When it comes to leading a startup, one of the most relevant and frequent conversations is about securing funding. Common questions such as how long will it take to raise and how much is needed are typically the first to come up. However, the most crucial question organizations should ask themselves is how they can make themselves more attractive to investors.
Completing the funding process can be long and tedious, especially in the medical device industry, making it vital to achieve proper positioning to accelerate the process.
How can you equip your company to stand apart during the funding process? This column outlines the four keys to keep in mind and help secure adequate funding for your medical device.
#1. Have an Awareness of What Investors Want
Risk is top of mind for every investor since their main driver is to make money without taking too many lofty chances along the way. However, when it comes to medical device funding, investors are generally concerned with three types of risk in particular.
- Technical risk: Will the idea work?
- Business risk: Does the device have a market with a legitimate need?
- People risk: Are the right people on staff to make it work long-term?
To truly maximize the potential for success, medical device executives must be familiar with these types of risks and the types of investors they are interested in pursuing to fund their endeavors.
Some investors look for high-risk, high-reward opportunities, while others want to avoid potential risk as much as possible. Either way, it’s essential to know what is a good fit for your specific organization or seek an investor who is a good fit for the goals in place.
#2. Roll Out a Robust Regulatory Strategy
Around 80% of United States-based medical device companies have 50 or fewer employees. Startups and small organizations are especially prevalent in the medical device space, and these types of businesses are often pursuing funding opportunities to cover various aspects of their businesses. Some of these initiatives include development, manufacturing and research.
One of the biggest challenges I have seen medical device companies face is the development of a robust regulatory strategy. This is one of the most valuable assets you can possess during the fundraising process since it allows you to easily highlight deliverables and critical milestones when pitching investors.
The primary goal of the executive summary within a regulatory strategy is to showcase two key aspects:
- The organization has the necessary knowledge and experience to secure funds
- The organization knows how to position the device to pique interest
The medical device industry landscape is continually evolving, especially when it comes to regulatory standards. Numerous changes to standards and regulations are already in place like ISO 13485:2016 and EU MDR and not to mention the ones coming shortly like the third revision to ISO 14971. Regulatory changes will only continue to occur as the expectations of modern medical device technology continues to advance. However, a well-defined regulatory strategy can help to curb the concern of compliance falling through the cracks.
#3. Establish the Business Case
Keep it simple. That’s an essential lesson to keep in mind when working to secure funding for a medical device. You don’t need a hyper-detailed business plan to get investors interested. Instead, conduct comprehensive market research and provide proof of concept and a working prototype.
When beginning market research, be sure to consider the following questions as a jumping-off point:
- 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?
Once market research is appropriately conducted and evaluated, it’s time to create a prototype. This device doesn’t need to be in its final stages or ready to go-to-market, but should still provide tangible proof of concept to investors. Prototypes can communicate the vision of the device throughout product development phase and allow all external stakeholders to gain a better understanding of long-term goals.
#4. Document Using a Right-sized QMS
While investors are looking at factors like risk and staff, many also consider the company’s design control documentation and risk management processes.
A comprehensive evaluation of a company’s medical device QMS (MDQMS) has become more commonplace in the fundraising process, but why? If there is no QMS technology in place, key processes are often missing and there is typically a lack of proper design controls, which may translate to a riper deal from an M&A perspective.
Design controls are the standing proof that you have created a safe device that meets requirements and user needs, which is a QMS must-have, regardless of the product stage, company size or exit strategy. Proper design controls are essential and equally important to the safety and efficacy of your device.
When evaluating your QMS, before pursuing funding, my expert recommendation is to establish processes around risk management that align with ISO 14971, the most up to date standard. It will be just as important for you to ensure proper design control and document management are in place, as well.
Put yourself in the shoes of a potential investor. What are they looking for to write a check? Once you have a good idea of what it will take, demonstrate your product solution in a way that meets these needs.
Investors are looking to achieve success, so whenever you can prove to them that their investment in your device will most likely be successful, there’s a good chance that funding will be secured.