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Four Key Trends Driving Increased Investment in Medical Alley

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Investment in Medical Alley has doubled over the last five years, reaching more than $700 million in 2017. The state’s share of total venture capital investment increased from 28th in 2016 to 15th in 2017.

What is driving this increase? Here are four trends that help explain the increase:

1) Healthcare is a Multifaceted Problem, Minnesota Companies Offer Multifaceted Solutions

Known for leadership in medical devices, Medical Alley is also leading in other aspects of healthcare innovation.

Innovative startups like Bright Health and Zipnosis are pioneering new models of care, and established firms like UnitedHealth Group and Blue Cross and Blue Shield of Minnesota are backing dozens of firms working to disrupt the status quo in healthcare.

Personalized medicine is a reality through companies like OneOme, Recombinetics, and Stemonix. Research from Mayo Clinic and the University of Minnesota is making cures once thought impossible a reality.

Medical Alley’s diversity has positioned the ecosystem to address the breadth of complex issues with novel solutions. In the first quarter of 2018 30 percent of the companies raising money were digital health, 23 percent were biopharma, and 47 percent were medical device.

2) Innovations Made in Minnesota are Staying Local For Their Growth Phase

Rochester, Minnesota, the home of the #1 hospital in the US, Mayo Clinic, is an emerging hotbed of healthcare startups. Drawing on world-leading clinicians, companies are rapidly finding their product-market fit.

A recent report from Chartio’s Tim Miller found that growth in Plymouth, Minnetonka, and Rochester is driving Minnesota’s improvement in venture capital market share.

In the past, much of the innovation developed by the Mayo Clinic ended up outside of Rochester, but recent efforts have turned this around, with more innovations incubating right in the clinic’s backyard. The work of Mayo Clinic Ventures, Collider, and the BioBusiness Center has made this transformation possible.

3) Exits Recycling Capital into New Deals

Industry leaders have observed that the dearth of exits has held back growth nationwide. But from 2012 to 2016 Minnesota led Midwestern exit productivity with 44 exits. 2017 saw exits for Upsher-Smith, Entellus Medical and three others that generated almost . 2018 has seen a pair of exits already, ABILITY Networks and NxThera, which returned $1.6 billion to investors. A third, Inspire Medical Systems’ IPO, is in the works.

Healthy returns are proof of the vitality of the Medical Alley community; refilling the coffers of investors will set the stage for continued success.

4) Capital Efficiency: Money Goes Further Here

A dollar is a dollar anywhere in the US, but in Medical Alley, it gets you more. Ping Yeh, CEO of biotech startup, Stemonix, said it in the March issue of Site Selection “A million dollars here is going to last at least six times [longer than] it would in parts of California.” Capital efficiency means you need less to start, less to continue, and less to generate ROI. Lower cost of rent, consulting, and other inputs reduces the amount of capital needed.

Affordability is not the only driver of efficiency in Medical Alley, in fact the biggest drivers may be domain expertise and strong networks. Expertise in clinical trials and regulatory affairs results in PMAs approved 6 months faster than anywhere else. Strong business networks mean finding an advisor or consultant is a snap. These efficiencies stack, accelerating time-to-market and lowering capital expenditure.

Startups are Hard, Medical Alley’s Entrepreneurs are Making Them Easier.

No one would deny that starting a company, raising capital, and building to an exit is hard. It may even be harder today than in the past. But the data coming out about Medical Alley is clear: entrepreneurs here are finding solutions to the biggest healthcare problems and to the challenges of starting and growing a company.

Want to know more about Medical Alley’s leadership in healthcare innovation? Visit https://www.medicalalley.org/

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