I am about to offend a few of my Orthopedic colleagues, but I have to be honest. This is how I see it.
Many Orthopedic startups are taking in too much money too early.
I have noticed a pattern. Many orthopedic startups become infatuated with their ability to raise large sums of money (tens of millions or even hundreds of millions) before they have accomplished anything. They act big before they have earned the right to act big. They become wasteful with decisions and instill bad financial behaviors. They build out a company before they have real sales. They become drunk with cash.
Then for years, they spin their wheels without getting traction.
Many guilty orthopedic startups come to mind (this is where I offend people) – Moximed, ConforMIS, Benvenue Medical, Spine Wave, Omni, OrthoKinematics, OrthoSensor, SINT/Amedica, Baxano, Conventus, SpinalMotion, AxioMed, and Vertebron.
A negative side effect of these poor investments is they scare investors from reinvesting in Orthopedics and Spine startups. Once bitten, twice shy. Then when “game-changing” innovation comes along, the chance for funding is low because good investors have been gutted by failed incremental innovation with poor execution.
The drunken sailors are spoiling future investment for those innovators who can execute.
Please don’t raise more money than you need to get to the next major milestone, then “earn” the next round of funding. Take enough capital to de-risk the business and prove your point, build your company brick-by-brick. It’s not sexy as raising huge money, but hard work rarely is sexy.
Here is an example of responsible funding for an orthopedic startup.
FOUNDER: I have an idea for a new solution to a real clinical problem.
INVESTORS: Great! Here is a little bit of cash to should get you to a working prototype, a regulatory pathway determination, and maybe a reimbursement strategy.
FOUNDER: Ok, we did it! Working prototype accomplished. Now we need to get to Regulatory clearance.
INVESTORS: Great! Here is some more cash to get you to Regulatory clearance in your allotted time.
FOUNDER: Ok, we now have FDA clearance and/or CE. We need a bigger influx of cash to ramp sales and collect clinical outcomes data.
INVESTORS: Great! Here is some big money. If you hit your sales goals, you can come back for growth capital.