Venture capital funding for one of the Bay State's key industries — medical device companies — is drying up, forcing startups to adapt and become mature quicker than in the past, according to industry insiders.
"In terms of VC funding, we're really in a lull," said Debbie Paul, CEO Americas of EvaluatePharma USA, which presented a state of the industry report to investors and others last week.
Funding for medical device companies dropped in 2012 for the first time in years, and seems to be on track to finish this year at the same level, Paul said.
Paul said investors are looking for a clear path to return on investment from a company before putting money in, a definite shift in mentality. She said companies now have to have more than just a great idea to get the funding they need.
"It's not just a business plan, it's not just having a thoughtful exit strategy, it's really thinking about who's your key target market," she said. "You have to be a sure bet to get the funding unless you've got really innovative technology."
Paul said another thing startups have to consider now is how their devices will be reimbursable by insurance companies.
Donna Brezinski, founder and CEO of Little Sparrows Technologies, said her focus as she looks for investors is the specifics of her product, a low-cost tent that addresses neo-natal jaundice.
It's "really identifying the market, identifying the customer," she said.
Still, there are options for those who can't find venture capital funding.
"If you're a startup and you can't get VC money, I think you'd know you need to talk to more angel investors," Paul said. "They may be filling a gap traditional venture financing may be opening."
Still, Brezinski is confident about her early-stage company and is optimistic about getting funding.
"Massachusetts in and of itself is an incredibly supportive and rich environment for early start startups," she said. "I don't think it's impossible."
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