This can be welcome news for medical device startups. We frequently read and hear and get advice about the importance of partnering. Given the difficulty in creating an IPO and becoming a publicly traded company for most medical device startups, the other option for an exit strategy has been acquisition by one of the large multinational device companies, e.g., Johnson & Johnson, Medtronic, Covidien, Abbott, et al.
“Some rights” essentially translates to being able to buy the startup at a future date once they invest in it.
“Corporates increasingly want some rights,” Nielsen said. “Historically the data shows that the ultimate buyer of a company may not be who the strategic investor had been.”
While in my experience it’s been relatively easy to create a “relationship” with a venture or business development exec or group in a large device company, it’s much tougher to get any sort of financial commitment. After all, they want to keep up with new developments and innovations in their markets. If they can get that for free, why not use that approach?
I’m not sure what’s changed recently. Perhaps there is more competition among the large device companies for the few good opportunities out there. Certainly there is less innovative development taking place at the large device companies, which appear to be using startups as a primary source of low risk R&D.
In any event, an option to be purchased can be a huge credibility advantage for a medical device startup in terms of attracting angel investors, clinical luminaries, and employees.