Money, Innovation and Good Management 

The success of a new venture, even a great technology company, depends only partially on the effectiveness of the new technology to solve a problem. Verifying the ability of a new management team to plan out the agenda of an enterprise, motivate/manage people and resources towards measurable goals is just as important when making an investment as the uniqueness of the technology.

I attend lots of conferences each year and the theme I continually hear this year is there are fewer and fewer dollars being invested in early stage Medical Device companies. Innovation is being stifled and valuable products are being denied the public, all because of an unwillingness of investors to take a chance on new technologies and product categories.

I don’t think the problem lies with the lack of investors willing to put their money into well-run companies that have real solutions to nagging problems. Good ventures always seem to come up with the needed money to commercialize their technologies.

The problem lies with investors not seeing good management practices and experienced product developers within these new companies. There are lots of new and wonderful technologies being developed at universities, research hospitals and at small start-ups. What’s often missing in a technology start-up are experienced people who know how to develop products and business people who can effectively and efficiently run an enterprise.

Questions investors often ask are: “Who are the people developing the technology? Are they experienced enough to understand how to develop the device so that it provides a real benefit to its intended audience at a certain level of quality and at a reasonable price?”

This is nothing new. A few years ago I managed a major office of a product development consultancy for the development of medical device and consumer electronic products. Even then, many of the new businesses we worked with were led by very smart, young entrepreneurial engineers, who had great product ideas, but lacked experience managing complex product development programs. They too had trouble raising sufficient funds to allow them to develop their products.

If my money was at stake, I’d need to know that those running a new venture understood the following long before I’d write a check:

• Do they know how to make the hard trade-offs between ‘nice-to-haves’ and what’s necessary to meet a real need? In design, engineering and business.
• Are they experienced in Program Management? Can they effectively manage internal and external people and teams, and focus them on measurable objectives?
• Do they have a handle on what’s core to their technological success and what should be out-sourced? Nobody does everything well.
• Is there a realistic understanding of the cost for employees, contractors, research, prototypes, equipment, facilities, and regulatory needs
• Do they understand, value and reward the efforts of those on the business side of the equation? Engineers love engineers, but they often minimize the efforts of other disciplines.
• Are they aware that product development, manufacturing and marketing take more time than most people imagine?
• Do they understand how to market and sell their product? If not, do they have the wherewithal to qualify and bring on a suitable partner? Or are they infatuated with the technology and think it will sell itself?
• Do they understand the distribution and sales channels for their intended market?

Now that you’ve read my thoughts, I’d love to hear your experiences and views on Medical Device Investment.