How to Fund Medtech Startups in a Capital-Efficient Manner




Medsider Radio: Learn from Medical Device and Medtech Thought Leaders show

Summary: “We will NOT invest in your company because it’s clear you’ll need a PMA.” That’s the stance that some medtech venture capitalists are currently taking. Why? Because costs continue to rise for early stage medical device companies at a significant clip. While the approximate cost to obtain a PMA approaches $100 million, 80% of medtech exits over the last several years have been LESS than $250 million. Do the math. Those numbers are less than impressive. In this interview with Rich Ferrari, Managing Director of De Novo Ventures, we’ll learn more about the current state of medtech venture capital and the corresponding impact on medical device startups. Here's What You Will Learn - Novel ways to fund early stage medical device companies. - The differences between a “medical device generator” model an “incubator” model. - Why late stage medtech deals are so popular today. - How does Rich identify and validate an idea that is truly disruptive? - Why does the FDA “runway” seem to get longer and longer over time? - Product vs. founding team: What is most important? - And much more! This Is What You Can Do Next 1) You can listen to the interview with Rich Ferrari right now: Download audio file (RichFerrari_MedsiderInterviews_2012.mp3) 2) You can also download the mp3 file of the interview by clicking here. Don't forget – you can listen to this interview and all of the other Medsider interviews via iTunes.  And if you get a chance, leave us an honest rating and review. 3) Read the following transcripts from my interview with Rich Ferrari.  Also, feel free to download the transcripts by clicking here. Read the Interview with Rich Ferrari Scott Nelson:    Hello, hello everyone.  It’s Scott Nelson, and welcome to another edition of Medsider, the place where you can learn from med tech and medical device experts on your own terms without going to school.  And on today’s episode we have Rich Ferrari who is the cofounder and managing director of De Novo Ventures.  So thanks for taking some time out of your day today, Rich.  I appreciate you coming on. Rich Ferrari:    No problem.  Glad to do it. Scott Nelson:    Alright.  So let's start out with a quote, or a statement I should say, that I recently read in MassDevice, I believe, if I remember correctly, but it was from Jody Hatcher who’s the CEO of Novation, and his quote was something along the lines of, “Hospitals have a burning platform to reduce cost.”  So when you first read a statement like that as a storied med tech VC yourself, what’s your gut reaction tell you about a statement like that? Rich Ferrari:    Well, I think he's fundamentally right in that hospitals are constantly looking to reduce cost.  Now, whether or not that relates specifically to medical devices or relates to, let's call it inefficiencies of the delivery system, you know, overall I’m not sure what he's referring to.  But be that as it may, there's always pressure on reducing costs and devices, at least on the device side, and things that are commodity-related, commodity-oriented devices, things that don’t really offer significant benefit, you have to ask yourself, why wouldn’t those be really scrutinized if you’re put under tremendous pressure to, if they all look alike, if they all do the same thing, there should be a way to lower the cost of them. Scott Nelson:    Right. Rich Ferrari:    So yeah, I mean I think the margins for the hospital business is kind of like [00:01:52], and a lot of it’s due to inefficiencies and some of it has to do with the devices they’re buying and why they’re buying and how they’re used. Scott Nelson:    Right, ...