Venture capital firms have poured $11.4 billion into the radiology industry since 2000, with peak payouts occurring in 2021, according to new research.
Since the turn of the century, about 2,850 different VC firms have made investments in 650 radiology companies. Spending activity plateaued four years ago, with nearly $2.2 billion spent on the specialty, experts detailed Monday in the Journal of the American College of Radiology.
The most funded categories across the specialty between 2000 to 2023 included medical devices ($3.2 billion), AI software ($2.5 billion), and biotechnology ($2.1 billion). These findings are derived from an analysis of venture capital transactions compiled by Pitchbook and underscore “the increasing role of private capital in shaping innovation within radiology.”
“Our findings substantiate that VC-backed innovation has played a pivotal role in radiology and will likely continue to do so, accelerating the adoption of emerging technologies and expanding market opportunities for startups,” corresponding author Denys Shay, MD, with the Harvard T.H. Chan School of Public Health, and colleagues wrote Dec. 15. “However, increasing VC funding in radiology may bring about ethical challenges with regard to safety, patient-centered product development, and appropriate implementation,” they added.
Radiology VC investments ranged from seed- to late-stage funding, with assets carrying an average investment valuation of nearly $6.3 million. Post investment, this figure climbed to nearly $51 million. Categories attracting the most investment by proportion of total capital spent included medical devices (28%), AI software (22%), other non-AI software (18%), healthcare services (14%), and biotechnology and drug discovery (18%). Altogether, nearly 270 clinical trials and 9,200 patents were identified for these companies, most of which were for devices and AI software.
“This suggests that VC firms are particularly drawn to categories like medical devices, where patents serve as indicators of innovation, securing competitive advantage and facilitating the recovery of development costs,” the authors noted. “Given the stringent regulatory requirements, such as FDA approvals, patents are crucial for market exclusivity, mitigating investor risk.”
While these investments present promise for the future of medical imaging, Shay and co-authors also expressed concern. Venture capital investments in radiology can create conflicts of interest between the “profit-driven motives of investors and the need for patient-centered innovation.” These firms typically prioritize rapid returns, which could lead to commercialization of new innovations that have not gone through rigorous clinical validation. Plus, VC-backed companies often focus on areas that generate high financial return, which does not always “align with the most pressing clinical needs,” the authors added.
“As the healthcare landscape continues to evolve, further research is needed to assess whether and how VC investments translate to improved patient outcomes,” they wrote.
