Current thoughts - October 2006
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MedTech VC funding difficult in Germany
The Germany venture capital market has suffered after the bubble burst around year 2000. As a result there are really no major local venture capital funds in Germany that today have an both interest in medtech and have cash available for new investments. This is hitting the local start-ups in two ways. They are finding it difficult to raise financing from local sources, and at the same time this is making it difficult to raise financing from foreign sources, many of which require a local investor in a syndicate for them to commit money to the German market. Examples of local investors include Heidelberg Innovation, Wellington, Polytechnos and Earlybird, all of which are in fund raising mode - and in some cases have been so for some time.
On the positive side, I am hearing more and more indications that some are now increasingly confident that they will be able to do their first closing soon and shift into investment mode again. For German life science companies and foreign investors this would be a welcome sign of improvement.
It is interesting to contrast the German situation with the French. Here a number of venture funds have raised new funds recently and are actively looking to invest in medtech both in France and across the continent (eg. Soffinova, SPEF Venture, Auriga, Matignon). From what I hear, this is partly due to the French government having decided to force French pension funds to allocate a fixed percentage of their funds for French venture capital funds (if somebody has a better explanation, I would love to hear it). I have also seen examples of a kind of tax-optimized/exempt venture capital vehicle, that draws yearly allocations from the public market and invests them into start-up companies (eg. 123venture).
The contrast is interesting when you consider the Danish situation, where the government backed VĂ¦kstfonden is trying to spin-off it's life science and technology venture arms into SunStone, with 50% backing from private capital. Getting commitments from private sources appears to have taken longer than expected and there is currently no clear indication of when SunStone will be able to reach first closing.
October 13, 2006 12:12 PM