“Uncertainty is the only certainty there is, and knowing how to live with insecurity is the only security.” — John Allen Paulos

Devicix helps start-up companies with product development and provides strategic consultation on how to best navigate the numerous challenges that are inherent to this process.  In light of this, I thought it might be a good idea to start talking about some of the recent developments occurring in this industry.  In today’s post, we’ll share some corporate and investor (largely Venture Capital) perspectives that were gleaned from some recent national conferences that we attended.

One thing is for sure:  the Obama Administration’s desire to reform healthcare has a lot of people standing on the sidelines wondering “What’s next?!”  People are uncertain but, in all fairness, when is any investor certain?  Almost never.  After all, uncertainty is tantamount to risk and we all know that if you take on increasing risk, you should expect increasing returns.  However, this community is facing:  an environment where mergers and acquisitions are responsible for the majority of the exits, as IPOs are almost at a stand-still; the amount of time to these liquidity events are lengthening to 7-8 years, whereas they used to be about 3-4 years; the amount of investment, on average, is increasing due to increased regulatory pressures and the average acquisition price is trending down putting a tremendous amount of scrutiny on capital efficiency and causing diminishing returns for their funds.  This has, what should be, some of the riskiest investors wondering whether they can afford to make new investments in firms, as they may have to keep some cash around to ensure success for their current portfolio firms.  Some people are saying that VCs are starting to look more like bankers:  funding firms at later stages, becoming conservative, etc. and it’s definitely a buyer’s market for corporations, so their requirements are becoming more and more selective as well.

Below is a ‘top ten’ list of what VCs and corporations appear to be looking for in potential investment opportunities or acquisitions (some are obvious, others are not but should probably be addressed in the presentations you make to investors):

1. Solid, broad, proven and disruptive technology/intellectual property or if similar to existing ‘standard of care’ then faster, cheaper or “better”
2. Addresses a real, unmet clinical need
3. Small, experienced management team with appropriate track record
4. Large market opportunities; greater than $500 million
5. Clear, unambiguous FDA path
6. Cost- or comparatively effective and explicit evidence that it is
7. Existing revenue streams OR less than 3 years to revenue
8. Well defined and explicit reimbursement strategy
9. Capital efficiency (keep management teams small and focused on managing attainment of key milestones; raise less than $40 million over life of the firm, prior to exit)
10. Established quality system in place

More to come…PLEASE COMMENT ON THE ABOVE WITH YOUR PERSPECTIVES