It’s safe to say that COVID-19 has changed pretty much everything in our pandemic-burdened world, and med tech isn’t immune. Amol Karnick is the president and CEO of KA Imaging, a Waterloo, Ont.-based designer and manufacturer of innovative X-ray detectors and systems that’s currently being used for COVID-19 pneumonia detection in clinical trials in Toronto. He says his company received early funding from angels and the community has been supportive, and even though there have been challenges, the business has been able to overcome issues. “The challenge has been face-to-face meetings, but with video conferencing and making a diligent effort to communicate, it seems COVID-19 hasn’t stopped investments, though it did slow them down initially,” he says. “Companies that help solve current issues during a pandemic have made traction with investors, including angels. We have been able to gather investment interest for our next round, but we also have an ongoing clinical trial for COVID-19 pneumonia. Angels are faster to respond and want to help the local community,” says Karnick.
Michael Phillips, CEO of Kitchener, Ont.-based Vena Medical, a company that provides doctors with the world’s smallest camera capable of going inside veins and arteries to help treat stroke, has had a similar experience. “When the pandemic first hit, pocketbooks definitely closed up as we prepared for a recession, but since then, there has been a keen interest in med-tech companies, specifically because their value has been put front and centre throughout this time. Angel investing was already taking more of an interest in med tech, but I think it’s strengthened even more.”
This also rings true to Jess Joss, president of Equation Angels, the largest angel investor network in Ontario. “For many entrepreneurs, it was and is a challenging time of growing their companies when there have been supply chain disruptions, and where angel investors were taking a pause during spring and summer while assessing their portfolios and guessing at the impact COVID would have across the board,” says Joss. Still, she says COVID has validated many med-tech visions, and there has been more activity and opportunities for investors that have come out of med tech during this time. “COVID has shown the need to invest in the medical space; we never know when we’ll need med technology,” echoes Karnick. “The pandemic has increased investment into the medical device space and the hope is that people will continue to better understand that medical devices have a significant impact on people’s lives.”
Prior to COVID, angel investments in life sciences and healthcare averaged between 16 to 22 percent of annual investment across Canada, according to a report released last summer by the National Angel Capital Organization. Jeffrey Steiner, president and executive director of Angel Investors Ontario, says angels are interested in various aspects of med tech. “They tend to invest in medical devices and diagnostics as opposed to drugs, which take a long time and are more capital intensive,” he says. There are also trends seen in imaging and testing, remote monitoring, surgical robots, prescription subscriptions, digital sales tools and virtual care collaboration tools.
“Angels who have scientific knowledge or a background in science tend to be interested in med tech, and they share this wisdom with their fellow angels, who piggyback on their knowledge.” says Steiner.
During the pandemic, med tech has truly taken centre stage. “There is no doubt that med tech has been at the forefront in the fight against COVID-19. Personal protective equipment, ventilators and diagnostic testing have saved the lives of many,” says Prathna Ramesh, the managing director and chief compliance officer at Maple Leaf Angels (MLA). “The industry has come together to exponentially scale up production capacity. This shift of resources builds a backlog up in other critical areas of treatment and surgery. In a brief period of time, the industry has seen a tremendous amount of digital tool adoption, which was gradually on its way up pre-COVID.” This has resulted in plenty of activity at the startup stage. “Early-stage med-tech companies are being given a real shot to play. What normally would be a difficult and lengthy sales cycle with the government flipped on its head, and deals were being closed in a matter of days,” Ramesh says, pointing to one of MLA early portfolio companies as an example. “Spartan Bioscience saw great interest from the federal government, as well as Air Canada, to leverage the Spartan Cube for rapid COVID-19 testing. Another one of our investments that saw a huge uptick this year is CleanSlate UV, which is a machine that uses ultraviolet light to kill 99.9 percent of bacteria on small devices like smartphones.”
So, what does all of this mean for angels investing in med tech? “I’ve heard some angels talk about the fact that they felt their investment had a greater good or social impact, which they appreciated,” says Joss. “Often an investment in a software-as-a-service company may disrupt an industry or improve the efficiency of a business model, but doesn’t necessarily make a huge impact by saving lives and preventing the spread of disease, so the feeling of investing in a company that is improving the world or the lives of patients is a good one.” Joss also says she’s noticed investors who normally pass on med-tech opportunities have been more open to reviewing them and consulting with experts in their networks. Plus, there’s an increase in health-focused angel groups and incubators. “I hypothesize that we will see a bump in med-tech investment over the next few years as angels new to the field become more confident in investing in med tech. There continues to be a need for devices to support new health protocols, and there’s a huge opportunity for growth and upside,” says Joss.
Ramesh also sees the changes coming down the pike. For example, there will be more done virtually, including conferences, investor meetings and selling devices in hospitals. She also sees changes to the med-tech industry. “The space is seeing an increasing number of startups. The pandemic has accelerated innovation and created new areas of opportunity. That said, this sector has enjoyed a strong bull run with record levels of capital raised and deployed over the last several years. In this very specialized sector, I think that industry expertise should be a key part of your investment decision when evaluating technical areas like diagnostics, dialysis equipment or therapeutics. Organized groups such as Halo Health in Toronto or the Life Science Angels in California leverage the collective experience of their PhDs and MDs in due diligence.”
An angel herself, Joss’s advice to entrepreneurs interested in entering med tech is optimistic. “The industry is relevant now more than ever — there’s a greater investor pool, increased support spaces (in labs, incubators and angel groups, for example), easier regulatory collaboration and also easier to validate virtual platforms. The overall outlook on health as a priority is at an all-time high.”
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