Venture Debt: Device Financing Lifeline or Anchor?
Venture debt has become an increasingly popular financing option particularly among device companies. But, if not used properly, it can help sink rather than save a start-up.
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Pools of venture capital for life science companies are drying up. The good news is that there are alternative sources for young medtech companies. EBI convened a panel of experts at its recent IN3 conference to explain when and where to find them and presents here a Q&A with an angel investor, a representative from a venture debt firm, and an expert in non-dilutive grant funding.
At In3 West, a medical device conference held in Las Vegas recently, Windhover Information convened a panel of venture investors to ask them what's in store for device companies seeking investments in the near future, and to address one nagging question: whether or not the heady funding levels of 2007 are sustainable, or even desirable. Certainly exits have become more challenging; consolidation has removed certain would-be acquirers and the IPO market has become more demanding; no company will get out there without at least $30 to $40 million in revenues, several on the panel felt. Others were feeling the pressure of having to carry portfolio companies for even longer periods of time; more complex technologies, lag times at the FDA, and the need to get companies not only to the commercial stage but to a revenue ramp were pushing up the number of years to an exit and total investment dollars. Many were optimistic that early stage deals, exits by acquisition and other unusual phenomena would continue to happen; but selectivity was the theme of the day.
In Vivo analyzed recent public and private device financings to determine the comparative strengths and weaknesses of the various types of device financings, and further broke down the investments by therapeutic categories to examine what areas are hot and which ones are not. We found that the device industry has rebounded from a dismal public market and is showing strength among both public and private investors, resulting in a sector well-positioned for continued growth.