Who stole medtech's money? Blame the recession. And Twitter.
Innovation is the jewel in the crown of the U.S. health care system. We surely can't brag about having the most affordable medical insurance, or the longest-living patients. But we can brag, and do brag, about having the most cutting-edge medical- and bio-technology in the world.
So this should scare you. Medical device, biotech and diagnostic companies account for
about a third of all angel and venture capital investments. But today, this system is in collapse, jeopardizing the very foundation of what has
made the U.S. healthcare system the envy of the modern world.
Why is this happening? I count three reasons. First, the collapse of public financing markets in the financial meltdown of 2008 cooled venture capital funding. The number of venture capital firms and the amount of
venture capital have both decreased by roughly two-thirds, to levels not seen since 1994-98.
Second, healthcare venture funds that survived the crash had full portfolios of companies
burning cash at alarming rates. They're simply not in a position to make new bets in promising medical technologies, much less bold ideas with 5-10 year horizons to liquidity. Third, other technology
sectors, notably Web 2.0, social networking, and software businesses, have seen their cash requirements
and time to exit decrease, sometimes by a factor of ten. This contrasts starkly with the medtech and
biotech space where -- primarily, but not entirely, for regulatory reasons -- cash requirements and time-to-exit are at an all-time high.