A recent announcement of a dedicated Medtech Venture Fund in Israel - a $50 million Medtech start-up fund - started me thinking about the famous question: ”What came first, the chicken or the egg?
In an earlier blog post, I highlighted a CB Insights analysis on the global shares of Medtech deals by country. The U.S. clearly dominates the global Medtech space, owning 77% share.
It is not surprising then, to see that over 75% of the Top 20 specialized Medtech VC’s also reside in the U.S. (full article here).
It might be a surprise, however, to see that tiny Israel (population 8.7 million vs 328 million in the U.S.) shares 2nd place with Germany at 4% of VCs residing in their country.
Why is this the case? There are many reasons, including an incredibly resourceful, educated and entrepreneurial population; a powerful and technologically advanced military providing engineering and scientific resources; and a very supportive American VC strategic alliance developed over the years after Israel’s formation? These are three critical ingredients for start-up success!
In that same CB Insights analysis, Canada came in third, tied with the UK, at 2%. If one considers Canada’s current population of 37.1 million, on a pro rata basis we should support 17% of the global Medtech deals, based on Israel’s performance - or at least 8-9% based on the U.S. Somewhere between 8% and 17% lies the true potential. In any event, we’ve got a long way to go based on today’s starting point of 2%.
Over the course of the last five years, I have tested the investment waters across Canada regarding a dedicated Medtech venture fund. I received consistent feedback that there was not enough deal flow in Canada to justify one on an ROI basis.
That may have been the case historically, but certainly not the case today with the advent of healthcare IT and AI. At last count, over 50 Medtech startups have surfaced in the last 24 months in Montreal. Many of these startups deserve - and would benefit by - the financial and strategic support of a dedicated early stage venture fund.
My last point is about the concept of smart money. I believe that there are several bountiful sources of startup money that exist across Canada. Many life science funds invest in both biotech and to a lesser degree in Medtech, but these sectors have disctinctly different needs and business models. I think that there is a real need for Medtech startups to have access to smart money, smart guidance and networking that only a dedicated Medtech fund can provide.
So the answer to my original question - the chicken or the egg - now seems a bit more obvious: a robust Medtech startup sector in Canada needs a smart startup venture fund.
The time for a dedicated Medtech Startup Fund is now!
In a future series of posts, I will solicit input in how a new Startup Fund would work, and what they will be looking for from Medtech startups. I’ll also continue the Startup Success Series in the coming weeks and months. Stay tuned!