Healthcare I-Bankers Give Outlook on Biotech, Pharma and Med Tech Financing

First, we know we know, we’ve been a little too lax on keeping up a consistent stream of posts. So here’s to our re-commitment to keeping the Biz O’ Emerging Tech Blog updated.

Now that we have that out of the way, I read an interesting interview done with Mark Dempster and Ralph Sutton of the Thomas Weisel Partners New York City healthcare investment banking team.

Here’s a couple quick hits from the interview:

• “VCs are consolidating their investments [and]…are being forced to hold onto portfolio companies longer than originally planned and…[concentrating] funds on a subset of companies.”  

I’m not sure that’s really newsworthy, but hey, it’s nice to hear someone “in the know” say it;

• “VCs may be an alternative funding source for public companies with low market valuations, but companies need meaningful clinical data in hand or in upcoming announcements to be attractive to them.”

I thought this was actually a pretty interesting insight for a couple reasons; (1)  the common perception (at least from a tech start-ups view) is that VCs provide later stage funding for small companies, not public companies (even ones with low valuations) that supposedly have a (supposedly) proven business, and have access to capital through the markets; (2) : Things have tightened so much in the VC markets, that even public companies have to prove their business ideas to get funding.

• “Access to capital is extremely challenging for small-cap and private biotechnology companies.”

I know that’s not really surprising, but again, it’s helpful (or not) to hear that from the horses mouth.

• “In medical technology…VCs [want] opportunities to provide growth capital or where the risks are related to commercialization and execution, rather than clinical, regulatory and reimbursement.”

Translation: Good luck to all you early-stage med tech companies. It’s unfortunate, because it used to be that although you gave up a ton of equity to get VC money, you knew that without it, you probably couldn’t get through the clinical and regulatory hurdles without that funding. Now, you’re still going to give up a huge chunk of equity, but now VCs only want to play ball once the hard stuff is done. Isn’t the whole point of giving VCs a huge equity stake, that they are taking on significant risk that the business won’t pan out, and should get rewarded if it does? I say, forget it, if you’ve gotten this far without them, strap on those boots and try and go it alone!

Click HERE for the whole article, as featured on rxforpr.com (check them out, it’s a cool site)