Living and working here in Minnesota, as I do, you constantly hear about how wonderful our state’s medical technology industry is. After all, we’re the No. 1 Global Medtech Cluster, as I was reminded again here at the AdvaMed 2016 conference. We all think we’re sitting on this huge industry that will just keep growing forever and bring bountiful riches to our state. Well, it turns out things are not all that rosy.
I learned today about a new report, “A Future at Risk: Economic Performance, Entrepreneurship, and Venture Capital in the U.S. Medical Technology Sector.”
“The American medical technology industry has been suffering from a steady decline of entrepreneurship for more than two decades…”
What? Yes, it’s a fact: the numbers associated with this engine of innovation (and jobs) have been declining quite markedly.
We can relate to the medtech startup engine very well here in Minnesota, with our own giant Medtronic having been started by Earl Bakken in a garage in Northeast Minneapolis. (I worked for the company early in my career and got to be taken out for a welcome lunch by the man himself.)
“The (medtech) industry is increasingly concentrated in a shrinking number of large players. All of those companies are scouring the globe for medtech innovation. With fewer startups in the system, the industry’s dominant companies recognize the long-term threat to innovation represented by fewer companies fueling the industry’s pipeline of innovation. All these factors represent a present and future threat to American leadership in the industry, to medical innovation and, ultimately, to patients.”
The key data points of this troubling picture? Here they are:
• The number of new medtech firms created each year has fallen by almost two-thirds, from 1,500 annually in the late ‘70s and early ‘80s, to around 600 in 2012.
• The industry is “graying.” More than 30% of medtech firms are at least a quarter century old and more than half are more than 16 years old. This age distribution is typical of a mature rather than a dynamic industry and is markedly older than other high-tech industries or even than businesses in the economy as a whole.
• Medtech’s share of total venture capital has fallen from 13% in 1992 to 4% in 2014.
• Medtech’s share of early-stage venture investment has fallen as well, from 10% in 1993 to 3% in 2014.
• During 2015, declining investor interest in medical devices led to a drop in new company formations, and the majority of Series A rounds were less than $5 million.
For reasons of brevity, I won’t get into the reasons for this decline. Read the report. But you can likely guess the major culprit. And you wouldn’t be incorrect to assume that money is also involved.
Funding for the activities and roundtables that led to the “Future at Risk” report was provided by AdvaMed through its Accel division. The authors of the report also thanked the following organizations that helped make the report possible: MassMedic, Medical Alley Association, Twin Cities Angels, Tech Coast Angels, and Edwards Lifesciences. Two Minnesota organizations there!
So What Can Be Done?
I said I’d mention a ray of hope. At Advamed today, I learned about one program that’s doing its share to stem the decline of medtech startups getting off the ground and becoming successful. I met and interviewed Paul Grand, the CEO of MedTech Innovator, an organization based in LA that’s been making quite an impact over the past few years to get medtech startups off the ground.
Here’s how it describes itself: “MedTech Innovator is the industry’s global competition and virtual accelerator. Our mission is to accelerate the development of transformative innovations that benefit patients and deliver improved value to the health care system.” It runs an annual competition that helps develop startups and gets them in front of the big industry players — at events like Advamed. It conducts its program with sponsorship assistance from Johnson & Johnson, RCT Ventures, Becton Dickinson, Enterprise Ireland, IDA Ireland, the U.S. Small Business Administration, and others. Note in the graphic some of MedTech Innovator’s stats to date:
I’m looking forward to their event on Wednesday at 7:30 am here at the AdvaMed conference, which is again hosting the “MedTech Innovator Competition Finals.” Twenty semi-finalists were selected from a field of nearly 500 early-stage companies to take part in their four-month virtual accelerator program. Four finalists were selected to compete in this live finals competition on stage at AdvaMed 2016 — yes, it’s at breakfast. You gotta get up early! Each of the attendees at the event — in the conference’s “big room” — get to cast their live vote to choose who will win. A total of $300,000 in prize money will be awarded.
The event is hosted by Paul Grand (CEO, MedTech Innovator). The MedTech Innovator judges this year were:
• Daniel Estes, Vice Chair, Mayo Clinic Ventures
• Jennifer Kozak, Vice President, New Business Development, Johnson & Johnson
• Albert Lauritano, Director, Strategic Technology Partnerships, BD
• Tamara St. Claire, Chief Innovation Officer, Xerox Healthcare
I’m looking forward to the audience vote, as the culmination of this year-long competition. Think of it as at the “American Idol” of startup competitions! I’ll definitely be tweeting the winner.
UPDATE: Here’s the tweet announcing the winner posted by the AdvaMed folks about 9:00 am October 19th, which I retweeted shortly thereafter. This lucky startup went home to Fort Collins, CO with a boatload of money!
Today’s press announcement about the “Future at Risk” report is here.
Here’s some background on the organizations mentioned above:
About the AdvaMed Conference
AdvaMed 2016 is the leading medtech conference in North America, bringing more than 1,000 companies together in a uniquely multifaceted environment for business development, capital formation, innovative technology showcasing, world-class educational opportunities, and networking. This year’s event is the first to be held in Minneapolis.
About AdvaMed Accel
AdvaMed Accel is the division within AdvaMed dedicated to addressing the unique needs and challenges of smaller medical device and diagnostics manufacturers – the lifeblood of the medical technology industry. The only organization of its kind focusing specifically on the needs of the medtech industry’s emerging growth companies, AdvaMed Accel works to create a policy environment more conducive to capital formation and innovation. For more information, visit
About MedTech Innovator
The mission of MedTech Innovator is to accelerate the development of transformative innovations that benefit patients and deliver improved value to the health care system. MedTech Innovator 2016 features 20 semi-finalist companies selected from 430 applications that address one or more of the transformative themes identified in a 2016 survey of leading manufacturers and providers. The 2016 program includes three competitions: the first was April 13, 2016 at the Innovation in Medtech Summit in Dublin, Ireland; the second was June 24, 2016 at the Wilson Sonsini Annual Medical Device Conference in San Francisco; and it concludes with the finals at AdvaMed 2016 in Minneapolis on October 19, 2016.