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Why are More and More People Investing in Medtech?


The UK medical technology (Medtech) industry is a world leader. In 2013 it was marked out as being the sixth biggest in the world; in 2014 the sector held about 3,268 companies, generated an estimated turnover of £18.1 billion and employed in the region of 88,000 people across the UK (Gov.uk). While other sectors struggled in the years following the global economic downturn of 2008, medical technology grew, the combined turnover of UK Medtech companies actually increasing by 50% between 2009 and 2012.

So why are Medtech companies turning to crowdfunding?

The reality is simply that there isn’t enough money around to give every promising idea a go. As Allan W. May, founder of Life Science Angels in the US, says: ‘The cost associated with getting a company off the ground is too great. The system is broken.’ While funding is scarce in all industries, this is especially poignant in the field of medicine and medical technology, where overlooked and underfunded developments can mean the difference between life and death. It is worrying then that healthcare in the UK has been lagging behind ‘banking, travel and the tax man’ when it comes to digitisation.

Even the government has recognised the need to modernise the way healthcare works: in 2014 the UK’s National Information Board launched the Personalised Health and Care 2020 framework for action. This was intended to promote better use of technology among medical professionals, patients and the general public in the hope of increasing levels of reliability, efficiency and transparency.

The push towards healthcare modernisation and development is happening, and the crowd wants to be part of it. Through equity crowdfunding this has become a possibility.

What’s the motivation behind investing in Medtech?

In opening up healthcare investment opportunities to the floor, we have already taken a big step forward – even if just one medical product reaches the market with the support of crowdfunding, that is one more treatment that wouldn’t have existed otherwise.

This is a key difference in the motivation behind investing in Medtech and investing elsewhere: with the latter, the major focus is on winning back the investment and then some, while most people investing in the former want to see the business (or technology) succeed – though of course they wouldn’t say no to a tidy financial return should things go to plan. It’s thrilling to think that you could be helping to save lives and cure diseases, and this is a great motivating factor for investing in Medtech – but it’s not the only one.

The knowledge that the need for healthcare – and, more specifically, the need for innovations in healthcare – isn’t going anywhere is a huge motivator. Fads around augmented reality and cheap B&Bs will come and go, but the fragility of human existence is an ongoing concern; at no point is someone likely to say ‘look, we’ve already halved the number of people dying from breast cancer, but let’s not go overboard on this “cure” business’.

The ageing population of many high-income countries is upping the urgency surrounding Medtech developments. According to the UK’s Office for National Statistics, there are currently 11.4 million people aged 65 or over in the country, while more than a third of the population is 50-plus. With fewer young people around to take up the physician’s mantel, technological innovations that make treatments safer, faster and more accessible are simply invaluable.

Simply put, there is always going to be a fertile market for medical innovation – and the human desire to do good is clearly playing a key role in drawing investors to Medtech.

The bigger picture

Medtech companies are at the head of developing innovative treatments that cater for a huge range of conditions, optimising the way generic medical procedures are carried out, and reducing risk and cost. But the consequences of backing a good idea may reach far further than just making a good return.

For example, Pulse Flow Technologies raised funds on SyndicateRoomthe European leader in equity crowdfunding for life sciences – with a patented innovation that saves sufferers of diabetes an arm and a leg – literally. Every 20 seconds, someone in the world loses a limb to diabetes, and half of those people die within the following two years. The Pulseflow DF reliably heals foot ulcers caused by diabetes within a matter of months, rendering amputation unnecessary. This isn’t only great news for people with diabetes, but also for the NHS, which in 2010–11 spent somewhere in the region of £662 million on ulceration and amputation, and therefore stands to save a huge deal of money. So in investing, the crowd is not just helping those directly affected by diabetes, but could by extension alleviate the financial strain placed on the country’s whole healthcare system.

The pros and cons of investing in Medtech

Investing in healthcare is a long-term game and, while you may well invest in a company that could eventually become more valuable than Facebook (and some healthcare giants are), it tends to take decades to get to a multi-billion pound valuation.

Medtech businesses require a lot of funds in the early stage to cover research and development, regulatory compliance, and building and maintaining factories and laboratories. They tend to be very capital-intensive, often requiring tens of millions of pounds, and have very long timescales that are likely to involve years of cash outflows and losses – you may have to wait decades to see whether they will sink or swim. Then, once the product is approved, there’ll be marketing and distribution costs to front.

You may be thinking that an investment-to-payoff lead time of a dozen or more years is a little far from your ideal scale, but don’t be put off – there are many investment opportunities within the healthcare sector that are less capital-intensive and run to shorter timescales. Technology in medical care, wearable technology (such as watches that can measure blood pressure), and innovative products or services aimed at the NHS are all ripe candidates for crowdfunding.

Crowdfunding and the future of Medtech

The future of innovation in healthcare will feature crowdfunding as one of its funding mechanisms. Not all projects will be or should be funded this way, but there are certainly solid opportunities arising all the time. And investors shouldn’t be intimidated by this sector. There’s no reason why researching medical technology companies should be any more complicated than reading up on any other industry, and the possibilities for investment are vast. It also means that you’ll be putting your money into a company that is trying to save lives, which is a far more humanitarian and, arguably, noble pursuit than most.

There are currently thousands of Medtech projects looking for funding, each with the potential to make patient diagnosis and treatment a lot more effective. There are worse places you could put your money.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer



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