MedTech Fundraising Outlook and Retrospective 2022 to 2025 (November)

Yesterday I attended a great talk on Med Tech fundraising by Bank of America at the Northern New England Med Tech Conference that parrots the MD+DI article that I’ll cite below by Amanda Pedersen. TL;DR: The last 2 years were horrible, hopefully 2025 will be better.

• In the 12-month period that ended in June 2024, total industry financing fell to an eight-year low of $27.5 billion.
• All financing streams were down compared to the previous five-year average investment.
• While venture capital investment ticked up 5% to $7.0 billion, it remained 11.3% lower than the average total for the previous five years.
• Similarly, the IPO market made a slight return in the first half of 2024 after five quarters of almost no activity. Fractyl Health and Tempus AI both went public earlier this year, but both were trading below their IPO price at the end of the first half of this year.
• EY reports that only 99 M&A deals were completed during the period from July 2023 to June 2024, which is the lowest annual total in 15 years. According to EY, the last time medtech dealmaking slipped so low was during the global financial crises of 2008. There were just 90 deals completed between July 2008 and June 2009.

What does this mean in English? VCs want and need their money to churn – they give money to company A. Company A IPOs or gets acquired and they get their money back and then some. VC gives a portion of that money to company B and so on. With so few IPOs and M&A deals their money is stuck. What little cash they have they’re sitting on in case a portfolio company needs a small infusion. If they try to do a raise they have the same problems as everyone else that capital markets are frozen by high borrowing costs and no churn.

Another takeaway, though possibly anecdotal, is that VCs are much more focused on a firm plan to profitably than they were in the past with realistic and reasonable growth – make sure that slide is a good one! Fundamentals are still the same though – they’re looking for disruptive technology that is superior to the standard of care or meeting an unmet need.

With borrowing rates going down worldwide hopefully the fundraising winter is over and 2025 will be better.