Panel: Market niche, patents critical to winning medtech seed funding (MassDevice)
A panel of startup experts at an Innovators Forum at Boston Children’s Hospital this week details the key elements of successful medical device startups.
A medtech product’s market niche and patentability are critical factors in winning seed funding, according to a panel of startup experts at an Innovators’ Forum at Boston Children’s Hospital this week.
The panel, moderated by the hospital’s cardiac surgery chief Dr. Pedro del Nido, discussed the key elements of a successful medical device startup.
“If you’re really meeting a need, filling a gap that’s out there, you’re going to find interest from strategic partners,” said Ron Lancaster, Boston Scientific’s (NYSE:BSX) director of corporate research. “But you really have to show how you’re solving a problem that’s out there.”
Johnson & Johnson (NYSE:JNJ) Innovation’s new ventures director, Ibraheem Badejo, said his company looks for products that improve patient outcomes while lowering costs. “What we really look for are products that address economic needs, but we’re also mindful to stay away from devices that will take a long time to reach commercialization.”
According to Broadview Ventures’ Dr. Maria Berkman, venture capitalists favor startups with strong intellectual property positions.
“Good IP protection is crucial. You have to have it. You can’t approach angels or VC groups or strategic partners without it,” said Berkman.
A startup’s management team can also make or break a deal, she said.
“Typically what we look for is a team that’s already in place,” Berkman said. “We want the founder, the inventor to be on board, meaning they have a real equity stake in the company, some commitment so they won’t take off in the near future. But we also want an expert manager. It’s a balance.”
Although enthusiasm for some technologies has waned in recent years, certain areas are still hot, said Berkman, particularly health IT. Also high on the list: “Smart” devices, such as wearable monitors, and “companion” devices, which are used with existing treatments or procedures, Berkman noted.
“And then there’s the ‘bread and butter, how to build a better mousetrap’ category, which continues to be about 30% to 40% of device activity,” she added.
Boston Scientific’s Lancaster advised budding entrepreneurs to thoroughly assess their product’s commercial risks before meeting with potential investors.
“When we incubate internally, we do risk assessments on all of the things that might trip up this product and prevent it from being a success,” said Lancaster. “If you do that … you’ll be able to go in with confidence and say, ‘I thought about that and here’s the data I have to support why I went to the next step.'”
GeNO CEO Kurt Dasse, who also co-founded heart-pump developer Levitronix, warned entrepreneurs not to ignore major risks, especially if they’ve already received funding.
“If you identify risks you can’t overcome, bail out, don’t burn through the cash, because you’re not going to get a 2nd chance,” said Dasse.
Market timing is also key, he said.
“One of the philosophies we’ve always followed is, ‘Don’t be the best, be the first,'” Dasse said. “There’s always going to be a better mousetrap out there.”
Dasse also pointed out that entrepreneurs don’t have to rely on VCs for seed money. Instead, they can apply for grants to fund product development and tap into the capital markets down the road.
“Literally, every product we did at Levitronix, we did with government money,” he said.