical devices and biopharmaceuticals amounted to the biggest losers with about 40 percent of respondents reporting decreased funding, as compared to 17 percent for diagnostics and 10 percent for health information technology.

"This report confirms what has been suspected for some time, which is that venture capitalists are shifting investment capital away from lifesaving and life-sustaining products and into areas less regulated by the FDA as well as into other countries," chairwoman of the MedIC coalition and partner at partner at Kleiner Perkins Caufield & Byers Dr. Beth Seidenberg said in prepared remarks. "This trend is one that the venture industry and, we believe, the FDA, wants desperately to reverse."

The survey collected responses from 156 firms, which accounted for an aggregate $10 billion in venture capital funding in health care over the last 3 years.