One of the main concerns that nearly every startup company will face as they experience growth is funding. Raising funds is often a long and tedious process. In fact, it takes anywhere from six to nine months from start to finish to secure funding, and for businesses in highly regulated industries, like medical devices, this process presents a unique set of challenges to navigate.
Medical device companies must work to position themselves as unique and attractive prospects to potential investors; however, it is also important to illustrate satisfactory corporate governance. Here are three key recommendations for device makers seeking funds that will help maximize success and accelerate the fundraising process:
#1 Solidify a business case for the medical device
The first step in securing funding within the medical device space is to build a business case for the device, keeping in mind this doesn’t require an elaborate plan. Instead, secure interest from investors through comprehensive market research and proof of concept.
To start market research in the right direction, be sure to ask six essential questions:
- Why is this medical device necessary?
- Does this medical device have a proven clinical need?
- Are there any other existing devices similar to mine?
- Who is the end-user of the medical device?
- Who will purchase this medical device?
- What is the market size for the device?
The next step is to provide proof of concept. In the medical device industry specifically, this often comes in the form of a working prototype. This prototype does not need to be in it’s final, fully accessible state, but instead should communicate the vision of the device to allow external stakeholders to gain a firm understanding of long-term goals.
#2 Build a robust regulatory strategy
Nearly 80% of medical device companies based in the United States have 50 or fewer employees. When it comes to startups and especially the medical device industry, it’s common to have a landscape made up of smaller organizations. These types of businesses, in particular, are often seeking funding to cover everything from research and development to general manufacturing expenses.
Throughout my career, one of the main challenges I’ve seen companies face is the failure to establish a concrete regulatory strategy. Firmly establishing this foundation from the start is one of the most valuable assets to have during the fundraising process. It creates easy access to key milestones and deliverables when pitching investors.
A successful regulatory strategy should showcase two main points:
- You know how to position the device to elicit interest from investors.
- You have the knowledge and experience necessary to secure funds.
Similar to many industries, the medical device landscape is continually evolving at a rapid pace. When it comes to regulations and standards, in particular, everything from EU MDR to ISO 13485:2016 and now ISO 14971:2019 should all be considered. The medical device industry is often met with rising expectations of medical device capabilities which will only continue to make regulatory changes more commonplace. However, establishing a firm and flexible regulatory strategy will help to ensure success.
#3 Find the right investor
The main goal for any investor is to make money with minimal risk. There are three specific types of risk most investors are concerned about:
- Business risk: is there a market for the device?
- People risk: does the company have the right people to get the job done?
- Technical risk: does the idea work?
To truly maximize potential success during the fundraising process, it’s vital that device makers know these differences and are also familiar with the different types of investors.
While some could be looking for high-risk, high-reward investments, others may prefer investing in low-risk opportunities. Regardless, when pitching investors, know who you’re speaking to and position your value proposition to address their specific needs. It’s important that you’re also prepared to identify when an investor may not be a good fit.
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Put yourself in the shoes of an investor. Is the device attractive enough to make you write a check? Build off of this idea and then demonstrate proof of concept and a regulatory strategy that meets an investor’s needs.
If you’re able to ensure a high likelihood of success, then the chances of securing funding will be improved as a result.
Jon Speer is the founder and VP of QA/RA at Greenlight Guru a medical device quality management MDQMS software and a medical device guru with over 20 years of industry experience. Jon knows the best medical device companies in the world use quality as an accelerator. That’s why he created Greenlight Guru to help companies move beyond baseline compliance to achieve True Quality in their medical devices.