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Venture Capital: How Medical Device Companies Can Secure Funding For Their Businesses
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If you are in the medical device development business your chances for obtaining venture capital have been improving lately. This fact can be seen in the Venture Capital Activity Report that was conducted by an investment database, which reveals that medical equipment companies received the highest number of investments in the healthcare sector in 2012. This is especially true in the fourth quarter, in which the medical devices sub-industry received approximately 42 percent of total investments, while the other sub-sectors (like biotechnology and drug development) received only 15 percent or less.
This data isn’t surprising since venture capitalists have found that investing in the medical equipment sector brings excellent returns. The announced sale on Monday, July 15 of Optimedica (a client of ours) to Abbott Labs for up to $400 million is but the latest example of potential returns for investors. However, it doesn't mean that getting venture capital for medical device companies is a piece of cake. If you want to get the best possible deal, you must be prepared. There are many items that need to be addressed, for instance:
Updating your business plan
Taking the time to do this is important because it will provide you with several benefits. First it helps you create a road map that allows you to keep track of where you are and inform potential investors about your business goals, helping them to understand how their money would be used and the potential final outcome of their investment. Of course, you should also use your current plan to evaluate your company's current status, assess where you stand based on your prior stated objectives, and improve your “plan of attack” for the future.
If you are too busy running your company to update your business plan, or if you feel that you could use some professional advice, don't worry because you can always hire a company that will help you address this most important of tasks. For investors in the medical device and diagnostic space, the plan needs to address the regulatory requirements, reimbursement, management team, market size, intellectual property and exits. Even if you have a well thought out plan, you can go through every detail of your plan with someone looking at things with a fresh set of eyes and make it more attractive to prospective investors.
Choosing the right investment firm
You may not realize it, but working with the right venture capitalist is incredibly important for your business's success, it is not always about the money. So, before approaching investment companies, look for those who specialize in the medical industry or specifically in the medical device sub-sector. This way, you will work with a firm that fully understands the needs of your business and the risks that are associated.
Usually, the investment company will want one of its members to be a part of your board of directors. If this is the case, learn more about this person and find out if he or she could add value to your company. A board is all about experience and being a positive force behind your growth.
Getting expert help
Raising venture capital for medical device companies can seem like a daunting task especially if it is your first time doing so. Fortunately, there are options that will allow to get the help of a firm that offers business development support services. With its assistance, you'll gain professional advice in dealing with and making a great impression on investment companies. Of particular importance is targeting the right firm given the size of your fund raise. With capital under $2 million per transaction, a combination of private coalitions and state funds are providing considerable capital, while $20 million plus raises involve more traditional syndicated venture capital deals.
Raising venture capital can be difficult and challenging. But, when you take the right steps, you can get the money that you need to further develop your company and make it what you envisioned from the very start.
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