It is no surprise to hear that I am confused about the economy and about the state of VC funding.  Surely the confluence of certain trends roils the marketplace and the risk profile of investment: cost of money, unemployment, immigration, high market value vs risk of an AI or other bubble, import tariffs, war, climate—not a stable backdrop to encourage VC activity and indeed, particularly in Massachusetts there is great fear of fading VC activity (the most recent issue of Boston Business Journal warned of waning Massachusetts med-tech prospects).  Just today, CNN announced a reset of the estimated number of US jobs created for the year ended last March, threatening that in fact the present estimate is likely 911,000 too high and such a final revision would show the largest annual jobs revision on record.  And stock market reportage seems all over the place: new highs in US corporate earnings vs concerns based on the above-mentioned cautionary factors.

Against this backdrop, an analysis of PitchBook data by MedtechDive gives some granular insight.

First, it is stated that investment by VCs in medtech  is on a path to reach the second-highest annual level in history, bigger than all but the 2021 pre-COVID year.  Since my practice reflects a retreat from VC deals, how is that possible?

Here is my summary of the data: there are far fewer deals, deals are concentrated at the high end with established mature companies (with AI features) and are larger in size, certain sectors are “hot.”  The reason: since exits for successful companies have somewhat dried up, larger companies raise more VC money to stay afloat with a longer runway before ultimate exit.

Although not mentioned in the referenced article, seems to me that the original investors also are protecting their prior investments prior to exist by use of dry powder which I have noticed has been more systematically held back in the last few years than in certain VC boom times of the past.

The article also notes two areas garnering greatest attention: surgical tools and devices, followed by diagnostics in life sciences.