Survey: Medtech startups respond to the medical device tax

April 4, 2013 by Arezu Sarvestani

Young medical device companies say the medical device tax will delay profitability and hurt their ability to raise capital, spurring many to attemp to pass on the cost and to shift their focus overseas.

There are few surprises in the medtech industry's outlook on the impact of the medical device tax, but the burden weighs heavier on the industry's startups.

Most of the startup executives surveyed by Silicon Valley Bank said that the tax will affect their long-term growth, including delaying profitability and hampering fundraising efforts, but it has also hurt their morale.

Startup executives in the medtech industry were less optimistic than their peers in other industries about their general business environment, translating to lowered hiring and growth expectations, according to a survey conducted by Silicon Valley Bank.

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"Foster incentives, not taxes for medical devices," an anonymous participant responded to the survey. "This is one industry where the U.S. used to lead the world and this position is eroding and at significant risk."

The survey depicted the tax yest another headwind the industry is facing, adding to regulatory uncertainty, delays and rising costs. Device makers have also had to content with an 11-year low in capital investments, further exacerbating an already stressed market, according to SVB.