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Take Advantage of the Golden Age of Medtech Investing

Take Advantage of the Golden Age of Medtech Investing
By Vin Narayanan
Date February 8, 2022

A basic market inefficiency has created a massive opportunity for startup investors interested in medical technology and drug development startups. And angel investors savvy enough to understand what’s going on have a rare opportunity to invest in medtech startups with massive upside that have been significantly de-risked.

Historically, early stage startups developing new drugs, medical compounds and medical devices have struggled to raise capital. They’re “too early” for venture capitalists (VCs). No matter how good the technology is (and it’s often very good), VCs want no part of investing in drugs or devices that haven’t gone through FDA testing.

But once the devices or drugs go through FDA testing, big medtech companies or big pharmaceutical companies line up to license the technology or buy/invest in the startups for massive amounts of money. So VCs get locked out again.

Medtech founders know that if they can raise enough money to get through clinical trials (or at least far enough along that the results are encouraging), they’re in position to succeed without giving up much equity to VCs.

Twenty years ago, this was a major problem. There was almost no way for startup founders to independently raise the money they needed to get through FDA testing. But the landscape has changed dramatically over the past five years. 

Now, medtech founders have a two-step playbook to secure the money they need to get through FDA trials. The first step involves equity crowdfunding. The second step involves accredited investors like you.

Thanks to equity crowdfunding, truly innovative medtech startups can raise money on platforms like Republic, SeedInvest, Wefunder and others from retail investors. Founders then use this money to make significant progress in preparing for FDA trials. 

This is a good deal for both founders and investors. Founders get the money they need to continue working on groundbreaking technology. And investors get a chance to invest in this technology in its earliest stages. It’s a chance investors don’t often see in other sectors.

Once founders are closer to starting FDA trials (or even partway through the process), they start to seek money from accredited investors like you. At this point, they’re looking for a few people to write some bigger checks to get them across the finish line.

These founders are willing to give up a small piece of the company to raise the money. But they don’t want to give away as much as many VCs would like. So the goal is to find smart, savvy accredited angel investors to fill in the gap.

For accredited investors like you, this is a pretty good deal. The crowdfunding investors are taking on most of the risk. They’re investing in a good concept. But not much else. 

By the time founders reach out to accredited investors, these startups should have shown significant progress, understand what remaining hurdles they have to clear and have a good plan to do so. And the upside is still tremendous.

I’ve been watching this process play out over the past few years. And the more I see, the more I’m convinced…

We’re in the golden age of medtech investing. And we have to be fully prepared to take advantage of the opportunities we’re seeing today. Who knows how long they’ll last.

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