The medtech industry poses significant challenges for startups, including financial barriers, complex regulations, technological advancements, and fierce competition. VC incubators bridge the funding gap by providing resources and expertise to navigate regulatory landscapes. As a result, there has been a significant rise in the number of VC incubated businesses in recent years.
The Role of VC Incubators in Empowering Medtech Startups
By forging strategic partnerships with venture capital (VC) firms, startups significantly enhance their prospects of operating a business that is widely regarded as a compelling investment opportunity. Consequently, it comes as no surprise that the past decade has witnessed an astounding surge of approximately 160% in the number of incubated medical device companies, surpassing the figures of the preceding decade.
An example of one of these partnerships is the recently announced $50 million BioMedtech Incubator programme in Australia that will see between 15 to 25 early-stage medical research projects with commercial value receive up to $5 million in funding over 5 years.
Approximately 29% of healthtech startups experience failure primarily due to inadequate funding, making it one of the foremost causes of startup setbacks, second only to misreading market demand, which accounts for 42% of cases. This critical issue, however, finds its resolution in the form of VC incubators, which assume the role of facilitators, bridging the funding gap and furnishing startups with the indispensable financial resources required to drive their research, development, and commercialisation endeavors forward. Given the prevailing constraints on funding faced by startups, the pivotal role played by VC incubators becomes all the more vital, as they provide the necessary resources and unwavering support for their sustained growth and triumph.
In addition to financial resources, VC incubators offer invaluable industry expertise that assists startups in manoeuvring through the intricate landscape of regulatory frameworks in the healthcare sector. The medtech industry is renowned for its stringent standards and compliance requirements, which can be troublesome for inexperienced startups looking to put their first product to market. By leveraging their knowledge and experience, incubators play a crucial part in helping startups meet the necessary standards and navigate the regulatory pathways to successfully bring their products to market.
The significance of mentorship and guidance from seasoned professionals cannot be overstated when it comes to medtech startups. VC incubators serve as a gateway to a network of experienced mentors who possess an abundance of insights and wisdom. These mentors bring diverse expertise across multiple areas of the industry, encompassing areas such as product development, commercialisation strategies, market access, and operational scalability. With access to expert guidance, startups can avoid common pitfalls, accelerate their growth trajectory, and adeptly navigate the complex challenges that will inevitably arise on their entrepreneurial journey.
Notable Success Stories of VC-Incubated Medtech Startups
In 2019, UK-based Odin Vision, a Cloud AI endoscopy company, was chosen as one of the five startups participating in the UK Space Agency’s ‘Space to Innovate’ initiative. This program aims to foster the advancement of innovative solutions by leveraging space technology. Under the program, Odin Vision received financial support, gained access to experienced mentors, and had the chance to collaborate with prominent companies within the space and technology industries.
The inclusion in the ‘Space to Innovate’ program marked a significant milestone for Odin Vision, offering the company invaluable visibility and establishing its credibility within the healthcare and technology domains.
Olympus, a prominent global Med Tech company, recently acquired Odin Vision in December 2022 for £57.01 million, recognising the alignment between Odin Vision’s capabilities and their own Digital Endosuite vision. This strategic acquisition by Olympus is driven by the shared goal of enhancing patient care pathways.
Speaking on the acquisition, Peter Mountney, CEO of Odin Vision, said “I’m incredibly proud of the team. We started with a university research project at UCL and transformed it into a commercial healthcare technology that will help millions around the world in the fight against cancer.”
By providing funding, mentorship, and exposure to leading industry players, the UK Space Agency was able to help a promising start-up to achieve its full potential, going from incubated to being acquired for £57.01 million within the mere span of just 3 years, and making a significant contribution to the healthcare industry in the process.
California-based Endpoint Health is a precision medicine company that aims to help healthcare providers make faster, better decisions when every second counts by using artificial intelligence and diagnostic tools to deliver targeted treatments.
The company aspires to integrate cutting-edge therapeutics, companion diagnostics, and artificial intelligence into a cohesive platform with the goal of enhancing outcomes for patients suffering with life-threatening conditions such as sepsis and acute respiratory distress syndrome (ARDS).
Endpoint was able to raise £9.62 million in seed funding from investors including Mayfield, AME Cloud Ventures, Wireframe Ventures, and Y Combinator, after emerging from stealth mode in July 2020, just two years after they were founded.
Since then, Endpoint has proceeded to raise a further £41.79 million in Series A funding in June 2022. Proceeds from the financing round were primarily used to extend the company’s Precision-FirstTM platform and expand its therapeutic pipeline to include programs for chronic immune-mediated diseases.
Upon completion of the deal, Jason Springs, co-founder and Chief Executive Officer of Endpoint Health said “At Endpoint Health, we’re building a new kind of biopharma company that’s uniquely designed for a new era of precision medicine. This funding provides us with additional resources to accelerate our mission to deliver precision therapies to patients with acute and chronic immune-mediated inflammatory diseases.”
Unlocking the Potential of Medtech Innovation
VC incubators have a profound impact on driving medtech innovation and improving patient outcomes. By fostering collaboration between startups, venture capital firms, and other stakeholders, VC incubators create a fertile environment that fuels the development of innovative medical technologies. The financial support and expertise offered by incubators attract continued investment, cultivating a vibrant medtech startup landscape.
Most of the usual challenges a medtech startup will face are mitigated by incubators. They act as a guardian to startups, helping them navigate these common stumbling blocks and aiding them on their journey to commercialising their innovative new offerings.
Ongoing investment in VC incubators is vital to maintain a thriving medtech startup environment. Continued financial support for incubators enables them to elevate the level of support they can provide to emerging medtech companies to help them flourish. This ensures that promising ideas can be transformed into tangible solutions, driving advancements in medical technology and ultimately benefiting patients and healthcare systems alike.
The increased utilisation of VC incubators in the medtech industry and the growth of startups holds substantial potential for job creation. This surge in entrepreneurial activity fosters a conducive environment for employment growth, creating new opportunities for skilled professionals in various fields such as research & development, manufacturing, sales and marketing and more.
The symbiotic relationship between startups and incubators not only fuels the growth of startups but also generates a ripple effect in the job market, attracting talent and fostering employment opportunities within the medtech sector. It provides a platform for skilled professionals to enter or progress in the industry, contributing their expertise and actively participating in the advancement of life-changing healthcare technologies.
Partnerships with VC incubators are becoming increasingly popular amongst medtech startups as a method of overcoming the traditional barriers of the industry such as complex regulations, high research & development costs and the need for specialised expertise. The success stories of companies like Odin Vision and Endpoint Health exemplify the transformative impact of VC incubators, from receiving funding and mentorship to being acquired by major players in the industry.
Any medtech startup that wants to take the industry by storm needs a competent leadership team steering them in the right direction. This is where Avery Fairbank can help. Leveraging our deep industry knowledge, an extensive network, and a proven track record of identifying and recruiting top talent in the medtech sector, we ensure that you receive the best candidates who possess the specialised expertise needed to drive innovation and lead your startup to success.
If you’re interested in further in-depth analysis of the medical devices industry; including deals, key players, trends and challenges from the last year and quarter, you can register interest for our exclusive Market Analysis Report.