Healthcare innovation is difficult, and the stakes are high: with the ongoing cost-cutting measures and high standard of care, the med-tech sector is in desperate need of technological improvements. During my time as a med-tech entrepreneur, we fumbled on some key aspects while building the business, and I hope the experience serves as a lesson to future entrepreneurs.
Our goal was simple, though not easy: designing a Swiss army knife for neurosurgery: 4 tools are used in most microsurgeries (including neuro, cardio, and ophthalmic surgeries), and surgeons are continually breaking their workflow to switch between them. Some surgical instruments saw a large amount of innovation in the 1950s, and things have gone quiet ever since. We aimed to build a single surgical tool to reduce surgery time by up to 15 percent.
Understand the sales process in detail
Many founders do not focus enough on sales. However, building a better mousetrap is different than changing surgeon behavior, which is different than building a lasting company.
Procurement policies change from hospital to hospital, country to county. Even the National Health Service (NHS) in the UK is famous for being small when it needs to be big, and big when it needs to be small. This is a nightmare when you want to drive positive change, so ensure you have a clear path to your first sales and your first thousand sales.
Lastly, engage all stakeholders early – not just the end-users such as surgeons, but nurses, admin, and others who are affected by a change in procedure. A salaried employee is incentivized differently than fee-for-service, and the case needs to be clear for all involved.
In a sector with high R&D costs such as healthcare, continually raising money needs to be top of mind. As with most, we severely underestimated the capital requirements to prototype and test the device. We also overestimated our ability to secure funds in a timely manner.
In a space where revenue will not be generated for many years, it is critical to have enough cash to cover R&D, regulatory, staffing, and patent costs. While there is a lot of money available for grant funding, in our experience this time is better to put towards executing on the product and getting market feedback.
A Patent is not as valuable as you think
A patent is a government-issued monopoly and is widely perceived as valuable. The number of patents granted annually is in the millions, though a very small amount of those leads to no revenue at all. Most importantly, once you file, the clock is ticking.
The first question every investor asked us is “do you have a patent?” We assumed this was one of the first things we should do and nailed down a generic though differentiable patent application. However, that time and money would have been much better spent on both R&D and commercialization efforts. At such an early stage of the product lifecycle, a patent was not needed to protect the product, and we could have kept the specifics generic enough to not worry.
However, on the regulatory side, it is worth engaging with notified bodies early, documents all your processes, and gets your ducks in a row when dealing with the FDA. Best to start with best practices and engage them early.
A lot has changed in healthcare innovation in the last few years. Firstly, corporate venture capital is making a lot more bets on technologies in the early stages. Their batting average from an investment perspective has improved significantly since a decade ago and this trend will only continue. With the global pandemic, there are strong headwinds driving shifts in healthcare delivery and R&D, which is a great time for positive change. The future is looking good.