At a panel during LSI Europe '23, leading industry experts and investors gathered to explore strategies for accelerating growth and early liquidity in the medtech industry. The panel provided essential tips for navigating M&As, early-stage funding, regulatory changes, and the role of private equity in medtech exits.

Importance of Revenue and Commercial Strategy for M&A

A significant focus of the medtech market is achieving the necessary revenue milestones to attract M&As. Most M&A activity in medtech occurs once companies have already demonstrated a viable market fit and revenue generation.

Alexander Schmitz, a partner at Endeavor Vision, explained, "The vast majority of medtech M&A occurs at the commercial stage, at or above $10 million in revenue. You need a clear commercial strategy to get to some level of scaled revenue." This point emphasizes the necessity for medtech companies to focus on achieving significant revenue milestones to become attractive for acquisition.

Challenges with Early-Stage Co-Investment and Liquidity

Early-stage medtech companies often have difficulty finding co-investors due to the lack of liquidity in the market, which can impede their growth and exit potential.

Enric Claverol from the EIC highlighted this issue: “We commit six, seven million, and then the companies cannot find co-investors because there is no liquidity in the market. This is a major issue." This discussion signifies the need for innovative solutions to create liquidity and attract co-investment in early-stage companies.

Potential of Secondary Markets for Early Liquidity

One proposed solution to the liquidity challenge is the creation of secondary markets, which could provide early liquidity for investors and support the growth of early-stage medtech companies.

Claverol proposed, "Would it make sense to create a secondary market before an IPO or an M&A is possible? It's just one of the thoughts we are exploring." This idea suggests an alternative path for providing liquidity and supporting the growth of early-stage medtech companies.

Impact of Regulatory Changes on Market Strategy

The new MDR in Europe has critically impacted market strategies for medtech companies, often making the U.S. market more attractive for initial commercialization.

Claverol explained, "We have this paradox where we have a market of 400 million patients, but most of our companies come to us saying, 'I want to go to the U.S. first because that gives credibility to my exit.' We need to solve this issue." The stringent regulatory environment in Europe pushes many companies to prioritize the U.S. market for their initial launches.

Role of Private Equity in MedTech Exits

Private equity firms are becoming increasingly important in providing medtech exit options, particularly for companies with established revenue streams and scalable business models.

Clara Campas, Co-Founder and managing partner at Asabys, noted, "On top of IPO, M&A, and consolidation, the question is whether or not a private equity firm will, at a certain point, jump in on companies as mature as the one Alexander referred to with consolidated revenues as an alternative to IPO." 

Leveraging Digital Health and Data Integration

Integrating digital health solutions and data-driven technologies is vital for the future of the medtech market. These advancements can enhance the value proposition of medical devices and improve patient outcomes.

Schmitz stated, "We evolved our strategy as some of these technologies have emerged. We remain focused on growth-stage investing but have explicitly added digital health to our fund mandate. We also hired a senior investment director focused solely on digital health in the U.S." The emphasis on digital health and data integration reflects the evolving landscape of the medtech market, where technology-driven solutions are working their way to the forefront.

The full recording of the panel can be found in LSI’s resource hub at the link below:

• Escape Velocity: Conventional & Alternative Scale-up & Exit Strategies to Achieve Liquidity Faster

To hear more insights like this, join over 1,500 executives at LSI USA ‘25 at the Waldorf Astoria | Monarch Beach Resort in Dana Point, California, from March 17th to 21st, 2025.