Are Taxes Hurting Medical Device Startups? Not Really
April 15, 2014
Is the Affordable Care Act's medical device tax, which went into effect in January 2013, having an impact on venture funding? Not necessarily.
Only 60 VC investments were made in the healthcare devices & supplies sector in 1Q 2014, as we report in our upcoming 2Q 2014 U.S. Venture Industry Report, to be released tomorrow. At that pace, 2014 deal flow would decline about 32% from 2013 levels, which was a down year itself, 18% off 2012 levels.
That said, capital invested in the sector is off to a strong start in 1Q 2014, and is on pace to match the amount of money put into the space in 2012, which represented a four-year high in terms of capital raised. Moreover, despite the widespread awareness of the tax and when it was set to go into effect, VC firms invested more capital every year into the sector from 2010 (when Obamacare passed) until 2012, and 2013 only recorded a slight decline in capital raised.