Entrepreneurs explain what medical device startups should avoid
A lively conversation has ensued over at the Medical Devices LinkedIn group in response to a member who posed the question: What are the three mistakes startups make that could act as advice for the industry moving forward?
One user tallied up the responses and found that most of the mistakes and pieces of advice were related to poor planning, followed by the marketing process and issues with the team. Here's some of the insight and advice from those who have been through, or are going through, the process of starting up a company.
"Look for, find & then pick the right product: simpler, faster, smaller, less costly and easier to develop & get FDA cleared. (Save the big projects for the F500 or when you have the cash flow)." - Burrell (Bo) Clawson, president at ColonTest LLC
"The one mistake that seems common to early stage companies is the belief that the idea on the table is so great that it will conquer all obstacles and sell itself.[...] Of course you have to have confidence, conviction and a vision; but there is a big difference between a great idea and a reliable, scalable, product that solves a real problem. Many companies have seemingly gone belly up because the solution that was created really didn't have an unmet need." - Derrick Richardson, product development consultant
"Not having clear knowledge of manufacturing and servicing cost is not only detrimental, but may be fatal to a startup company. The sales price for the product had better include the cost of servicing the device with parts, labor, and including costs of transport and technical and customer service. When a device with new technology is released, however fantastic it may appear, it is evident that there will be bugs and things that need to be fixed. This better be in the equation when pricing is set." - Anne Chechile, director of customer relations at Ekso Bionics
"There are many other important items that need to be put into writing when a small new medical device companies is started. A few of these are for example: 1. Set aside some stock in the company for potential use to issue to key employees who stayed with the company during the hard times and you want to keep them for the long term future but you can't give large salary increase to them.[...] 2. Select a Board of Directors who each bring some value to the company on a continuing basis. Do not pay them cash for serving on the Board. Pay them in stock options after each year of service at a pre-determined price per option. 3. Never hire Directors that are just friends of the President and CEO." - Larry Petersen, medical device consultant at Medical Products International
"Regardless of the industry, business strategy is a hypotheses based on assumptions. It is within these assumptions that the seeds of success or failure are sown. If assumptions are not fully vetted the probability for success is diminished. In the medical device industry the hypotheses becomes problematic because of IP and regulatory hurdles and the fact that the buyer is not typically the beneficiary of the product or service.[...] Accepting assumptions without critical, analytical vetting is at the top of my list. Its absence consumes time, squanders capital and inhibits execution. Adequately funded companies will run out of runway." - Phil Brooks, consultant
"After funding, forecasting. We tend to be optimists and underestimate time required to penetrate the market. Slow penetration means a need for more funding." - Jon West, president at Biofluid Focus Inc.
"Conflict resolution. Particularly in start-ups, the team is young and doesn't have a lot of experience working together. They may be technically aligned, but not aligned on how to handle conflicts. Many times, I see the ‘Let's deal with that off-line' attitude. Instead, I would propose that start-ups deal with conflicts between members head on. It pays off in the long run." - Mike Kagan, product development and manufacturing consultant at M. Kagan & Associates.
"If your company is a start-up, you are going to be weak in some areas. It shows a lot more maturity to investors when a founder can be open and honest about the weakness. If a founder can identify strengths and weaknesses in a balanced way it will impress investors. If the founder can show how funds will be used to fill in the holes, they are more likely to secure funding." - Robert Packard, consultant at Packard Consulting
"Capability is the single most important variable in a start-up environment. In start-ups where the founders and senior leadership know their technology in and out, you will find a successful start-up. In start-ups where the founders and/or senior leadership plan to 'manage the business' you will fail. When your founders and sr. team know the technology they know where to take risks, where to skimp on spending, and how to fundamentally do what others in larger environments simply cannot do based on their silo structure of experience. [...] Capability is the most important, and the capability must be on your pay-roll doing the work with you side by side, day by day, and sharing your dreams, stress, and goals." - Robert (Jay) Jones, vice president of research and development at Pioneer Surgical Technology