Article perview reprinted from IN VIVO - July/August 2009
Device deals--albeit fewer--are still getting done in the current environment, and many investors remain bullish on devices. A panel of venture investors--both VC and corporate--who are still active dealmakers, discuss what they want to see today in start-up companies, and whether the device investment model has changed both for now and the future. Read more...
Device Investing in Tough Times: The Venture View
Article perview reprinted from IN VIVO - July/August 2009
With all of the concerns that the current economic climate has created regarding life science investing generally and device investing specifically, it can be useful occasionally to step back and try to gain some perspective on whether the sky really is falling or whether this is simply a deeper trough in just another economic cycle. The impact of the current recession on health care investing is undeniable. The real question is whether the result of this shift is a temporary—albeit significant—trough or whether it results in a longer-term change in the traditional device venture investing model.
The immediate impact is severe. Many venture capital firms, including those with longstanding commitments to device investing, will not survive this downturn. Some estimates have as many as one-third to one-half of VC firms slated for extinction, with any number of those currently being referred to as the walking dead—firms whose demise is imminent, but they are surviving on life support.
A large number of device companies will also succumb to the current market realities, including those with promising technologies that might have survived their missteps in a more forgiving environment. But now the path to commercialization has become increasingly difficult to navigate, dealing with cash-strapped limited partners (LPs), VC funds that—if they have the capital—want to preserve it for their current portfolio companies, reluctant corporate partners who may have the cash but not the inclination to do deals, the lack of a public market for device companies, and longer, more expensive regulatory and reimbursement pathways requiring investors to stay with companies longer before being able to bring products to market.
Yet, the device industry has seen and survived downturns before. Indeed, an optimistic view of the current crisis holds that, unlike previous downturns that were triggered by underlying concerns with fundamentals of the device industry (e.g., the disappointing IPO Class of 1995-96), the current problems have nothing to do with the device sector per se, but are the result of much larger economic forces.
- Stephen Levin
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