Funding insights for entrepreneurs from top med tech investors
At the MedTech Investing Conference in Minneapolis last week, two sessions focused specifically on med tech funding: from early- and late-stage investing to emerging funding sources available to private companies. Below are insights from the two panels:
- Noah Lewis, managing director, GE Ventures: “The risks we’re comfortable taking would be engineering, clinical. The hurdle rises when it comes to reimbursement risk. The highest hurdle of all is new market creation for us.”
- Kirk Nielsen, managing director, Versant Ventures: His litmus test: “Would Kaiser pay for this?” Given market size, disruption, impact in clinical care and intellectual property, he said, “when is this project likely to be acquired?” Nielsen added: “As investors, we need to be prepared to take it all the way.”
- Guido Neels, managing director, Essex Woodlands: Entrepreneurs should think about whether they can make and sell their product or service cheaper and if the payer will embrace their model. “It’s a different mindset,” he said, “but it’s the way to go now.”
- Lewis: The “mega trends” he’s seeing the space include increasing prevention, catching diseases early, and moving people outside the hospital setting.
- Josh Baltzell, managing director, Split Rock Partners: He’s surprised by entrepreneurs who say, ‘I know when we get to this point, someone will buy us.’ He hasn’t seen it work out that way. “We’re uncomfortable with those business plans that say, ‘We’re going to get X-number of patients and then the business plan stops,’” he said.
- Neels: “Ninety-nine percent of the companies require much more money [to get to exit] than you ever expected. And it takes more time than you ever expected.”
- Nielsen: When asked what he looks for in early-stage investments, Nielsen said the bar is high. “Every piece needs to be in place: great market, great team, disruptive tech and a business model that makes sense.” Nielsen added: “It’s a great time to start a company... If you can get a first-in-class project funded in this environment, you’re going to have a lot of fun ahead.”
- Neels: His advice for entrepreneurs: “Separate your personality from the facts and be very objective to your board about the facts.”
- Chad Cornell, vice president of corporate development, Medtronic: When asked how he sees the corporate venture landscape changing, Cornell said strategics like Medtronic are still “voracious acquirers of tech,” but not enough of those technologies are being funded.
- Mike Carusi, managing director, Advanced Technology Ventures: “It’s one of the best time in the industry to do early-stage investing,” Carusi said. “When you see more people running for the exits, there are more opportunities.” But fewer companies will get funded, he said, because there is less capital.