Tasneem Dohadwala, founding partner at Excelestar Ventures, shares her thoughts on current medtech funding trends and provides advice to founders.
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Slower rate of funding concept
News of slow funding across the medtech industry has been dominating headlines for much of 2023, with Pitchbook reporting that the value of medtech venture capital deals fell 40% year-over-year in the first quarter. Much of this can be attributed to common themes such as inflation, higher interest rates, and a frozen IPO market, which places more importance on planning and strategizing properly to ensure long term financial stability.
For example, it’s imperative to ensure that a company’s cash culminates to a significant milestone that allows for funding. Before the slow down, strong companies could raise funds at milestones that were considered “soft,” perhaps not indicating huge inflection points. But now, companies need to rework plans to incorporate more clinical work including EFS trials, human data, and more.
All of this must begin with a solid plan. When it comes to multimillion-dollar fundraising rounds, portfolio companies should give themselves at least six months to strategize. This allows companies to go through the legal process swiftly but not rushed, and allows ample time to ramp up manufacturing, complete clinical trials, and analyse data and present to the FDA. It also gives more space to commercialise by building relationships with customers and enables companies to build strong relationships with several different investors before picking the right one. And because bringing an investor on board is like a marriage, this is a crucial step. Working with an investor is a long-term commitment that you want to make absolutely sure is well-aligned, otherwise it can become incredibly problematic for the future of the company.
In addition to strong strategizing and planning, it’s important for companies to stay on top of current trends within the industry to identify new areas of opportunity. For example, the burgeoning personalisation of medical devices has become a popular topic. New devices are being constructed with flexible materials and sensors that can optimally conform to individual anatomy and be modulated as the patients’ disease state shifts. This individual conformity and modulation brings personalisation to medical device therapy as novel discovery is allowing for customisation in therapeutics.
Start-ups are also beginning to add a degree of customer centricity in their development cycles. This means the customer is no longer just the patient, they’re also the payors, hospitals, and providers. This increase in customer centricity is not just about the best outcomes, it’s also about keeping costs low and delivery streamlined. The start-ups whose technologies will prevail are those who can survey all customers, understand, and apply all the must-haves into their device, and keep the nice-to-haves to a minimum. This allows the cost to stay low and the actual needs to be met.
Finally, the topic of AI is obviously an important one, but we can’t just expect AI to generate data and stop there. We still need technology to use that data. Data for the sake of data is not enough. Data needs to be applied. AI’s abilities across the medtech industry are exciting, but it’s important to remember the additional steps required to make it relevant and helpful.
The slowdown of funding across the medtech industry is understandably concerning, but with the right tools it can be managed. Strategic planning and staying on top of trends are a good start.
