The dominance of strategic investors in China’s med tech sector is one of the most common complaints we hear from western device startups. Let’s take a deep dive analysis to understand the reasoning.
Before companies reach the FDA or CE market, device companies usually attract venture investors which have vastly different risk management methods.
Once devices reach the FDA/CE mark, yet lack revenue or revenue is well below $1 million USD in sales, western investors are not interested. On the other side, Chinese investors prefer investing in the post-FDA/CE mark as technology risks are minimized.
Meanwhile, China is one of the largest device markets in the world making it common for Chinese investors to secure equity investment and China distribution rights. It is at this time many of the terms are structured to protect China’s rights.
How is this issue resolved? First make sure to generate sustaining revenue above the common threshold to be attractive to all investors. Secondly, be strategic when selling your China rights.
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