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OCTOBER 21 - 27, 2013
Medical: It’s a ‘dangerous’ time continued from PAGE 1
Instead, investors have been turning their attention to later-stage medical device businesses and information technology companies, which often need less time and money to become profitable. Mr. McBrayer, who has helped launch several startups, says he never has seen a more “dangerous time� for emerging medical device companies that need capital to get their products to market. “It’s a difficult climate for brandnew medical technologies,� he said. The trend is good for local IT companies, which have been raising more money lately, but it could pose a problem for Cleveland’s medical innovation engine. The shift hasn’t had a big impact on local medical device companies — at least not yet. Local health care startups attracted $79 million in venture capital during the first half of 2013, and $47 million of that went to 14 medical device companies. Those figures compare well to totals from previous years. But Karen Spilizewski said she “wouldn’t be surprised to see a dip in those numbers.� Ms. Spilizewski has an interesting perspective on the situation: She’s a vice president at both nonprofit BioEnterprise Corp. in Cleveland — where she leads a team that helps local medical device companies commercialize their products — and at RiverVest, a St. Louis-based venture capital firm that focuses exclusively on the life sciences sector. Through RiverVest, Ms. Spilizewski still is focused on looking for medical device companies that might make for good investments. But a lot of other medical investors are putting more money into software companies focused on the health care sector, she said. Investments in the white-hot health IT sector often are seen as faster, easier ways to capitalize on the growing demand for products that can lower the cost of delivering health care. The shift could mean less competition for RiverVest, but it isn’t good for medical device companies. Ms. Spilizewski suggests they hunt for more grant money and plan on spending more time raising capital. “You will see good companies not get funded,� she said.
The trend accelerates Nationwide, fewer medical device companies are raising fewer dollars. Those companies raised just $1.6 billion in venture capital during the first three quarters of this year, according to the MoneyTree Report, which is compiled by PricewaterhouseCoopers and the National Venture Capital Association. That’s down 33% from the $2.4 billion U.S. medical device companies attracted during the same period in 2011, according to the report, which is based on data from Thomson Reuters. Meanwhile, software companies attracted $8.2 billion in venture capital during the first three quarters of 2013. Those three quarters alone nearly match the 2012 total and easily beat annual figures from the past 10 years. Local statistics aren’t quite as dramatic, but IT companies here have been receiving a bigger piece of the venture capital pie over the past few years, according to figures compiled by JumpStart, a Cleveland nonprofit that supports high-tech startups. Health care startups in Northeast Ohio typically raise more investment dollars than local IT companies, partly because of the technologies that have been coming out of
CRAIN’S CLEVELAND BUSINESS
WWW.CRAINSCLEVELAND.COM
HE SAID IT “In many ways it feels like the late 1990s, with information technology driving venture investment and significantly outpacing other sectors when it comes to level of activity and momentum. The difference, however, is where we go from here. There will be no tech bubble. IT investing will continue to be the bedrock of the venture industry — but at sustainable levels. ‌ Life sciences investments (are) poised for a slow and steady recovery, provided we can continue to see progress on the regulatory front.â€? — Mark Heesen, president of the National Venture Capital Association, on results from its second-quarter MoneyTree Report the Cleveland Clinic and Case Western Reserve University since the turn of the century. Last year, however, marked the first time in at least six years that local IT startups did more venture capitaldeals than their health care counterparts. One big factor that makes it easier for local IT companies to raise small amounts of capital are the three startup business accelerator programs that have opened in Northeast Ohio since the start of 2012. All of them heavily favor companies based on software or services provided via the Internet. Among them is FlashStarts, a Cleveland-based accelerator led by longtime software entrepreneur Charles Stack. Despite the dot-com bubble that burst 12 years ago and the more recent recession, there continues to be an “immense untapped opportunityâ€? in the IT sector, Mr. Stack said via email. Medical device companies can be good investments, but “for regular individuals with lifetimes measured in mere decades, the time frames are positively glacial,â€? he wrote.
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Preparing for ‘second adulthood’ Reaching retirement requires new mindset — one with much more financial discipline By JOE FORAN and TOM FUHR
ADVISER
H
ow would you react if you were told that you could relive the majority of your adult life, taking full advantage of all that you know and every lesson you’ve ever learned? What would it be like to have 30 or more years to do it all over again, just the way you want? The reality is that most of us are being given exactly that chance because of the truly astonishing advances medical science has made over the last two decades. These realities are radically altering how we must think about the notion of retirement. This can either be viewed as a burden, or it can be viewed as a gift. That gift is quite simply the opportunity to do and be almost anything we want and to live our lives in almost any way we wish. But this extension of life is only a gift if we recognize it and act on that recognition by intentionally planning our future lives. Unfortunately, only a small frac-
tion of Americans actually plan in any way for retirement. Even then, plans are typically short-term reactions to the past, not a creativelooking forward. The result is that most people outlive their plans and don’t have any Plan B. We urge our coaching clients to stop using the word “retirement� and to instead think about the transition from full-time work to their second adulthood. Simply changing your terminology will help you change your paradigm, putting you in the right frame of mind to create an exciting future life for yourself. Here are some things to think about and some steps to take to move beyond the limits of retirement to the promise of “second adulthood�: First, change your mindset; embrace the likelihood of a much longer life ahead of you. This one is simple — and hard. It is simple because it is quite
straightforward. But adding visualization and emotion to thinking expands the lenses through which we view the issue. Second, quality financial planning and financial discipline is essential — but it’s not sufficient. Competent financial advice is an essential part of planning your transition. By all means find a great and reputable financial advisor. But frankly, you have to give them something to work with by doing life planning as well. Third, recognize that very few of us ever succeed in doing quality life planning on our own. Don’t do it alone. We suggest you recruit your spouse, a close friend, or retain a certified coach to help you walk this journey. A long second adulthood is inevitable for the majority of baby boomers and anyone younger than that. If we allow the notion of retirement to cloud our thinking and limit our options, the future will be grim indeed for the large majority of us. But if we fundamentally re-imagine what happens going forward — and if we plan intentionally for it — our futures can be bright indeed. (Joe Foran and Tom Fuhr of Chagrin Falls are life coaches.)
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‘Game changers’ only, please The Cleveland Clinic has gotten into IT in a big way, too. About 20% of the inventions that come out of the Clinic are based on information technology. Three years ago, that figure was 6%, and three years from now it should be in the 30% range, according to Gary Fingerhut, interim executive director at Cleveland Clinic Innovations, the hospital system’s business development arm. Mr. Fingerhut said he expects the number of medical devices developed at the Clinic to keep growing, but at a slower pace. He noted that the bar has been raised in the medical device industry. “Another glucose monitor isn’t going to make a difference,â€? Mr. Fingerhut said. “We’re looking for the game changers.â€? Besides going after grants, medical device startups also should pursue capital from strategic investors, which are picking up where some venture capital firms have left off, according to Jerry Frantz, managing venture partner at JumpStart. Like Ms. Spilizewski, Mr. Frantz suggested medical device startups be conservative when estimating their ability to raise money. Despite the current softness in medical device investment, “the sector will weather the storm,â€? Mr. Frantz said. After all, lots of innovation will be needed to treat the aging population, control the obesity epidemic and hold down the cost of health care, he said. “The trends at large, some of the drivers of health care, are not going away,â€? Mr. Frantz said. â–
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