Center for Free Enterprise Event Summary
March 16, 2018
An enthralled and engaged full house audience interacted with a powerhouse panel on a morning offering a glimpse of spring. Moderated by Ben Calkins, the power panel included Brad Pulver of IME, Dr. Najan Shah formerly of the Cleveland Clinic and now a private investor, Bill Fuller of BioEnterprise and Ken Mendelsohn of JumpStart. The rapt audience learned about the current deal and valuation environment for medical device companies and other medical related companies. The panel also touched on the pros and cons of being in Cleveland, especially with respect to raising capital and recruiting talent.
Let’s start with a few of the cons. The panel agreed that there have been some very good health care exits in the past few years. Also, there is interest and capital available for startups and stage 1 fundraising. But, the second and third rounds of raises, to really build out a business and finish FDA approvals (for instance) are almost impossible to complete. One major obstacle seems to be that there are not enough funding sources in NEO for those types of deals. Lots of capital is on the coasts but to raise money for those rounds, the investors and the entrepreneurs must have personal relationships developed through consistent proximity. NEO just does not have enough density of those relationships.
Another con (not to be too pessimistic) is that start ups are having real trouble finding experienced people to fill the key functions needed, such as business development, engineering and navigating the approval processes. Mr. Pulver described a miracle hiring he made of a BD professional working for Stryker in Seattle who wanted to relocate to Cleveland. He indicated that scenario is impossible to replicate. Mr. Fuller echoed similar challenges in finding professionals with 8-10 years experience, who are self starters and can hit the ground running and make a business a success. He also noted that professionals who join start ups have to be, by nature, risk takers. They have to be willing to join a firm, work like the devil, and witness it fail within 12 months and then have to go back into the market. That profile does not really exist in NEO, it does in California and somewhat in Boston.
One positive is the affordability and lifestyle in CLE compared to NoCal or the East Coast. Capital goes further here but is harder to acquire.
An audience member volunteered that valuations of device companies now are less than other medical service or related companies. A big drag on value is the need for FDA approval which is a slow and expensive process. Investors find that process to be risky in contrast to developing and launching an AI application.
Just after 9a, Mr. Calkins wrapped up the program with warm wishes for St. Patrick’s Day and thanks to the panel and an enthusiastic audience. Please calendar the next meeting of the CFE on Friday, May 18!
Next CFE Event
May 18, 2018
Quote of the Day
Experience is simply the name we give our mistakes.
– Oscar Wilde