What is going on in the MedTech financing landscape of 2022?
Nina LaMeule (Venture Finance Expert and Fund management at the European Healthtech venture builder NLC) gives key insights in this interview by Chris Ashbrook (consultant MedTech-funding at FFUND)
Hello, Nina! Let us talk about the MedTech field in 2022: Did you notice any extraordinary developments?
I already started to become excited in late 2021, when many reports discussed trends and positive sentiments regarding tele-health, which we also observed at NLC. We work in different verticals within the Life Sciences and Health Tech sector, but also in the digital health space. I am personally extremely excited about everything related to the remote management and monitoring of patients through digital solutions. The pandemic has highlighted several dysfunctions in the healthcare space and pushed innovative digital solutions accordingly, although investments have decreased lately.
What would you say are the main dysfunctions?
Any stress factor on the hospital and healthcare system made it hard to manage or to maintain the patient flow at an efficient level. The pandemic made hospitals realize their shortcomings, but it also forced patients to make use of innovative solutions, such as tele-health. Although the pandemic is nearing its end, I still notice a high adoption rate of tele-health innovations among patients. It is also a very political topic; a few weeks ago, a report mentioned 1 in 4 French women live a 45-minute drive away from their gynecologist, equally for children living away from a pediatrician. The government is aware of this. At the same time, public owned investment funds in France (bpifrance) make their way up the list of the most active investors in Digital Health. I think that we will see more public owned investments funds push for investments in that space.
You mentioned a reduction in the amounts invested lately. Why is that?
In the overall sector, this is due to the war in Ukrain and its impact on inflation and investments. The market is strained regarding the economic landscape, but things look different for the MedTech sector.
At NLC, our sweet spot is the very early-stage investment space. Here, we see VCs shifting toward later stage investments, but this trend has already started before 2022. In fact, more mature ventures are more likely to have reached the market or be close to market entry. These ventures will see their revenue be negatively impacted by the rise of inflation and the public decrease in spending power. Given this context, VCs might be more cautious on how much they invest or turn towards sectors that are benefiting from the current political situation, like energy and defence.
In the early-stage MedTech space, the market is resilient. Here, we also work a lot with other types of investors, such as corporate funds, public owned funds, and pension funds. These types of investors typically determine their budgets at the beginning of the year, for the next 12 months, independent of any turmoil throughout the quarters. Moreover, it takes many years for a MedTech venture to develop and reach market entry. The current inflation will hopefully be long gone by the time they start generating revenue. This should be another reason and incentive to push such investors to stay active in the MedTech early-stage scene.
It is good to hear that the MedTech investment field is resilient. How about the non-dilutive funding landscape?
The non-dilutive space in MedTech is growing, there is a lot of funding and grant opportunities out there, although there is still a question mark about how much will be available in 2023. In relation to the geopolitical context, we might see governments prioritizing the energy crisis, making less money available for grant and loan opportunities. I hope that will not be the case, but it is in the back of our mind at NLC. Beginning 2023, when the new grant pools will be announced, we have a clearer idea.
Coming from the orthopedic sector myself, I am curious about your insights: Is this a promising field for investors?
Absolutely. The most obvious factor would be the ageing population and hence the growing prevalence of orthopedic disorders. Remarkably, some procedures in the orthopedic space have not been changed for decades – there is a high need for innovation! In some cases, current gold standards are highly invasive and do not allow for an optimal recovery. Of course, orthopedics is a broad field. At NLC, we have recently built ventures engaging in pain management, infection treatment, implants procedures, and tendons recovery. The field is not as capital intensive as people think, as most of the time, they think of implants only. I am not saying that implants innovation is not interesting, but there are lots of interesting innovations in development that can make it to the market even quicker.
Have you noticed any other new hot topic in the investment space recently?
Sustainability is a hot topic for NLC, although we do not necessarily see it incorporated yet in the MedTech space. At NLC, our core industry has always been healthcare, but now we have launched the Green Health Challenge, in which we will build MedTech start-ups in batches to help with the reduction of pollution and waste management related to the health industry. My personal sentiment is that sustainability should not be perceived as a separate industry topic, it should be part of all industry verticals. I hope that investors realize that every industry can benefit from sustainable innovations. Every investor or party has a role to play in realizing the needed change.
I think especially in MedTech, sterilization protocols and disposables should be tackled, too.
Absolutely, innovation is not the sole solution for the climate crisis. This must go hand in hand with reduced consumption and stepping away from an intensive consumer society. But in the MedTech space, we will provide more care in future, not less. Therefore, we need to actively factor in sustainability in our innovations.
Thank you for sharing your insights with us, Nina!