VC funding in medtech ticks up, raising hopes that slump has bottomed

Venture capital investment in medical technology (medtech) startups increased in Q2 2023 compared to the previous quarter, both in terms of the number of deals and total deal value, according to financial database PitchBook. This suggests a potential recovery after a period of decline. While current activity remains lower than the peak seen in 2021, the analysts at PitchBook predict that funding for medtech startups will continue to increase throughout the rest of the year. This recovery is seen as a return to a more normalized level of funding.

The analysts also noted that the initial public offering (IPO) market for medtech companies has been relatively closed in the US during the year so far. However, M&A (merger and acquisition) activity might pick up, as larger companies have worked through spinoff and spinout plans. M&A offers an alternative exit route for investors. Although the number of deals has been light recently due to economic uncertainty and a focus on cost-cutting, recent activity has shown signs of increasing momentum.

The analysts highlighted that antitrust concerns remain a potential challenge for increased M&A activity in the medtech sector, as evidenced by the cancellation of major deals involving Boston Scientific and CooperCompanies due to regulatory issues. Despite these challenges, the gradual recovery in VC investment and the potential for increased M&A suggest a positive outlook for medtech startups in the coming months.

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