The world of corporate VCs is complex and rapidly evolving, with top decision-makers from multi-billion-dollar strategics continuously evaluating how they invest and align their efforts with medtech M&As and business development. During the LSI USA ’24 panel, titled Corporate VCs: What They Want, and How They Align With M&A and Business Development, industry leaders from Medtronic, Boston Scientific, Intuitive Ventures, Dexcom Ventures, and Orchestra BioMed shared valuable insights into their investment strategies and how they align with broader corporate goals.
Understanding Corporate VCs’ Investment Criteria
Corporate VCs often differ from traditional venture capitalists by prioritizing strategic value over purely financial returns. Michael Ryan, Vice President of Venture Capital & Business Development at Boston Scientific, emphasized the company’s active role in investing:
“We’re one of the most active acquirers in the medtech industry, generally deploying somewhere north of $100 million a year into venture investments.”
Boston Scientific’s approach is heavily reliant on partnerships between the venture team and the business units, ensuring alignment with corporate objectives. Ryan added:
“Every venture investment winds up being co-sponsored and co-written by someone from venture and someone from the business unit BD team. They both have to love it, and the division president needs to also love it.”
For Medtronic, the approach is similar but structured around establishing clear sponsorship from its extensive network of operating units. Dave Allen, Vice President of Business Development & Strategy at Medtronic, explained:
“You really need to have a belief it’s a platform technology you can build around. You’re probably going on a real market development journey that requires a lot of investment.”
Allen further stressed that without full internal commitment, projects are likely to fall short:
“The businesses that we acquire where we just kind of dabble tend not to work. You lose the management and leadership focus needed to execute well.”
The Role of Corporate VCs in Strategic Investments
Corporate VCs play a crucial role in fostering innovation that aligns with a company’s long-term strategic goals. Murielle Thinard McLane, President and Managing Partner at Intuitive Ventures, highlighted how her firm approaches investment:
“We have been a category innovator, and as a fund, we’re looking at supporting companies aspiring to be category leaders. We focus on early-stage investments in automation, imaging, big data, hardware, software, regulatory, and quality.”
This emphasis on category leadership and ecosystem play is echoed by other corporate VCs who focus on technologies that complement their core businesses. Steve Pacelli, former EVP & Managing Director of Dexcom Ventures, noted:
“We’re focused on sensors. How do we deploy sensors into adjacent markets? We’re investing in technologies that tie back to the core business while also looking at platform technologies that could become part of Dexcom.”
Navigating the Complex Corporate VC Landscape
Understanding how to engage with corporate VCs is a critical aspect of securing medtech investments. Each company operates with unique structures and decision-making processes. Ryan highlighted Boston Scientific’s streamlined process:
“If you’re trying to engage with Boston on a venture investment or an acquisition, there may be more like 20 people you need to worry about. We get together with our CEO, CFO, and General Counsel every few weeks, going through the business cases of all the investments and acquisitions.”
Medtronic, by contrast, requires finding internal champions. As Allen put it:
“Finding an advocate who can navigate the approval process we have to go through to make these types of investments is what you really need. Connecting with people like me, who can help find the right person for your technology within the organization, is key.”
For Intuitive Ventures, securing buy-in from operating units is not always necessary. Thinard McLane explained:
“Unlike other companies, we do not need a business unit sponsor. My investment committee is composed of our CEO, a board member, and some of our key leaders. We’re looking at the ecosystem 10-15 years out and seeing how we can make it successful more globally.”
The Risks and Challenges Corporate VCs Face
Investing in early-stage companies is inherently risky, and the panelists discussed some of the most painful lessons they’ve learned. Pacelli reflected on the dangers of choosing the wrong management team:
“I invested in a company in spite of my better judgment on the CEO, and it proved to be a colossal train wreck. It’s critically important to make sure you’re betting on the right management team.”
Ryan also emphasized the importance of humility in the investment process:
“Humility. I’m wrong most of the time. When we make investments, we try to stick to things where we could do a half dozen of these, and several of them will break, and it will still be okay.”
Meanwhile, Thinard McLane pointed out that inadequate funding is one of the biggest challenges for medtech startups:
“The worst is when you believe in an idea, and you don’t have the right syndicate to get to the next stage. A lot of companies have good ideas, but when an unknown challenge arises, there’s not enough capital to pivot or recover.”
Looking Ahead: The Future of Corporate VCs in Medtech
As corporate VCs continue to play a significant role in the growth and innovation of the medtech sector, understanding their motivations and operational structures is crucial for emerging medtech companies. From Boston Scientific’s co-sponsorship model to Intuitive Ventures’ ecosystem approach, each corporate VC follows a distinct strategy aligned with its broader organizational goals.
Ultimately, those medtech startups that can align their business model with the strategic priorities of corporate VCs while building strong syndicates and securing sufficient funding will be best positioned to thrive.
Interested in more insights like this? Join us for our upcoming medtech conference from June 10th to 13th in Singapore.
