Securing funding can be a long and tedious process, and medical device businesses must work to position themselves as especially attractive to potential investors to maximize success and accelerate the fundraising process.
Jon Speer, Greenlight Guru
According to Alejandro Cremades, author of The Art of Startup Fundraising, it can take from six to nine months to secure funding for a business. For organizations in highly regulated industries such as medical devices, the fundraising process can present a unique set of challenges and mountains to climb.
These three tips that can help you stand apart from the rest to secure adequate funding:
Build a robust regulatory strategy
About 80% of U.S.-based medtech companies have 50 or fewer employees. Medtech startups often seek funding to cover the research, development and manufacturing costs of their devices.
One of the biggest challenges these companies face is developing the executive summary of their regulatory strategy. A strong regulatory strategy is one of the most valuable assets to have during the fundraising process because it allows easy access to milestones and other deliverables when pitching investors. A regulatory strategy should demonstrate that you know how to position the device to elicit interest from investors and that you have the knowledge and experience necessary to secure funds.
Keep in mind that regulatory requirements for medical devices keep changing, including ISO 13485:2016, EU MDR and the upcoming release of a third version of ISO 14971. Rising expectations for medical device capabilities will only continue to make these regulatory changes more commonplace. Building a solid regulatory strategy will become more critical than ever to ensure compliance.
Establish a business case for the device
You don’t need an elaborate, detailed business plan to interest investors. Thorough market research and a prototype to provide proof of concept are what they want to see.
Here are six market research questions to get started:
- Why is this medical device necessary?
- Does this medical device have a proven clinical need?
- Are there any other similar devices?
- Who is the end-user of the medical device?
- Who will purchase this medical device?
- What is the market size for the device?
Produce an adequate prototype
The prototype does not need to demonstrate its final, go-to-market state, but it should provide proof-of-concept to potential investors. When developed effectively, prototypes communicate the vision of the device throughout product development and allow all external stakeholders to gain a better understanding of long-term goals.
Know what investors want
All investors are trying to make money with minimal risk, but there are three specific types of risk most are concerned about:
- Business risk — Is there a market for the device?
- People risk — Does the company have the right people for the job?
- Technical risk — Does the idea work?
To maximize success in the fundraising process, it’s crucial that medical device companies familiarize themselves with these types of risk and also the types of investors. For example, some may look for low-risk opportunities while others opt for a high-risk, high-reward approach. In the latter case, they may be willing to invest solely based on ideas and prototypes, rather than concrete processes or finalized paperwork.
One more thing
Put yourself in the shoes of a potential investor. What do you think they need to see to write a check? From there, demonstrate the technology in a way that meets these needs. If you can assure a potential investor that a device will more than likely be successful, there’s a good chance you will secure funding.