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What is Medtech?

Medtech is a very broad sector – it covers any technology that can be used in a care setting, which covers disposables, capital equipment and surgical procedure innovations, through to implant technology, biomaterials and connected health IT. Medtech accounts for all devices with which a patient can be diagnosed or treated: in diagnostics, a medical device is typically used in or on the patient, whereas in vitro diagnostics (IVD) devices are used in laboratories; therapy tends to be on the physical level, whereas pharma/biotech is on the chemical/biological level.

‘‘Combinations have appeared on the market, including drug/device combinations – such as drug eluding stents – and devices which combine diagnostics and therapy into one e.g. endoscopes with surgical tips.” – Wolfgang Rencken, CEO of Sphere Medical

Therapeutics is a broad field. The biggest categories are orthopaedics – although this is much smaller because due to commoditisation – wound care, and cardiovascular – the segment which includes pacemakers.

‘‘When categorising medtech, you probably get a different answer from everyone you ask! Historically, medtech has been crudely divided into diagnostics and therapeutics, with diagnostics being subdivided again into in vitro diagnostics – anything lab based – consumable based devices, and imaging based devices. That’s a crude way of splitting it. Some people include health IT within the broad umbrella of health-tech these days – a lot of investors who have been active in medtech have started to invest a lot in health IT or digital health as well” – Christoph Ruedig, Partner at Albion Ventures

What are the most exciting medtech areas?

People will always need medical technology, and the ways in which people get sick aren’t going to be affected by the market. But whilst the need for medtech may not be under risk any time soon, the ways in which money is made from the sector are constantly changing, as new technology arrives and certain areas begin to become unprofitable through lack of innovation. A recent review by Deloitte showed that IVD is the largest subsector within medtech, projected to grow annually by 5.1% until 2020, whereas neurology took the title of fastest growing segment. Other areas of interest include companion diagnostics – medical devices that provide information for the safe use of corresponding drugs – and patient-empowering and information-leveraging (PI) technologies – products that blur the lines between medical devices and health IT, and are becoming more and more commonplace in an era when everyone has a smartphone at their disposal. We asked our three experts which areas they saw as being hot stuff in 2016.

“Digital technologies allowing connected health, point of care and companion diagnostics and minimally invasive surgical devices/approaches remain an area of disruption and opportunity.” – Peter Dines, investment director and head of life sciences at Mercia


“Orthopaedics and robotics have certainly grabbed a lot of headlines recently. There’s been a flurry of M&A activity seen with the big players such as Johnson & Johnson and Medtronic buying smaller start-up companies in these areas. Another major development is the trend towards non-invasive or minimally invasive diagnostics such as wearable sensors. Examples of these are the Google/Novartis collaboration on a contact lens which can measure glucose, or the already marketed patches from Medtronic or Abbott and other players in the diabetic control field. I am also very excited about the recent developments in the medical monitoring and diagnostic devices space.” – Wolfgang Rencken

“We’ve seen some interesting things with minimally invasive surgery, and I think this area will grow, just because medically it makes sense. Rather than opening someone up in a major surgery, if you can do the same surgery minimally invasively, that’s clearly better for patient outcomes. Technology is getting better there.


"There are a couple of robotics start-ups which make previously very difficult-to-perform minimally invasive surgery now possible all of a sudden. I think that’s an area which I would expect to grow, and I’m hoping to see some VC investment there over the next 5 to 10 years to make it potentially really hot. 

"Other hot areas I would say include mitral valve replacement and clinical diagnostics – particularly owing to the genomics revolution and how you can now sequence large parts of the genome very quickly. Something which I think is on the cusp of getting really big is liquid biopsy: taking blood to determine whether a cancer is responding to therapy, or even for cancer diagnosis. That’s an area that will see substantial growth in the not so distant future.” – Christoph Ruedig

What’s special about medtech? Who invests in it, and where should companies look for funding?

Medtech is often perceived as low risk, and also differs from other life sciences in its investment and exit timetable. Medtech is a valuable addition to many specialist investors’ portfolios.

“Medtech investments typically comprise lower risk than investments in biotech as innovation is often incremental rather than disruptive. The timelines until commercialization are also a lot shorter, which means that the money required to bring a product to market is lower. Investors find medtech attractive if they are looking to add lower risk companies into their portfolio. However the commercial scale up in medtech typically is slower, as the body of clinical evidence at commercial launch is not as abundant when comparing it to biotech.” – Wolfgang Rencken

With recent uncertainty in the economic climate, general appetite for risk has decreased. This means that medtech startups are starting to seek more unconventional means of funding, including corporate venture capital and crowdfunding. However, investment in medtech should not be taken lightly, as it often involves a long-term commitment as the product comes out the other side of development and goes through commercialisation. Whilst medtech may seem like an attractive option for many involved in crowdfunding owing to its comparatively low risk, this assumes that the product has already been commercialised. Investment in early stage medtech is usually reserved for the specialists.

“Whilst there are outliers that achieve an exit in, say, 2-3 years, the vast majority of exits in medtech are achieved at a significantly later date, having achieved major commercial milestones such as regulatory approvals, clinical and health economic publications and sales in major markets before becoming attractive for large companies to acquire the innovation.” – Peter Dines

“Whether a company is invested in by angels or VCs, etc aligns more with the maturity of a company, and less with the sector per se. There are specialist and generalist investors who invest in healthcare, and they tend to try and balance their portfolio across pharma, biotech and medtech depending on their risk reward profile. Specialist investors tend to invest earlier in the life cycle, as they have experts who can understand the risks of early stage companies, whereas generalists tend to join later in the game when the risk is lower. During the initial startup phase, medtechs should look for money from incubator or university spin-out funds or from angels. Once a first proof of concept has been demonstrated, speciality healthcare VCs are a good address. While crowdfunding may seem appealing at first, it must be understood that returns on investments in medtech and healthcare in general are more long term, owing to the long time taken for commercialisation, and this usually does not fit the expectation of participants in crowdfunding.” – Wolfgang Rencken

“For the most part there is quite a big divide between classic biotech investors and medtech investors. There are some who do both, but the two sectors typically have different types of managers. People in the past would invest more generally in life sciences, whether it was diagnostics or drugs, but now there’s clearly specialisation. It doesn’t make a lot of sense if you approach a pure biotech investor for medtech. They’re going to turn you down and say it’s out of scope.

"The one exception that springs to mind is that for therapeutic devices – especially things like implantable devices, where the regulatory pathway is similar to biotech – you will often get biotech investors interested in these as well. Abingworth and Sofa-Nova, for example, whilst being focussed on biotech, do make investments in things with a similar clinical development and regulatory path to drugs. They can get interested in these areas.

"Clearly the most important thing to do when raising capital is finding and approaching people who are interested in that particular sector. It’s not hard to find the big name VC’s that invest in medtech across Europe, but it’s more difficult to get an introduction and meeting with these guys; that’s the most challenging bit. Conferences aren’t a bad place to look; generally VC’s turn up at big conferences. The Biotech and Money conference is a good one – it’s not necessarily medtech focus, but it’s clearly a good venue to try and approach investors. Otherwise it’s best to get an introduction through someone you know. The warm lead is always better than a cold call. It can be helpful to hire an advisor who has connections to VCs.” – Christoph Ruedig 

 Meet the medtech innovators making waves in Stockholm this August. 

Lea Bidiville
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