In my quest to understand product development, I thought I would start at the beginning, literally, with startups. I recently did an interview with Tiger Buford. Tiger has over 25 years of medical device product development experience.
What makes a startup successful?
Lise, this is a big question, but I’ll give it a try. There are many many ingredients to a successful Medtech startup. It’s like a complicated gourmet dish. If any one ingredient is wrong it will bring the entire meal down. From my experience, all of the successful startups have practiced some or all of these principles:
- Focus, focus, focus on the unmet clinical need that you are trying to bring a unique solution to. Regularly test the market to make sure that your technical solution solves the unmet need. Taking your eye off the unmet need is certain startup death.
- Be frugal. Spend the company’s money like it’s your personal money. If you burn $15K per day, then you have to ask if you have created $15K of value for the day.
- Fail fast. Eliminate business risks and technical risks as fast as possible and as cheaply as possible. I have seen startups spend $20M to find out that the technology doesn’t actually work, when it could have been tested faster and cheaper.
- Stay in stealth mode as long as possible. There are more downsides than upsides to telling the world what you are doing.
- Knowing who your investors are and their intentions is more important than the amount of the investment
- Don’t drink your own Kool-Aid. Deal in facts and objective reality.
- KISS. Simple IP, simple legal, simple structure, simple. This may be obvious, but simplicity gives the team the best use of time, complexity robs time from the team. And time is everything. Time = cash burn = available life.
What is one piece advice you would give to a startup company?
The most important ingredient is the management team. VCs are known to invest in teams, not technology. The management team should be made up of people who can wear many hats and who thrive in chaos and uncertainty. And also, having startup experience with either a success or failure (it doesn’t matter which), is a big plus.
What are some of the challenges that startups face?
Money and Time. This is a double whammy because they are directly affected by each other. Today, Medtech startups are requiring more money and time to reach value-adding milestones because of longer regulatory pathways, smaller funding increments, and longer horizons to exit. Since the credit constriction in 2008, we have all seen the available investment funding shrivel up. There is less investment available for the same number of Startups. Keep in mind that startups don’t have income, but they have a finite barrel of money. The sole purpose is to reach a value-creating event (e.g.: regulatory approval, First-in-Man, etc) before the barrel is dry. If the event is reached, more incremental funding may be available.
Regulatory approvals. Under this administration, the FDA has become unreasonable, unpredictable and not driven by objective science. This unpredictable behavior by the FDA is challenging the business plans of Medtech startups and VC investors. More years are added to the FDA path each year for the same technology. Experts estimate that a startup must spend $90M to get through PMA approval for a Class III device today. Few VCs have the tolerance for this.
By contrast, the EU Regulatory bodies are reasonable and predictable. Therefore, all startups pursuing Class III devices are going to Europe first for regulatory approvals and clinical studies. Many Class II device startups are going to Europe first also. I really wish someone would document the number of Medtech companies fleeing to Europe, because there is a silent exodus happening right now.
Tell me about some of the startup situations you have been involved with.
I jumped into the startup world in 2008, after a successful career in three large Orthopedic device companies.
My first startup experience was VC-funded startup called NovaLign Orthopedics in Memphis. NovaLign was spun out of an incubator in Atlanta called The Innovation Factory. I was the 2nd hire and had a large voice in the business. The technology that the company was based on was “dead on arrival”. So, in my first month on the job, with the Board’s blessing, the CEO and I scrapped the technology and started over. 12 months later, I had saved the company with a completely different technology and IP that addressed the same unmet market need. During this 12 months, I also transitioned the company from outsource R&D to insource R&D as hired the engineering talent.
My second startup experience was Angel-funded startup called Active Implants with the corporate offices in Memphis. I was brought into to lead the Israeli-based team from a Research-focus to a Development-focus. They did a great job in bringing a game-changing polymer meniscus replacement from Research, through Development, and into Manuf8acturing and Clinical Studies in Europe. After a CEO change, the company is now moving its headquarters to Europe. I am helping out during the transition.
Thanks for sharing your information and experiences, Tiger. This certainly helps me to better grasp what is involved with “starting up” a medical device company.
Stay tuned for further blogs on the product development subject as I continue my research…