the likes of (computer maker) Digital moved here. They set up manufacturing plants here in Ireland because the government encouraged them with good tax breaks and what have you. And really that was the start of the Irish industrial revolution 25 to 30 years ago. And it’s grown from there to be a major exporter of tech products globally. Although a lot of it isn’t indigenous, in truth; a lot of it is the multinationals.
X: How has medtech become a major focus in Galway?
JP: The first medical companies that came to Ireland from America set up in Galway, so it grew into a kind of cluster around medtech. So the Irish government, responding to that, put a lot of money into the ecosystem and the universities and education system, developed courses to churn out grads in sciences and engineering that you need in medtech and life science. Over the years, that’s grown and grown. Boston Scientific employs about over 3,000 people here. Medtronic has 2,000. Abbott is up the road. Ireland is now the fourth biggest exporter of medical products in the world. [Galway is] very much a power base in medtech manufacturing. If you went into those plants and saw the manufacturing going on there, it is as good as you’ll get anywhere in the world.
X: How did the focus shift from manufacturing to research?
JP: Only in more recent years, truthfully, is the R&D side of [things] being pushed. The Irish government realized to have longevity for these facilities, we need to get the R&D done here. So they actually pretty much forced the multinationals by way of what they get in grant aid and everything else to put R&D in Ireland. I would say begrudgingly at first these companies did. They started it in a small way and it grew and grew. Pretty much most of the medtech multinationals are doing R&D of some level to quite large level here in Galway.
X: How has that translated to a medtech startup culture?
JP: There are more and more startups in medtech. There are very successful subcontracting companies now around here; most of them are Irish-owned. They’ve built some really serious businesses, like Creganna—they started supplying the Boston Scientifics and the Medtronics. They’re a huge company now, a global business. On the R&D front there are lots of small R&D startups now, either spinouts from the universities which they’re encouraging at incubator centers, or just guys who have stepped out of the multinationals with ideas and have businesses up and going. There was none of that [when I first came here]. I can’t think of a company that was really set up as an original developer of equipment of products of any type in Galway.
JP: So what’s missing from the scene here?
X: Funding is very good [now], I believe, at the early stage. The government gives good grants to people who start up companies. There’s quite an active angel investing scene in Ireland—high net worth individuals who’ve made money out in industry or other industries and medtech’s been seen as a pretty good one to invest in. And there are now a growing number of American VC and PE companies that have set up in Ireland. So there is money, but I think what has happened, in general, though is that the medtech industry right now might not be attractive as it was to that second-tier investor—the one that comes in with the $5 million to $7 million to bring you to commercialization.
JP: Why are those investors dropping out?
X: FDA approvals have gotten a lot longer. It’s a lot stickier to get a product out the door. So development timelines have increased, costs of development therefore have increased, and return on investment suffers. Things like the reform in the [U.S.] of healthcare—which I think is a good thing, but investors see that as negative because there’s a tighter squeeze on prices people are selling equipment and devices at. The tide has turned against medtech in terms of investing as I see it. And also at the same time you’ve had the sort of upswing on these app/information and communications technology [ICT] types. A guy said to me in Silicon Valley, look, I can put a bet on a medtech company where $5 million isn’t even going to see it out the door—it’s going to need more money—or I could put 10 bets of $500,000 each on some kids in a dorm making apps to find the nearest Pizza Hut. What would you invest in?
X: How can a Galway medtech startup navigate through that environment?
JP: It’s very important to have a good board, and have well connected people—both on the financial side and on the industrial side. A lot of times people don’t think they need that; they think they’re clever enough themselves. That’s a mistake. So getting good people interested in your company and having good advisors is probably one of the best things in the world. And unfortunately [while] I think huge advances can be made in medtech in incremental product [advances], those don’t get funded. You’ve got to really aim for pretty big market opportunities. [Even though] there’s bigger risk, obviously—those go hand in hand.
Photo used under Creative Commons license from Flickr user Gian Michele
