Proving Device Incubation Works: An Interview with The Foundry

Article preview from IN VIVO - April 01, 2011

A decade ago, incuabators were seen as the best medicine for what then ailed the medical device industry, most notably a complex regulatory pathway and a difficult venture financing climate. Perhaps not surprisingly, as both the regulatory path and venture financing grew easier in the mid 2000s, incubators began to struggle, victims of their own financing problems. More recently, two huge acquisitions, Abbott's purchase of Evalve and Medtronic's of Ardian, suggest that at least one incubator, The Foundry, is proving that incubation works.

Proving Device Incubation Works: An Interview with The Foundry

Article preview from IN VIVO - April 01, 2011

The medical device world is a very different a place than it was a dozen or so years ago, yet in many ways nothing has changed. It's still hard for small companies to get funding, particularly venture funding, and start-ups and their investors still look to large multi-national device giants for their exit through acquisition. In addition, the strategy or game plan for successful device start-ups remains very much the same: look for large clinical markets with unmet clinical needs, convince a handful of cautious investors of the potential of the technology, and wrestle with a sometimes recalcitrant regulatory process before finding that much-hoped-for exit.

If the device world feels different now, it's because the problems, while similar in nature, seem so much more severe today. A decade or more ago, financing device companies with venture capital was difficult, but no one worried that the venture model itself was broken – and in fact, the robust financing climate of the mid-2000s seemed to reward the perseverance of many start-ups who hung in and battled on. In the same way, getting approval and/or clearance from the FDA has always been a challenge, but as the industry faces 510(k) reform and precipitous declines in both 510(k) clearances and PMA approvals, today's struggles make the late 1990s seem positively rosy in comparison. Even exit-through-acquisition seems more difficult today – while a handful of blockbuster deals give investors hope, many venture-backed medtechs complain privately that despite sitting on hoards of cash, big device companies are holding back as they look for deals that are non-dilutive and large enough to be able to move the needle.

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