In 2022, venture-backed pharmaceutical and biotechnology companies in the U.S. raised $31.2 billion from investors.
In Minnesota, $200.9 million of those dollars went to Minnesota-based companies. While small in comparison at the national level, it's nearly twice the amount state companies in that sector raised in 2021, 2020 and 2019 combined.
In the coming years, that figure should continue to rise. Biotech, experts said, is the next big driver for the state's already flourishing medical and health technology industry, which for decades has attracted billions in grant and venture capital dollars. And it's one of the sectors taking center stage at Twin Cities Startup Week, the annual series of seminars and discussions that has grown into one of the largest such events in the country designed to continue growing the area's startup industry.
Through the first half of 2023, the bulk of investor dollars in Minnesota have flowed into med device, biotech and digital health companies, and capital those companies have raised is on pace to surpass $1 billion for the fourth time in five years, according to data from Medical Alley, Minnesota's trade group for health, medical and biotechnology.
"Biotech often takes 10, 15 or 20 years [to commercialize]," said Frank Jaskulke, vice president of innovation at Medical Alley. "It's now starting to come to fruition, and I think could be the most transformative thing for the ecosystem. We think of med device companies as being big companies, but biotech is far larger. The investment rounds in biotech for a seed round, it might be a couple of million in device or digital but might be $100 million in biopharmaceuticals."
It's a piece of a bustling medical startup industry fueling business and job creation across the state. And a new generation of thought leaders — creating new-age implantable devices, digital health services around medical charting and streamlining payments as well as therapies that improve human health — are taking the lead, Jaskulke said.
Creating an inclusive ecosystem
Diversity will also be part of that new generation.
Minnesota is home to more than 1,000 health care companies that employ more than 500,000 people across the state. It has a reputation as a dominate medical technology and digital health hub — along with its ability to pop out new companies that push the envelope of global patient care — and annually attracts innovators, students and academics from other states and countries who want to become part of that bustling environment.
In order to uphold that reputation, however, the med-tech startup ecosystem needs to be more inclusive, said Kris Bauerschmidt, one of the founders of the Twin Cities Medical Device Networking Group. While Minnesota ranks among the top states in life science patent registration — including first in the country in pacemaker-related patents per capita and third in medical device patents, according to the Minnesota Department of Employment and Economic Development — more perspectives will create tools that cater to underrepresented groups in the industry, he said.
"What I've seen is a bunch of people that look just like me, white men running companies, and all the managers are the same thing," he said.
At the national level, women hold only 21% of executive roles in the med-tech industry, and African-Americans hold only 3% of leaderships positions, according to the Advanced Medical Technology Association.
Bauerschmidt recently attended a trade show in Boston where a female speaker talked about women's productive health. At another event, a global initiative pitch competition where he served as a judge, a woman from India spoke about menstruation and the lack of care for women in the country.
"It's important for these voices to get in the med device world," he said. "Every industry has its kind of old boys network or something, and it's changing. But it's not changing quick enough, and it's nice to see these voices get elevated."
For a while, those who understood the blueprint to starting companies around new medical products were engineers, scientists and other executives working at companies like Medtronic and 3M who eventually stepped out on their own, said Bauerschmidt and his co-founder Mark Oreschnick.
But it's now more common to see recent college graduates starting companies, clinicians and nurses launch digital health ventures or surgeons follow-through on their ideas for a new surgical device,
A generational shift is brewing, with younger, more diverse entrepreneurs — many of them women — entering the industry, Jaskulke said.
"The group of entrepreneurs looks very different from what it did 10 or 20 years ago," he said. "We've added a whole group of people into the mix which has made the pool much larger than it used to be."
Nurture and expand
Through Thursday, those individuals will network with other professionals, learn strategies from experts and discover ways to commercialize their inventions as part of Twin Cities Startup Week. Bauerschmidt and Oreschnick have created three medical-focused events for Startup Week and said nurturing and expanding the state's med-tech ecosystem is a goal for this year's programming.
Their monthly networking group for medical device professionals launched this past April and will host Startup Week attendees Monday evening. It has grown to roughly 500 people, an indicator of how strong the device and health technology community is in the Twin Cities.
"It's impressive how quickly people are jumping into it," said Bauerschmidt, also co-founder of Prevailing Medical, a Maple Grove-based service provider doing research and development for early stage, small and midsize medical device companies, particularly those in the catheter-based device space.
Job recruiters are known to flood their laid-back socials, Oreschnick said, but one of the other main draws is the opportunity to network and pick the brains of other professionals. To put those one-on-one type conversations into a learning environment, they designed their two other events to give attendees an overview of what to expect when building a medical device startup, options on how to manufacture the device and regulations they need to know.
"We just want to open people's eyes," said Oreschnick, who runs his own consulting firm for medical device startups. "Med device startups are not a quick sell. This is a long process. It's really expensive. You need to understand how many pieces there are to this puzzle."
In 2015, the Smithsonian National Museum of American History honored Minnesota as one of its "Places of Innovation", referring to the state by the name of its trade group association, Medical Alley.
It's fundamentally important to the state's economy and its demographics that the vibrancy and energy of the medical and health technology cluster serve as an attraction tool, Jaskulke said.
"I think that's probably the biggest potential impact, if we can break out of our bubble as the state becomes seen as the tech hub that we are," he said. "I would argue we already are a startup tech hub. Now the story has to catch up with it nationally and globally."