I’ve been working for the last 18 months or so in support of a medical device company and experiencing first hand the difficulties that startups, and in particular, medical device startups, face. It is a difficult time for these companies given the current economic climate. In addition, these companies now face additional regulatory hurdles, of at least three distinct types.
The Patient Protection and Affordable Care Act signed by the president on March 23, 2010 provides for a medical device tax. This is an innovation killer; there is no other way to say this, in my opinion. You can read more about this and attempts to repeal .
The FDA approval process injects major risk (uncertainty) into the process of product commercialization. A large portion of a typical device commercialization program cost is associated with preparing for and executing clinical trials. The process takes significant time and there is significant schedule and cost uncertainty. Investors are reluctant to support startups because of this barrier. Things are getting worse- not better…..
Finally, investment banks and brokerages are feeling the watchful eyes of government much more strongly since 2008. One outcome of the scrutiny is that raising money to fund startups has slowed significantly.
