Revitalizing Innovation

Summary

Venture capital (VC) plays a critical role in driving advancements in medical device innovations through its investment in early-stage companies. However, a concerning trend has emerged over the past decade: a decline in interest from VC funds toward investing in medical devices. Particularly alarming is the more than 50% decrease in investment in early-stage medical device development over the span of 2 decades. In the last 2 years, there has been a significant drop in small to mid-cap VC funds allocated toward the cardiovascular (CV) device space. These obstacles are exacerbated by several factors, including high interest rates, inflation, global economic slowdown, and ongoing international conflicts. These declining investments stifle innovation and jeopardize the timely development of life-saving technologies, highlighting the urgent need for increased funding support. This manuscript delves into the pivotal role of VC in CV device innovation and examines the challenges and concerns stemming from the downturn in VC financing within the CV device sector.

Venture capital (VC) plays a crucial role in advancing medical device innovations and translating scientific knowledge into therapies. VCs often provide guidance and expertise to help start-ups navigate the complex regulatory and commercial landscape of the medical device industry.^1,2 However, there has been a trend of decreasing interest from VC funds in investing in medical devices over a decade for several reasons. The past 2 years have witnessed a significant decline in VC financing in the medical device space, which mirrored overall trends in the VC funding of cardiovascular (CV) start-ups.

Medical device start-ups raised $8.8 billion (USD) in venture capital in 2023, falling nearly 62% since 2020.³ Several factors, including high interest rates, inflation, and ongoing international conflicts, have contributed to a decrease in both the number and value of VC deals. This article explores the role of VC in CV device innovation and the challenges and concerns arising from the downtrend in VC financing in the CV device space.

Understanding the Mechanics of VC And CV Devices Innovation

VC firms manage significant capital, with some investing in early-stage companies with high growth potential. In return for financial support, VC firms acquire equity, exerting influence over strategic decisions. Since 2019, 379 VCs have invested $11.4 billion in 163 CV device companies.^4,5 Whereas most academic institutions may initiate an idea or concept, they seldom provide funding to fruition. Most large health care companies do not prioritize internal innovation. Therefore, the development of transformational CV devices hinges on VC funding. Translating a concept into a marketable CV device typically takes between 5 and 15 years, with costs ranging from $100 million to $1 billion.^2,3 VC accelerates enterprise creation, intellectual property licensing, proof of concept, and proof of safety. VC-backed companies usually aim for exits (acquisition or initial public offering) in 3 to 5 years; however, it can take about 10 years for CV devices needing CV outcomes trials (or pivotal trials) to achieve US Food and Drug Administration approval. VCs accelerate clinical and regulatory development; use their networks to help companies; often serve on start-up boards; and focus on value-creating milestones, increased valuation, talent attraction, and acquiring interest. VC-backed companies aim for exits by focusing primarily on value-creating milestones (Figure 1).

Figure 1.

Value-Creating Milestones by VC for Exits

Value-creating milestones by venture capital (VC) for exits in a hypothetical cardiac device company. Y-axis shows values in millions of dollars. EFS = early feasibility study; FDA = U.S. Food and Drug Administration; IP = intellectual property.

VC Contributions to CV Devices Innovation

The majority of the devices on which cardiologists rely in our daily practices originate from VC-backed start-ups. Table 1 provides an overview of selected large VC-backed CV device and implant start-ups that have raised initial institutional funding in the past 5 years (2018-2023).^4,5 Alleviant Medical, a VC-backed company, has raised $89 million to develop a no-implant shunt therapy for alleviating heart failure symptoms. Companies developing cardiac valve solutions, such as Nyra Medical and ConKay Medical Systems, have raised $20 million and $1.8 million, respectively. Companies in electrophysiology, including Affera, Galaxy Medical, and Field Medical, have raised $75 million, $20 million, and $14 million, respectively. Amplitude Vascular Systems has raised $58 million and has already performed successful first-in-man using a hydraulic mode for lithotripsy. Though these numbers may bring a sigh of relief that innovation and funding are ongoing, the hard truth of the matter is that 75% to 95% of these start-ups will unfortunately fail.

Table 1.

