The Medtech Fundraising Landscape for 2014

19 Jun

By Michael Quigley, Research Manager, LSN

mike-2There is a common perception in the industry that direct medical-device investment has all but frozen over the past few years. As a fundraising entrepreneur, this is an easy kickstand to lean on when you have trouble securing financing for your proprietary technology. Data gathered over the past nine months by the research team here at LSN paints a different, much more positive picture, however. After reaching out to thousands of investors throughout the life science industry, we have identified and interviewed more than 300 qualified investors actively seeking to allocate to the medical device space.

Many may argue that 300 investors represent the marketplace as a whole, not the investors interested in early stage, higher-risk opportunities. However, the chart below shows the highest level of investor interest lies in the venture stage, which LSN defines as companies that have raised at least one round of financing outside of friends and family but have yet to reach commercialization for their product. And while interest in the growth stage does outweigh seed, there are still a large number of investors with capital looking to invest in compelling seed-stage opportunities.


Analyzing this data further, we find that the investors looking into this space are very diverse. (See the chart below)


The interest in the medtech sector is also reflected in PWC’s MoneyTree Report, which shows that 25 deals accounted for total early stage medical-device funding increasing by 11% in Q1 2014 to $216 million, as compared with $194 million from 29 deals in Q1 2013. The average investment for early stage device firms also reached an all-time high of $8.6 million.

This significant uptick in dollars invested and decrease in deal volume tells us something interesting about the changing landscape: Although the numbers may not be as high as they have been historically (and it is also worth noting that PWC’s findings only include reported financings), a large group of investors are without a doubt staying involved and investing in the medical device industry. However, these investors seem to be more selective, investing more capital into slightly fewer deals. Now more than ever, it is crucial for medical device entrepreneurs to understand which investors might be interested in their specific technology and how to present the opportunity to these firms to best demonstrate value.



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