Why do so many talented Orthopedic leaders start promising new companies then later hit the wall?

I have noticed a pattern. After witnessing the birth of hundreds of orthopedic startups, I have come to the conclusion that it is way too easy to start a one-product company, and way too hard to grow one.

Let me explain.

Too Easy to Start

Today, it is just too easy to start an orthopedic company with a single new product. All you really need is one good product idea and built-in customers to get started.

At first, it’s all good. Starting a new company is exciting and intoxicating. The founder develops the new product, the patents are filed, outside suppliers do all the operations, you breeze through the FDA with a 510(k) clearance, and a few surgeon investors start implanting right away.  Then, your surgeon investors convince a few of their peers to use the new device.

All your first surgeon customers are located in a few MSAs so sales support is convenient and you can shuffle the kits for surgeries. Margins are good. Your early funding gets you through the first year’s inventory build and the first few hires.  You can taste the first break-even month. You are on your way!

Too Hard to Grow

Years later, you hit the growth wall.

Sales have plateaued.  Many early adopter surgeons have moved on to other new devices. They have found new “shiny objects” to play with.

The product development pipeline has dried up.  The second and third good products never materialized. Back to the drawing board. And of course, more new product development takes more capital.

Finding new customers in new MSAs requires more capital. You have to offer high selling commissions in order to attract mindshare with the distributors because you only have one product in your bag. Margins suffer. Supporting more distributors requires more instrument kits which require more capital.

And by the way, it’s hard to attract new funding once your sales have gone flat.

All of these challenges start to box you in. You hit the growth wall.

Take Home Message

Don’t start a company around a single product idea unless it is a ground-breaking new category.  You can certainly launch your company with one product, but you MUST have #2, #3 and #4 in the pipeline within the next 12/18 months.  If you have to, swallow your pride and partner with another smaller company and combine your products.

We all remember these promising companies that started with a single promising product- Vertebron, Archus Orthopedics, Amedica, Disc Dynamics, Spinal Restoration, SpineWave, Distalock, FXDevices, Suspension Orthopaedic Solutions, TranS1, and Baxano.

Early advice before you start: