In tracking venture capital or other money flowing into “medtech”, I am frequently struck by how often the numbers that are presented as evidence tell only part of the picture, like one of the several blindfolded men touching different parts of an elephant tasked with identifying what it is they are touching.
Recent results from Pricewaterhouse Coopers on Q1 2014 venture capital paints a picture illustrating an 11% increase from Q1 2013 to Q2 2014 in total funding for “medical device” companies, with a drop in the number of deals, from 29 to 25.
There are two problems with this, the first being that the fundings data so presented is only looking at “medical device” companies, the second being that we have no evidence on the number of companies seeking funding in either year.
First, talking about medical devices in 2014 is a lot like talking about horses in 1910. Neither one tells the whole story of the markets in which they very clearly compete. Second, while the amount of money actually funded by VC in 2014 versus 2013 is obviously important (especially to the recipients), the number and size of the deals rejected in both years is also rather important as well (especially to the non-recipients).
So, what should be presented differently? Well, tracking the “medical device” industry is just not relevant anymore (I’ve already argued this ad nauseum), since medical devices don’t just compete with medical devices anymore — for clinical applications or venture funding. In my opinion, the tracking of funding should first look at funding in, say, coronary artery disease treatment (i.e., “disease state”), then consider the share of that funding that is going toward this or that therapeutic option. As for the amount funded, would it not be meaningful to all involved to track the amount of actual versus proposed funding, especially if the proposed funding was limited to actual deals that were ultimately accepted or rejected?
Below is the amount of funding in “medtech”* by month from January 1, 2009, to May 21, 2014, presented both as an annual overlay to reflect seasonality and as a continuum, with a linear trendline.
Source: MedMarket Diligence, LLC
*What is “medtech”?: We view medical technology (medtech) as principally medical devices and equipment, but also all technologies that are directly competitive with or complementary to technologies represented by therapeutic or diagnostic medical devices/equipment.
Note: Historic coverage of “medtech” has been limited to medical devices, supplies and equipment. We feel that such a limited definition poorly reflects the true nature of the markets that once were limited to such products. In reality, assessing the markets and competition for medical devices by ONLY considering other medical devices would result in gross underestimations of both competition and market potential. Moreover, this is reflected in both the nature of medical devices, which may be hybrid device/bio/pharm products or products that may not be “devices” at all, especially in the typical definitions defined by material type and function, but that compete head-on with devices.