This is a guest post by life sciences entrepreneur Mikael Totterman
I was surprised by a recent Wall Street Journal article, which reported that venture capitalists are now investing more in the eyes than in any other organ. In 2013, VCs injected $850 million into eye-related startups, more than they invested in traditional areas such as the heart and orthopedics.
Intrigued, I attended the American Academy of Ophthalmology Annual Meeting in Chicago earlier this month. to learn more. In discussions with venture capitalists, industry thought leaders, and physicians, I heard four main explanations for the rush to invest in the eye:
- Large and growing market with significant unmet needs
- Lower reimbursement risk
- Entrepreneurial and technology-friendly physicians
- A favorable regulatory framework
Large and growing market with significant unmet needs
The eye disease segment of the ophthalmic market is driven directly by an aging population. This includes common conditions such as wet macular degeneration. It’s the leading cause of vision loss for Americans over 60, but treatment options are still quite limited. Eleven million Americans suffer from some form of macular degeneration today. That figure is expected to rise steadily to 22 million by 2050.
In addition to the disease-based market, refractive vision correction represents a significant market opportunity. The refractive correction market is very substantial with over 150 million individuals in the United States alone needing vision correction across a broad range of age groups. Historically, LASIK-related companies (both excimer and femtosecond lasers) have generated substantial returns for venture investors.
Lower reimbursement risk
Compared to other medical technology markets such as orthopedics and cardiology, the vision correction market is much less affected by reductions in insurance reimbursements. Procedures are generally paid for directly by patients, and top physicians can charge premium fees. Market dynamics are similar to the cosmetic surgery market, which has been an attractive opportunity for investors.
Entrepreneurial and technology-friendly physicians
Definitive data are scarce, but the impression I have is that the refractive surgeon market is an early adopter of technologies. Most refractive surgeons I met appear to be very open to trying new approaches and tools. This contrasts with other segments of the medical market, such as general practitioners, where adoption is slow.
Favorable regulatory framework
Most conference participants felt that the regulatory climate is improving. The FDA is providing clearer guidance into what is required to achieve regulatory approval. This is very favorable for investors who are considering putting their capital at risk.
While it’s impossible to predict the future, things seem to be looking up for ophthalmic investing and entrepreneurship. I intend to continue to track this market closely.