Examples of Large VC-backed CV Device and Implant Start-ups That Have Raised Initial Institutional Funding in the Past 5 Years (2018-2023)

Company/Start-Ups	First Investment Year	Amount of First Institutional Funding (millions $)	Total Capital Raised (millions $)	Products or Services
Heart valve
Nyra Medical	2022	20	20	Nyra is developing CARLEN, a transcatheter technology that uses a proprietary implant to modify native mitral valve leaflets. This corrects deficiencies causing mitral regurgitation while preserving the valve’s physiological geometry.
ConKay Medical Systems	2024	1.8	1.8	The company’s main innovation is an annular repair technology designed to address the root cause of functional tricuspid valve regurgitation by treating the valve annulus with healthy leaflets.
Heart failure
Alleviant Medical	2018	1.07	89	Alleviant Medical developed a no-implant shunt therapy designed to alleviate heart failure symptoms in patients.
Puzzle Medical Devices	2022	0.2	25	Puzzle Medical Devices specializes in developing a minimally invasive, long-term hemodynamic transcatheter pump.
BioVentrix	2017	14.5	258.2	BioVentrix develops clinical solutions for heart failure, including the Blue Egg Sizer used with left ventricular reconstruction. Their Heart Failure Program aids hospitals in establishing financial models, operations plan, and data management for integrated care programs. Formerly Chf Technologies, BioVentrix was founded in 2003 and is headquartered in Mansfield, Massachusetts.
Vascular disease
R3 Vascular	2020	2.8	104	This company is developing bioresorbable vascular scaffolds for treating peripheral artery disease.
Remedy Robotics	2020	2	2	The company develops remote-controlled endovascular robots and offers a device to automate mechanical thrombectomy procedures.
Amplitude Vascular Systems	2020	2.7	30.3	Amplitude Vascular Systems has developed a hydrodynamic pulse mechanism for intravascular lithotripsy. The company is located in Boston, Massachusetts.
	2023	1.07	1.07	The company offers a 2-in-1 guided catheter for cardiac surgical procedures, ensuring that patients receive the appropriate treatment.
RoddyMedical	2021	0.6	1.57	The company’s devices anchor delicate vascular access lines without adhesives or tape, allowing health care professionals to confidently support early patient movement.
WaveClear	2020	1.12	1.27	The company's devices use piezoelectric energy to safely disintegrate blood clots in peripheral vasculature without damaging blood vessels.
Electrophysiology devices
Field Medical	2023	14	14	FieldBending technology enhances therapeutic effects and reduces side effects of early pulsed-field ablation technology, expanding its use beyond atrial fibrillation.
Galaxy Medical	2021	18	20	Galaxy Medical’s product uses pulsed electric field technology to treat cardiac arrhythmias, reducing muscle stimulation, and gaseous emboli.
Affera	2020	0.68	75	Affera, a medical technology company based in Newton, Massachusetts, designs and manufactures cardiac mapping, catheter-based ablation technologies, and pulsed field ablation solutions. Acquired by Medtronic in January 2022, Affera enhances clinical workflows, procedural efficiencies, and patient care in treating cardiac arrhythmias.
Manufacturing and distribution
Meril	2022	210	210	Meril, a medical device company based in Gujarat, India, operates in the medical technology industry. Since 2006, it manufactures and distributes various medical devices, including vascular intervention tools, cardiac surgery instruments, orthopedic implants, and diagnostic devices.
Other devices and implants
Kingstron	2018	19.5	66.5	Kingstron Bio specializes in the research and development of surgical operating instruments, particularly focusing on heart valves.
Protaryx Medical	2020	3.2	8.3	The company’s main product is a transseptal access device designed to cross the atrial septum of the heart, facilitating minimally invasive, catheter-based left heart interventional therapies.

The capital raised information is sourced from CB Insights/PitchBook as of December 2023.^4,5 Companies in the cardiovascular device sector were identified based on the presence of keywords like “cardiovascular,” “cardiac,” “vascular,” “devices,” or “implant” in their descriptions. Additional details were collected from company websites.

We considered large start-ups that have raised at least $1 million in institutional financing. It is important to note that the provided list of companies is not exhaustive.

Decline in VC Financing for CV Devices

The proportion of VC investment in medical device technology companies dropped by over two-thirds from 1992 to 2016. More concerning is the nearly 50% decline in investment in early-stage medical device development as a fraction of total VC from 2006 to 2016. This declining investment reduces the likelihood of innovative medical devices from small companies reaching patients. The last 2 years have seen a significant drop in small to mid-cap VC funds, which may delay or cause a standstill in financing for ideas and therapies. Only a fraction of VC money is committed to high risk, early-stage funding of medical device innovation, which may take decades to develop, several factors have led to not just fewer deals being made but also a fall in deal value, such as high interest rates, inflation, global economic slowdown, and the ongoing conflicts in Russia-Ukraine and the Middle East. The recent hype around the use of artificial intelligence in health care has also shifted money from traditional CV device companies. Market-sizing accuracy often decreases with therapy novelty because of required care changes, physician resistance, and reimbursement challenges. Strategic investments validate ideas and offer exit paths, but they can be hard to secure for novel concepts not aligned with existing strategies. They may also be unstable owing to leadership and market changes. The poor performance of stock markets in 2022 also caused less acquisition money for large publicly traded companies and strategics. Time to market and efficacy often have an inverse relationship, complicating management for start-ups, especially in tough capital markets.

