Academic Entrepreneurship in Health and Medicine: Is the USA Losing its Edge?

So I have continued to beat my drum over the last 7 years about the crucial importance of the supply of entrepreneurial (risk) capital in the academic entrepreneurship arena.  It was interesting  to stumble upon this article today in the Atlantic.  I thought I’d summarize it, identify some areas where research is needed, and circle back to the University’s role in the supply of capital.

Essentially, the author argues that it is the supply of venture capital that is putting a damper on innovation in the USA. This supply of venture capital is effected by various factors including the state of the public markets. The lower supply of risk capital is having a negative effect on the transfer of knowledge out from the university through new venture formation (spin-outs and start-ups).

“Universities specializing in medtech and biotech innovation are seeing fewer professors, post docs and engineers willing to quit their day jobs to take promising technologies out of academia into the commercial environment. Biodesign programs everywhere struggle to offer options to graduates who have spent a year or more defining a compelling clinical need and identifying technological solutions, only to realize there is no funding to take these ideas out of university as in the past. In short, we are offshoring our medical device and biotech industries – two of the most successful industries in modern history – faster than we offshored the automotive industry.”

The author’s last point is particularly intriguing — that we are offshoring medical device and biotech industries faster than the automotive industry.  Is this true?  Research on this topic is needed. Also, there is an interesting research question here to answer about the impediments facing academic entrepreneurs in the health and life sciences field now.  Is the lack of supply of risk capital a major factor?



Another good research project would surround the author’s contention that venture capital is migrating from the medical and health sciences side to the social media start-up side, because of the faster time to exit. I am not so sold on this statement, but we need to know more about this:

“Third, other technology sectors, notably Web 2.0, social networking, and software businesses, have seen their cash requirements and time to exit decrease, sometimes by a factor of ten. This contrasts starkly with the medtech and biotech space where — primarily, but not entirely, for regulatory reasons — cash requirements and time-to-exit are at an all-time high.
The upshot is a massive flight from de novo, innovative medical technologies in favor of propping up existing portfolio companies or investing in Web-based companies that don’t have the regulatory burdens of healthcare firms. First time funding in medtech (that is, rounds of institutional funding, after friends and family and angels), fell in 2010, according to Pricewaterhouse MoneyTree, as did first-time financing for biotech companies.

The author moves on to discuss how angels are filling the gap to some extent.  This is an interesting thought as well.  Again, more research is needed to ascertain to what extent the gap is being filled, and to answer the question of whether or not angel capital is actually decreasing in supply, as some have found.

An interesting point that basically surrounds regulation is found in the last paragraph. Essentially, here the argument is that the “Medical Tourism” industry, that encourages patients to go abroad for treatments that are not yet legally approved in the USA, will result in the development of novel medical devices and solutions in foreign lands. These solutions and devices will have to be imported, eventually, to the USA.

“But medical tourism has become one of the fastest growing segments in healthcare, and it is now the case that the latest cancer therapy, minimally invasive surgery, or least invasive implant are all available outside of the United States for years before they are approved for use here. Many of us doubt of that same pacemaker technology would be able to attract initial angel or venture funding today. I hope we are wrong. Otherwise, prepare for a future when we import medical devices and drugs like we do cars and electronics today.

So the bottom line is that there is a both a risk capital and regulatory challenge here confronting medical innovation in the United States.

Which brings us around to the question of

“What is the University’s role in this regard”?

If the third role of the University is economic development (in addition to research and education) as myself and others such as Etzkowitz contend, then what should the university be doing in terms of increasing the supply of risk capital so that its knowledge can be transferred out to benefit society?  And what should the university be doing in light of a competitive world environment to interact with government in order to make regulations effective and not unneccesarily burdensome?

I’ll be exploring more but for now, let’s here from you!

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