Bridging the gap between angels and VCs in the medtech innovation ecosystem
Dr. Jeffrey Fitzsimmons, professor of radiology at the University of Florida School of Medicine, knows well what is required to advance new medical technologies from concept to commercialization. Holding the patent on two MRI technologies, Dr. Fitzsimmons built and later sold MRI Devices Corp. turning a $1,000 investment into a company with $40 million in recurring annual revenues. According to a post from Silent Partner Technologies, “The RF coil legacy of the team he co-founded at MRI Devices is the current mainstay of medical systems of well-known companies such as Philips and Siemens.”
Dr. Fitzsimmons is also a seasoned angel investor. He is an investor in Myolyn, winner of the 2017 SEMDA PitchRounds Roadshow in Orlando. Jeff was gracious enough to provide us a key insights on something urgently needed to get investors off of the sideline and into the game: improving the financial relationship between angel investors and VCs.
The value experienced medtech angels bring to VCs
“Medtech angel investors, especially those who happen to be physicians or physician innovators tend to exhibit higher levels of altruism than the average angel investor,” Jeff said. “Because unmet clinical needs are as much about saving lives and improving patient outcomes as anything, we are usually willing to accept lower rates of return on our investments than a VC would. After my success, I also feel a sense of responsibility to help others grow their businesses.
“Mentoring young medtech companies to a level of investability for angels is hard enough alone. Engaging a venture firm for a larger seed round or series A is even more difficult. Many VCs that invest in young medtech companies often don’t realize how much value physician innovators with proven records of successfully building a medtech companies bring to the table when they present them with an opportunity to invest in a promising young company. VCs that cultivate mutually beneficial relationships with the right medtech angels can reduce their risk, but they need to fairly acknowledge the up front risk the angels have shouldered.
Minimum returns to encourage angel reinvestment
“What is critical is that the return for an angel does not get marginalized to the point that discourages future investment in outstanding young companies with smart, passionate founders and outstanding new technologies that address an unmet clinical need with a significant addressable market like Myolyn.
“It’s next to impossible to keep angel investors active when they take on high levels of risk with low rates of return. I don’t need my return to be 10X, but if I am going to reinvest in the next promising company, it can’t be some sub-fraction of 1X, that is for certain.
Improving the process to get more money in the game
“The medtech investment community as a whole has to improve the process in a way that helps early investors and encourages VCs to expand their selection parameters. There is always money out there. The ecosystem needs to work across all funding levels, types and mechanisms to get more money off of the sidelines, into the game and keep the wheels of medtech innovation turning.
I welcome the opportunity to connect with the entire community, but investors especially, at SEMDA 2017.
Register for SEMDA 2017, May 26-27 in Atlanta here.