Medical Alley: VC funding down, IPO cash up in 2021

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Minnesota medical startups did not raise as much venture capital in 2021 as the year before, but they more than made up for it with capital acquired in the public markets.

That’s according to the latest investment report from the Golden Valley-based Medical Alley Association, Minnesota’s medical technology trade group. Member startups of the association raised $437 million in private capital last year. That compares to $1.4 billion in venture capital money in 2020. At first glance, a $1 billion total drop in funding might seem concerning, but the association takes a broader view of startup funding . Factoring in funds raised in public markets, total investment in Minnesota medtech startups topped $3 billion, according to Medical Alley.

“A down year in private funding does not mean a down year in the industry,” Medical Alley spokesperson Jamie Oyen said in an email. “Essentially, capital for growth is capital for growth. … Big swings happen, and there’s not always a reason. With so many companies that previously raised significant private capital going public or being acquired, we expected and saw more early-stage investment happening this year.

In calculating total investments, the association included funds raised through initial public offerings (IPOs), as well as secondary offerings. That means Bright Health’s $924 million IPO in April 2021 also contributed to the total, as did Miromatrix’s more modest $43.2 million offering.

Meanwhile, Francis Medical, a Maple Grove-based startup developing a new treatment for prostate cancer, attracted the most private capital in 2021. The company raised $55 million last year.

In two investments last year, scientific research platform Flywheel secured $32.5 million in venture capital funding. Next is insurance platform Gravie, which raised $28 million last year.

In its 2021 report, the Medical Alley Association also touted funds raised through the state’s “angel” investment tax credit program, which provides investors with tax relief when investing in startups. focused on technology in Minnesota. According to the association, 30 startups have secured a total investment of $18.7 million through the Angel Tax Credit program. But, it should be noted that this is actually historically low.

In 2019, for example, 31 companies raised a total of over $38.7 million through the angel investment program. In 2017, the total angel investment figure was $24.4 million.

The angel program has been in place since 2010. The program temporarily expired in 2018, but lawmakers reinstated its funding in 2019 and 2021, skipping 2020. Although it has helped dozens of businesses obtain funding, the angel tax credit program has come under scrutiny for failing. up to its own diversity goals.

Medical Alley leaders aim to continue to push for more funding for the program in the next legislative session. “We will continue to advocate for funding for the Angel tax credit program, especially given the large budget surplus at the state level,” Oyen said.

Although Medical Alley often champions the interests of startups, some of its “founding” members include big-name companies in the city, such as Best Buy, 3M, and Medtronic.

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