IDGVI News: Media Coverage 2010

Tips to raise a healthy medical device company

The Economic Times | 6 August, 2010

Sudhir Sethi
Chairman and Managing Director
IDG Ventures

Investor View

WITH the huge buzz surrounding the Indian healthcare sector, investments from VC and PE funds are flowing into all segments of the industry, with medical devices emerging as a top draw. Such interest is driven by the necessity of using technology as a tool to provide affordable healthcare to the masses says Sudhir Sethi, Chairman and Managing Director of IDG Ventures, whose $ 150-million fund has invested in medical devices, firms such as Perfint Healthcare. In a conversation with Peerzada Abrar, Sethi presents a five-point plan to kick-start a medical devices company.

BUILD PATENTED TECHNOLOGY
To build a good medical deices company an entrepreneur needs intellectual property, global scale and a competitive price point. Medical devices come in a broad range, starting from low-technology products designed for mass consumption. However, there are no entry barriers here. As investors, our first criteria is to look at technology that has intellectual property and patents. This is what entrepreneurs must take care of, so that the returns – both for the entrepreneurs and the investors – can be extremely good.

BUILD A PROTOTYPE
This is critical to give the investors an actual idea of the business. Perfint is a good example. When we came in, their product prototype was ready and it had to be launched commercially in the market. So investors like us put in a pool of capital of around Rs 25 crore in the company. The company has already raised capital of above Rs. 75 crore so far. It is going international now and more importantly it has range of products in line for another 3-4 years.

FIND ANGEL INVESTORS
Investment is an essential part of building out a product. Investment does not happen from venture capitalists at the first instance itself. So it is critical for the entrepreneurs to find Angel investors, who have deep knowledge in the medical space.

BUILD SCALE
The third criteria is that the product should have a market in India, as well as outside the country. This is very critical as it enables a company to achieve scale. The moment a start-up addresses a global market, the potential for the business becomes much higher.

MANAGE REGULATORY REGIMES
Intellectual property is at the core of medical devices company. So a start-up needs to ensure it doesn’t violate the IP of others while also registering its own. Another strategy is to buy the rights for some existing IPs and to then exclusively build products in India and add value to the IP in terms of modifications and market the product on a global basis.