The declines in tech fundraising and exits first seen in 2022 have continued through the first half of 2023, with the market for public listings "facing a new normal of stunted exit activity," according to PitchBook.
Still, there may be hope on the horizon. There have been 52 initial public offerings priced so far this year, which should outpace last year's 71 IPOs, according to Renaissance Capital data. By comparison, there were 397 IPO pricings in 2021.
Even for Augmedics, a medical device company that announced an $82.5 million Series D round last week, the venture capital market is forcing startups to think about fundraising a little differently. While Kevin Hykes, president and CEO at Augmedics, says this is "the toughest market" he's ever seen, he thinks finding the right market fit is one key for startups in a tight market.
Augmedics closed $36 million in Series C funding in 2021, $15 million in Series B funding in 2020 and has now raised around $144 million in total funding. Based in Arlington Heights, Illinois, the medical device startup uses augmented reality to help doctors better visualize their patients during surgery.
Hykes spoke with Chicago Inno about what stood out to him about fundraising in 2023 and what's next for the companyamid stunted exit activity.
This interview has been edited for brevity and clarity.
What did you find different about this fundraising cycle?
This is my sixth startup and I've raised capital for virtually every one of them over the last 17 years. This is the toughest market I've seen, there's no question about it. This is a tight market—a lot of conservatism out there. There's a lot of money on the sidelines, but they are reluctant to get involved and are saving their dry powder for their own portfolio companies.
We're thrilled to have two new, seasoned med device investors [CPMG and Evidity Health Capital] joining our syndicate. In an environment like this one, not everyone is getting financed. Actually, probably a pretty small number of companies are able to raise capital, but if it's in the right market with the right technology and the right syndicate, those appear to be kind of the recipes for success. And thankfully, I think we check those boxes.
What's next for Augmedics? How are you looking at going public considering how difficult that is for companies right now?
I think it's an option and it's certainly under consideration. We're not in a hurry to do that and thankfully we don't need to. The market is closed right now. There really are no IPOs happening, but I think by the time we're a candidate for something like that, it may be an interesting way to raise capital—but probably not for another 18 to 24 months.
What do you think about the latest boom in artificial intelligence? How has it helped Augmedics?
It's definitely a high-profile space that cuts both ways. There's tremendous interest in AI and AR [augmented reality], both of which are part of our system, and there's tremendous potential to improve health care with it. That draws investors to the space, but it also creates a fair amount of noise and new competitors. So we do spend a lot of time trying to help explain our technology in this very noisy market to potential investors.
What's next for Augmedics?
We're putting this money to work in two areas. The first is for the continued expansion of our commercial footprint in the United States. A second focus is the continued iteration of the technology and to try to introduce successive versions of the software and a second hardware platform in roughly 18 months that will allow us to further streamline the use of the system.
