Why MedTech Startups Fail - Part 2
By Aidan Petrie, NEMIC Co-Founder
In February, I posted Part 1 of a blog sharing my thoughts on why MedTech Startups fail. In that blog, I outlined a number of themes that contribute to a misleading sense of assurance in the development of a nascent medical device or technology–namely because “they seem easy.” In Part 2, I will delve into other parts of that failure.
A key factor in the failure rate of nascent technologies is that–while the first part of a startup’s journey through development (and even through the FDA) is fairly direct and involves disciplines of clinical, engineering, usability, regulatory, etc.–the Go to Market aspects are very different and often outside of the knowledge base of the startup entrepreneur who likely has a science, academic, or clinical background.
What are those challenging go-to-market aspects?
1. The payment model
Is there a reimbursement code [CPT code] in place that can be tapped into; if not then is there a clear path to a code, or some other path to payment?
2. The customer model
Are you going to have to teach an old dog new tricks? Are you disrupting current workflows? Are you making life easier (or harder) for the folk on the frontline who are already overstretched?
3. The distribution model
Acquiring new customers is not easy in and of itself, but then getting the product to those customers is a whole separate consideration, and it’s going to require some mix of salespeople and distributors.
Hospitals have a process for evaluating the risks and rewards of new devices and diagnostics. It is wise to understand the components very early so that a device is designed with the criteria in mind.
Nothing here is new or insurmountable, but as the easy part grinds on, investors will want to know how the company is planning for success. Are you realistic about the time and costs involved? Have you raised enough money to weather a process that always takes longer than you want? Is the CEO one who can best manage development, the one who can drive market adoption?
New entries into the market are usually big plays rather than incremental improvements, and leadership does well to have a holistic view of all the areas that investors will look at rather than an incremental one. The latter stage challenges do not need to be fully articulated at the start, but they should be understood and emerge as the developmental cycle goes through its development stages.
Every company that comes through our NEMIC doors gets screened such that we know where they are on the path to market, at a holistic level; and then we write a program and bring together experts who can fill in the gaps and provide education appropriate to their position in 'space and time'. This ensures that the unknowns that can cause damage in the future are recognized and addressed early.