Jim Kasic, President and CEO, Boulder iQ05.21.24
Inflation, interest rates, worries about a recession, talk of a “soft landing” and more have been hard on the strongest and largest businesses. For small medical device startups looking for funding, the going has been much tougher, with the uncertain economy leaving many with more questions than answers.
The good news is that there’s always a market for medical device startups. And while funding was down in 2023, the industry is optimistic we’ll see a turnaround this year. Companies that understand key trends in what’s getting funded, and how, will be much better positioned to succeed in their fundraising efforts and getting their devices to market.
Investors are more selective, focusing on devices with very clear regulatory and commercial pathways, or ones that have versions of devices that are already commercially viable. They prefer products with a higher level of de-risking. Companies already producing revenue – even minimal – are more likely to receive follow-on funding.
With these preferences, we’re seeing many early-stage startups resort to grant funding. Because the process to obtain this funding is slower, they’re facing much longer go-to-market times. Companies that can obtain private funding tend to be more mature.
Finally, the political environment may impact the rest of 2024 in ways we can’t fully know. Election years always create questions, and economic predictions and concerns, which trickle down to the risk each investor will take.
Jim Kasic is the founder, president, and CEO of Boulder iQ. With more than 30 years of experience in the Class I, II, and III medical device industry, he holds more than 40 U.S. and international patents. His career includes experience with companies ranging from large multinational corporations to startups with a national and international scope. Kasic has served as president and CEO of Sophono, Inc., a multinational manufacturer and distributor of implantable hearing devices, which was acquired by Medtronic. He also was the president of OrthoWin, acquired by Zimmer-BioMed. He holds a Bachelor of Science in physics and a Master of Science in chemical/biological engineering from the University of Colorado, and an MBA from the University of Phoenix. Contact him at jim.kasic@boulderiq.com or on LinkedIn.
The good news is that there’s always a market for medical device startups. And while funding was down in 2023, the industry is optimistic we’ll see a turnaround this year. Companies that understand key trends in what’s getting funded, and how, will be much better positioned to succeed in their fundraising efforts and getting their devices to market.
2024 Device Trends
Clear trends are emerging on funders’ device interests and preferences. While demand exists for innovative, effective products across the board, developers involved in the following areas will generally experience the greatest interest from investors.- AI: Without question, AI is the hottest term in 2024 for medical device startups. Investors are excited to see how startups can incorporate AI into their products.
- Robotics: More precisely, it’s about specialty apparatus used to perform high-tech electrical and mechanical-assisted surgery. Investors are interested in seeing how companies are developing minimally invasive devices and techniques to make truly transformational changes in conventional surgery.
- Connectivity: Advances in using Bluetooth technology to pull information from devices rapidly and transparently are improving patient outcomes – and investors are taking note.
- Applications for conditions affecting Baby Boomers: Startups that can take an existing device used to treat conditions seen in the fast-growing Boomer population and improve on it – such as to make it minimally invasive and deliver data – have an advantage in the funding world.
Funding Trends
Investor money – plenty of it – exists. However, we’re still seeing a general reticence to employ it because of an overall “wait-and-see” position on the economy. As a result, we’re seeing more big deals, with more mature companies, than small deals with startups.Investors are more selective, focusing on devices with very clear regulatory and commercial pathways, or ones that have versions of devices that are already commercially viable. They prefer products with a higher level of de-risking. Companies already producing revenue – even minimal – are more likely to receive follow-on funding.
With these preferences, we’re seeing many early-stage startups resort to grant funding. Because the process to obtain this funding is slower, they’re facing much longer go-to-market times. Companies that can obtain private funding tend to be more mature.
Finally, the political environment may impact the rest of 2024 in ways we can’t fully know. Election years always create questions, and economic predictions and concerns, which trickle down to the risk each investor will take.
Navigating the 2024 Landscape
With a good understanding of some of the forces shaping the funding landscape, medical device developers can take these steps to up their chances of success in finding investment money for their ventures.- Make the shift to become a market-driven business: In the medical device field, the norm is to develop a technology and then market for it. It’s a hard way to run a business, and even harder now. Instead, work to understand the market, find an unmet need in that market, and develop the technology and application to fill that need.
- Differentiate: In today’s market, revolutionary bests evolutionary. A truly new device that meets an acknowledged market need will, in most cases, receive funding before a “me-too” device with an incremental advantage.
- Be patient: Accept that it may take more time and effort to find private funding. You may need more data and clinical results and may need to find ways to further de-risk your product. Consider looking at alternate sources, such as grants.
Conclusion
Things are looking up for medical device startups. Yet funding is more competitive than ever. Companies that are in tune with their market and users, and work to develop products those users need most, will be the ones with which investors want to work.Jim Kasic is the founder, president, and CEO of Boulder iQ. With more than 30 years of experience in the Class I, II, and III medical device industry, he holds more than 40 U.S. and international patents. His career includes experience with companies ranging from large multinational corporations to startups with a national and international scope. Kasic has served as president and CEO of Sophono, Inc., a multinational manufacturer and distributor of implantable hearing devices, which was acquired by Medtronic. He also was the president of OrthoWin, acquired by Zimmer-BioMed. He holds a Bachelor of Science in physics and a Master of Science in chemical/biological engineering from the University of Colorado, and an MBA from the University of Phoenix. Contact him at jim.kasic@boulderiq.com or on LinkedIn.