Besides the financial downturn, regulatory obstacles, such as the U.S. Food and Drug Administration approval processes, introduce risks and delays, increasing investment uncertainty. The Centers for Medicare and Medicaid Services approval complexities compound these challenges, especially those concerning reimbursement uncertainties. Established health care firms are cautious about long-term returns, reducing strategic interest and funding avenues. These obstacles impede innovation and threaten the timely development of life-saving technologies, underscoring the pressing need for increased funding support.

VC Investors Support Early-Stage Medical Device Companies

Between 2021 and 2022, the VCs that invested in the most companies were Sofinnova Partners, Deerfield Management, 415 CAPITAL, Broadview Ventures, and Ascension Ventures, who invested in a total of 23 companies and participated in rounds totaling $923 million.⁴ The proportion of VCs focusing on early-stage medical device start-ups has decreased within the total VC population. Private equity firms and other investors tend to gravitate toward companies with existing revenue streams, seeing them as safer bets and more likely to be acquired, as they often contribute positively to the acquirer's bottom line within a short time frame.

Strategies to get VC Funding

VC firms continue to fund early-stage companies addressing genuine market needs with robust leadership and efficient business models. CV innovators navigating this landscape should prioritize several strategies to secure scarce funding.

• 1.Build the right team: Finding a suitable chief executive officer, a well-balanced team, and partnering with seasoned professionals early in a start-up's infancy can make a significant difference in the success of the company.
• 2.Establish a business case and niche: Thorough market research forms a compelling business case, addressing device necessity, clinical need, competition, target audience, buyers, and market size.
• 3.Protect intellectual property: Securing patents enhances company value and investor confidence by protecting innovative ideas and assets.
• 4.Develop a prototype: Proof of concept is crucial for effective communication and stakeholder understanding during development, aiding in conveying the device's vision to investors.
• 5.Prioritize time to market: Early market entry balances speed with development, allowing refinement post launch based on customer feedback while adhering to regulatory standards.
• 6.Acknowledge risks: Develop plans to address them by presenting a clear clinical and regulatory development pathway that is both realistic and efficient.
• 7.Understand investor preferences: Some investors prioritize revenue over development speed. Know your investors: Are they seeking an acquisition, aiming to establish a robust sales force, or intending to take the company public?
• 8.Know the patient, the health care systems, and practice patterns: Many innovations are dead because they tried to change existing referral or existing physician practice patterns. These may take decades to change.

Future Perspective on VC Investment

The government, foundations, university endowments, and the interventional cardiology community need to support early-stage financing and VCs to ensure optimal patient care and encourage future device development. University endowments frequently opt for “secure” investments rather than using their substantial resources and influence to make a meaningful impact on patients' lives by backing early-stage innovation. CV devices proven safe and effective, facilitating timely procedures with good outcomes, are eventually well-received in the marketplace, but they must be nurtured, funded, and supported in infancy. The decline in VC funding is concerning, yet select VC firms continue to fund early-stage companies that address genuine market needs and operate with a capital-efficient business model. Policymakers should prioritize investing in early health care innovation that will eventually yield maximum returns for our society and patients by reducing time, reducing cost, and enhancing safety. Barriers in the governmental process need to be more time efficient and more user friendly to start-ups and early feasibility studies in the United States. This will encourage funds to support early-stage VCs and enable market entry for life science innovations without delay. Neglecting these policies and reimbursement issues risks leaving significant medical needs unmet. Collaboration among VCs, health care professionals, university foundations, pension funds, and regulatory bodies is essential for overcoming challenges and ensuring the development of ethical, sustainable, and patient-centric health care solutions for our patients and our providers.

Funding Support and Author Disclosures

Dr Granada is an employee of Cardiovascular Research Foundation, the organizing entity of the Transcatheter Cardiovascular Therapeutics conference. Dr Cannon has served on Advisory Boards or Speakers Bureau for Medtronic, Abbott, Boston Scientific, Covidien, and Edwards Life Sciences; is the founder of the Cardiac and Vascular Research Center of Michigan and is the Founder and Senior Managing Director of BioStar Capital; and has served on the Boards of Directors of Versa Medical, REVA Medical, Ablative Solutions, and Amplitude Vascular Systems. Dr Sardar has reported that he has no relationships relevant to the contents of this paper to disclose.