Successful medical device exits for startups often share a combination of business factors. As a business development leader with over 30 years of experience in the healthcare sector, I spend a significant amount of time meeting and speaking with start-up entrepreneurs in the medical field.
It is widely accepted that founders and CEO’s of successful startup medical companies often possess common personality traits such as grit, perseverance, persistence and confidence that help them succeed, but there are also common business factors to a successful exit, which I define as a conclusion of its operations or ownership changes in a positive and profitable manner.
Successful medical device exits can take various forms, including:
- Acquisition: A larger company purchases the medical device company, often providing a return on investment to the original investors and founders.
- Initial Public Offering (IPO): The medical device company goes public, allowing it to raise capital by selling shares on the stock market.
- Licensing or Partnership: The company enters into a lucrative licensing agreement or partnership with a larger corporation, which can include significant upfront payments or royalties.
- Strategic Alliances: Forming strategic alliances with other companies or investors can be considered a successful exit, particularly if it leads to substantial financial gains.
Similar to successful founders and CEOs having common personality traits, successful medical device exits for startups often involve a combination of other important business factors, 18 that I believe are the most important to a successful exit below.
- Develop a Strong Value Proposition: Ensure your medical device addresses a significant unmet need in healthcare, has a clear value proposition, and can demonstrate improved outcomes, cost savings, or efficiency.
- Intellectual Property Protection: Secure strong intellectual property protection through patents and trademarks to create a barrier to entry for competitors.
- Regulatory Strategy: Understand the regulatory pathway for your device and engage with regulatory agencies early. Complying with regulations is crucial for market approval and acquisition.
- Build a Strong Team: Assemble a skilled and experienced team with expertise in medical device development, regulatory affairs, and sales and marketing.
- Professional Advisors: Engage with experienced legal, financial, product development firms and M&A advisors to navigate the complexities of startups.
- Clinical Validation: Conduct robust clinical trials to generate solid evidence of your device’s efficacy and safety. This data is critical for attracting investors and potential acquirers.
- Reimbursement Strategy: Develop a reimbursement strategy to ensure healthcare providers are willing to adopt your device and that it can be financially viable in the healthcare system.
- Establish Key Partnerships: Collaborate with key opinion leaders, healthcare institutions, and potential distribution partners to validate your technology and gain market access.
- Risk Management: Identify and mitigate potential risks associated with your product and business operations.
- Quality Control: Implement robust quality management systems to ensure the safety and reliability of your medical devices.
- FDA Interaction: Establish open communication with the FDA to navigate regulatory hurdles effectively.
- Attract Investment: Seek funding from angel investors, venture capitalists, and strategic partners who can provide not only capital but also industry expertise and connections.
- Exit Strategy: Plan your desired exit strategy from the start, whether it’s acquisition by a larger medical device company, going public, or other options.
- Market Entry Plan: Identify the most suitable markets and establish a clear market entry plan. Consider global expansion possibilities.
- Data and Analytics: Leverage data and analytics to continuously improve your device and demonstrate its long-term value to potential acquirers.
- Keep a Lean Operation: Efficiently manage resources to extend your runway and reduce the need for continuous fundraising.
- Compliance and Quality: Maintain a strong focus on quality management and regulatory compliance throughout the product development process.
- Due Diligence: When approached by potential acquirers, be prepared to undergo thorough due diligence and have all necessary documentation in order.
The ultimate goal of successful medical device exits is to provide a positive return on investment for shareholders, founders, and investors while advancing the impact of the medical device in the healthcare industry. The specific criteria for success may vary depending on the goals and expectations of the stakeholders involved. Remember that success in the medical device industry may take time and persistence. Each startup journey is unique, and it’s essential to adapt your strategy based on changing market conditions and opportunities.
For more business insights, check out another blog by Lynne Lowry on finding the right match with your product development.
Lynne Lowry is Senior Vice President of Business Development at StarFish Medical. Lynne is a seasoned Business Development Executive in the medical diagnostic industry. She has held multiple roles in the diagnostic, life science and medical device space in her 30 year career.