Medtech startups raising venture capital in the first quarter kept the strong pace from 2019, according to an analysis by Silicon Valley Bank. But the uncertainty over the pandemic likely will slow down fund-raising in the second quarter.
In an interview with DeviceTalks Weekly Podcast, Jonathan Norris, managing director, SVB Life Sciences, says SVB recorded 79 U.S. medtech companies recording a total of $1.2 billion in the first quarter of 2020.
That tally was almost identical to the first quarter of 2019 when 77 companies raised the same amount. (Norris noted that 2020 Q1 numbers are likely to go up as data from more deals is unearthed.)
Norris said all systems were go until March 20 or so when the impact of COVID-19 took root. “People realized the world had changed,” he said on the podcast. “Venture investors that invest in devices really started to critically look at their portfolio and understand the ramifications (of the pandemic.)”
That understanding likely will prevent medtech fundraising from matching the $4.9 billion secured in 2019.
Norris says early-stage companies may feel the pinch the hardest. First-quarter 2020 Series A deals came in lighter than the same quarter last year, 21 deals vs. 32. Medtech companies secured $200 million in Series A dollars in 2020, compared to $280 million over the same period in 2019.
“Series A is going to be impacted, especially as investors really start dealing with their portfolios right now,” Norris said. “And there was already a small group of Series A investors to begin with.”
But medtech investors might find “interesting opportunities” in later-stage companies that had planned to stage an IPO over the next 12-18 months. Valuations may come in a bit lower, but they might not be severe enough to hamper the companies.
Norris says SVB will issue a more complete medtech VC report over the summer when first-half data is collected.