A recent Wall Street Journal article discusses how many medical startups are now seeking funding from non-traditional locations. Since the financial crisis began in 2007, the medical industry has seen the worst drop off in venture capital funding among the top industries that tend to draw funding. There was of course a major dropoff across the board, including funding for technology and software, but the recovery of the biotech startup scene simply hasn’t happened.
For a bit of comparison, since 2007 software startup funding has increased 75% while medical technology funding has decreased about 28%. So how are medical startups getting their technologies off the ground in the spartan funding landscape? Many of them are trading their potential for cash right now.
Companies that normally would have been funded by angel investors are now selling low to established biotech companies. By pre-selling the rights to their emerging technologies, they are garnering the necessary funding but are sacrificing potential dollars down the road. The ideal situation for a medical startup, like any company looking to sell, is to set yourself up in the middle of a bidding war. Two or more established biomed companies competing to acquire your technology will almost always drive up the price, but many in the field today simply don’t have that luxury. For now, with medical venture capital in short supply, taking what is offered by established companies can be the only option for medical startups looking to sell their nascent technology.
While venture capital investors are always looking for a solid investment, hopefully an element of responsibility will start to creep into the decision making of funding medical start ups. Funding apps and software may be a safer bet at the moment but putting money behind medical companies looking to make it could help change the face of healthcare.