TLDR:
- Healthcare startups backed by CVCs have faced challenges leading to their closure.
- Reasons for their failure include competition, excess debt, funding issues, licensing disputes, and fraud.
The healthcare sector has witnessed a significant number of corporate-backed startups going out of business, alongside fintech and consumer startups. This trend has raised concerns in the industry, highlighting several key reasons for the failures of these startups:
- Competition: Companies like Escape Bio faced insolvency due to competition from well-funded rivals in the market, leading to their inability to sustain operations.
- Excess Debt: Startups like Tarveda Therapeutics struggled with a heavy load of debt, eventually leading to their liquidation despite initial funding support from corporate backers.
- Expansion Exceeds Funding: Fluidic Analytics may have failed due to over-expansion and insufficient follow-on funding, resulting in the closure of the startup despite promising technology.
- Licensing Legal Issues: VHsquared got embroiled in a licensing dispute, which led to heavy losses and operational challenges, ultimately leading to the company’s liquidation.
- Fraud: Curonix (formerly Stimwave) faced legal troubles and bankruptcy due to fraudulent activities by the CEO, impacting investors and resulting in a Chapter 11 filing.
Despite corporate backing often providing a boost to startups, not all portfolio companies find success, highlighting the challenges and risks involved in the healthcare sector. It is essential for startups and investors to navigate these challenges effectively to ensure long-term sustainability and growth in the industry.
