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January 12, 2016

Need Investors? Look East

Shanghai Skyline At Night, China.Last month I learned yet another prominent venture fund will be throwing medical devices overboard in its quest for higher returns in biotech. It’s more evidence that medical devices continues to be shunned by most American venture capital firms.

The exit of traditional investors from medical devices has created a vacuum, and recently I’ve seen a lot of evidence that Chinese investors are trying to fill it. I’ve crossed paths with three new venture firms in the last 60 days that are funded largely or entirely with Chinese money. The partners I met all struck me as smart, sophisticated, and refreshingly humble.

I asked one of them why his limited partners want to invest in US medical device companies.

He answered, “First, and most important, in China the medical device market is booming. We see medical devices as a great growth opportunity. Second, our investors are looking to diversify, especially outside of the country. In fact, stock market turmoil in China makes it easier for us to raise money. It’s no longer possible to get easy returns in the domestic stock market.”

These new venture capital firms aren’t following the pack, so they look at opportunities objectively. They see the opportunity to create important new medical device businesses.

The entry of Chinese venture firms into medical device investing is great news for the sector and for entrepreneurs. I hope they are richly rewarded for investing in medical devices at a time when so many others are just following the crowd.

It’s in times like these, when the sector is out of fashion, that smart investors can make a killing

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