Proposed investor test threatens to cripple medtech innovation, warns MTAA

MedTech News: The Medical Technology Association of Australia (MTAA) has voiced concerns during a public hearing of the Parliamentary Joint Committee on Corporations and Financial Services, regarding the proposed changes to the Wholesale Investor Test.

The MTAA warns that raising the threshold for qualifying as a wholesale investor could drastically reduce the already limited pool of private investment – whether through venture capital or direct angel investment – available for medical technology commercialisation. They argue that wealth alone is an inadequate measure of an investor’s ability to assess the risks associated with private investments.

Matthew Versi, Director of External Affairs and Communications at MTAA, told Committee Chair
Senator Deborah O’Neill, “We recognise the importance of striking a balance between consumer protections and facilitating investment in privately held, high growth sectors such as medtech.

“However, we are concerned the current proposal to raise the threshold for wholesale investors will have unintended consequences that could significantly hamper investment in the medtech ecosystem, ultimately reducing Australia’s capacity to commercialise world-class medical innovations.”

Versi pointed out that early-stage medtech companies already struggle to secure sufficient venture capital, noting, “Raising the threshold would shrink the pool of active investors, limiting by as much as half the capital for early-stage medtech companies which already face challenges in accessing sufficient venture funding.”

Risk aversion is already a significant hurdle in the medtech sector, as reflected in venture capital trends. According to the Australian Medical Device Venture Investment report, the sector accounted for just 25.3% of venture capital deals and only 14.6% of the total $1.7 billion invested in health and medical technology. Furthermore, early-stage investments in the sector are disproportionately low, with only 4% of funds going to seed-stage companies between 2018 and 2023. In contrast, 64% of venture capital was directed toward later-stage ventures.

In addition to limited early-stage funding, a growing portion of medtech venture capital is flowing offshore. Over the past five years, 38% of Australian medical device venture capital, approximately AU $96 million, went to companies headquartered abroad including Bivacor, EBR Systems, Alimetry. Notably, these offshore deals accounted for 30% of all medical device investments during that period.

Pravin Siriwardena, MTAA’s Policy Manager, highlighted the unique perspective of investors in the sector, many of whom are also patients. He cited Baymatob as an example of innovation born from personal experience, where a biomedical engineer developed a medical device after experiencing postpartum haemorrhage.

Siriwardena stressed, “The social and health determinants should not be looked at independently in this discussion.”

Stuart Anderson, Program Manager for Clinical Translation and Commercialisation MedTech (CTCM), underscored the challenge of translating Australia’s innovations into successful businesses. He pointed out that while Australia holds close to 4,000 medical device patents, few companies are achieving commercial success comparable to older giants like Cochlear and ResMed.

“We need to be able to find ways to support new companies that come through those growth projects,” Anderson stated.

Versi concluded by warning that increasing the investor threshold could push more Australian medtech companies to seek capital abroad, stifling local innovation. Instead, he suggested that “an education and syndication approach will better ensure investor protections while still allowing Australians to invest in and benefit from the incredible potential that the medtech industry has to offer.”

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