July 26, 2016
When you think of startups, there are likely a number of trivial services that come to mind. From GrubHub and Groupon to Uber and Lyft, the startup world is filled with companies that solve problems that don’t need to be solved. After all, a slow, inefficient food delivery service is far from a burden on society. But when it comes to healthcare, startups are aiming to change the world. And investors have apparently recognized the necessity, and potential return on investment, of these revolutionary companies.
According to research from the Silicon Valley Bank Healthcare Investments and Exits Mid-Year Report, the number of investments in early-stage healthcare startups has been staggeringly high in recent years. While 2010 boasted less than $10 billion invested and raised in VC, the total amount of money invested in 2015 reached as high as $17 million between investors and VCs alike.
As far as this year is concerned, series A funding for startups in all sectors are up in 2016. In fact, there have already been more series A funding deals this year than in the entirety of 2015. Biopharma, device, and tools/diagnostic startups are all enjoying an amazing amount of capital. And that should usher in a new era of medical technology.
“I think you’re seeing unprecedented new entities, new therapies, and faster ways of doing things,” said Jon Norris, managing director for SVB’s healthcare practice to Business Insider. “I think there is that optimistic feeling that’s the reason why you’re seeing more investors.”
However, unlike food delivery and coupon startups, healthcare startups are required to go through a wide range of regulatory tests that slow down production and curb speedy innovation. Subsequently, the slow churn of the healthcare industry means that these investors won’t likely be able to see a return on their investment in quite some time, making these early-stage investments that much more perplexing.
“It’s counterintuitive,” said Norris. “Why you would increase early stage and make bigger investments into a sector where you’re seeing struggle to get to M&A and IPO?” he wondered. “It all comes down to trying to make the right midterm bet.”
With the advent of these healthcare startups, along with fintech and edtech businesses, the world of budding entrepreneurs has finally started focusing on bettering the world we need, rather than the world we want. And whether these investors know something we don’t, or they’re just taking a risk on an industry that needs to evolve faster than food delivery services, the world will be better for their commitment to the cause. That is, as long as they don’t pull their capital before they reach their goal.
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