In a post-event haze fueled by rice and curry chicken (the 2009 Annual Life Sciences Venture Capital Outlook Event was held by The Indus Entrepreneurs), I can conclude that medtech in Massachusetts continues to be a great place to innovate and invest, but as entrepreneurs we need to pause to let the markets settle down a bit before raising more funding.
About 100 venture capitalists, entrepreneurs, and students sat down March 11 in a Harvard Business School lecture room for two presentations by local MedTech entrepreneurs.
{IMGRIGHT:85×85:http://www.massdevice.com/sites/default/wp-content/uploads/headshots/picture-34.jpg}I thought that both Ninth Sense (nanowire diagnostic for point-of-care breast cancer detection) and Moma Therapeutics (novel hydrogel dermal filler) did a great job pitching their companies. Representatives of Canaan Partners, < a href="http://www.siemensventurecapital.com/">Siemens Venture Capital, and Galen Partners asked them some tough questions and gave their initial feedback to the presenters.
While these thoughts were directed specifically at these two particular startups, their pearls of advice are applicable to all of us entrepreneurs:
1. Pick your first application carefully and stay focused on that one application.
Make sure that the market need is there for your device and that your product actually serves that need.
2. Get your intellectual property nailed down before you start making pitches.
If you can wait until it’s granted, that’s great, but at least make sure that all of your IP has been filed and your licenses are all signed (and exclusive!).
3. Finally, consider going overseas.
There are two reasons for this: Gaining clinical experience at lower cost than staying in the US and to start shipping product and therefore gaining a revenue stream earlier.
The second part of the evening comprised four presentations by the panelists on their outlook for VC in the biotech and MedTech spaces. I could devote an entire column to each of their presentations, but here are some of the highlights:
• Roopom Banerjee (Director, Leerink Swann): The confluence of the worst capital markets since the 1930s, a closed IPO market and weak M&A market (except perhaps for a few biotechs) and a 20% decrease in VC fundraising last year has shifted the priorities of VC firms. So-called “A” companies can still find institutional funding, but firms are now prioritizing their portfolio companies over prospects and generally shifting to later stage investments (including PIPEs) to lower the risk profile of their portfolios.
• Andrew Jay (Managing Partner, Siemens Venture Capital): Medtech remains a hot area for investment due to the market’s receptiveness to innovation and the high margins. Key device markets include cardiovascular, orthopedics, neurology and cosmetics.
• Stephen Bloch (General Partner, Canaan Partners): For IPOs, the money returned to investors approximately equals the money put into these companies. M&As often provide a preferred exit due to the potential for higher multiples. Successful exits often require that entrepreneurs build real companies (with real products), meet or exceed benchmarks, be cost efficient and design their business to be an attractive near-term acquisition target.
• David Jahns (Managing Director, Galen Partners): Two things are particularly great about medtech: the strong barriers to entry provided by IP and the high margins in the marketplace. Entrepreneurs need to be patient right now and avoid raising cash unless they absolutely need to. Companies that can afford to wait a little while should find themselves in a better bargaining position.
So what do medtech entrepreneurs need to do to survive this rough patch? Everyone’s list should include protecting IP, building something that brings real value to the marketplace, staying focused on core technology and efficiently meeting milestones.
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