What can MedTech startups learn from UPS drivers?
It turns out, a lot.
UPS delivers 5.2 billion packages to customers around the world every year.
How the heck do they do it?
In the 1970s, UPS began mandating that its trucks avoid taking left-hand turns.
Taking left-hand turns means trucks are sitting idle waiting to turn, wasting time and fuel.
It also means that those trucks are susceptible to collisions.
UPS’s onboard navigation system directs its trucks to use right-turn only routes, eliminating the guesswork for drivers.
The navigation system saves the company 10 million gallons of fuel a year, and saves endless hours by shortening routes from eight to six miles.
UPS is a pioneer in maximizing efficiency
This same concept of maximizing efficiency applies to leadership when you are seeking rounds of funding.
You may not know it, but your startup might need three different CEOs during the lifetime of your company.
That’s because each stage of funding requires different competencies from a CEO.
This article will help you to:
- Recognize what stage your startup is in
- Recognize the different skills needed at each funding stage (so you won’t hire the wrong CEO and get poor results)
Ready to dive in?
3 Stages of MedTech Startups
It may be obvious which stage your company is in, but let’s make sure we’re all on the same page.
Stage 1: Moving out of seed funding to the A round
The objective of Stage 1: raise sufficient capital to launch Stage 2, the product development stage.
More often than one would think, early-stage founders have a tendency to become enamored with their technology concept.
Looking for acknowledgement on brilliance of the concept can become the focus, with little emphasis on the realistic commercial potential.
Absent is a rigorous examination of all the objections as to why such a concept would fail or have little customer acceptance. These need to be addressed head-on.
Too much is left up to the investors to “get” why this is a successful concept.
This can contribute to a lack of understanding of what the key drivers are for the investor audience and what they need in order to feel comfortable putting energy behind a new innovation.
What are investors looking for?
They’re looking for the most direct path for their return on investment.
Your leader needs to have the skills to raise funds for the next stage of your company.
Early-stage startup CEOs should have a grasp of what investors need and want (as seen from their viewpoint, not the founders’ viewpoint) in order to close the deal.
Preferably, the leader has past successes with investors that have a reputation for backing winning ventures—the more sophisticated and demanding the better.
A legitimate and comprehensive sales forecast needs to be created for market potential.
Other leadership qualities for Stage 1 would include:
- Upstream marketing experience (understanding the scope of potential markets and customers)
- Investor relations experience (a knowledge of ongoing investor communications and ability to maintain investor confidence)
- Knowledge of product development (lifecycle timing and costs)
The question to ask yourself now: is your leadership in place to propel the company forward into Stage 2?
Stage 2 skills:
- Directs the steps of the product development life cycle
- Manages all aspects of clinical trials
- Possesses mastery of FDA regulatory strategies
- Knows the intellectual property landscape (copyrights, patents, and legal defense)
- Establishes and maintains quality systems and standards
- Possesses good organizational team building skills
- Prepares and manages clinical trials or other field tests (even if a formal clinical trial is not FDA-required) as needed
Let’s go behind the curtain to see what Stage 2 looks like.
Stage 2: Developing a product for market release
The time-to-market for medical devices can often be measured in years.
During these years, your technology may be eclipsed by newer technologies.
That’s why it’s important to never lose sight of continuing to address market need and acceptance, especially in fast-moving and evolving markets.
You want to anticipate issues early on so you can modify and adjust your plans to incorporate emerging technologies.
It’s time for fine-tuning the product based on clinical field testing
This is a significant milestone that may require additional funding rounds to fully finance. This includes anticipating the time and expense for modifying product improvements.
Now that you’ve successfully produced a product (with approval/clearance), it’s time to scale the product.
While having a prototype is necessary, scaling your product has issues of its own.
When you’re ready to scale, one issue that has plagued many companies is poor quality.
Some startup leaders who have not gone through scaling up of a complex medical product have discovered that product quality and reliability suffer when production quantities increase.
At low volumes, product quality can be at acceptable levels. But when it is time to move to full production, flaws begin to present themselves.
These flaws can derail a successful launch in a number of ways:
- Customer dissatisfaction with the product’s effectiveness
- Negative publicity for the company and its leadership
- Potential for FDA intervention
- Possible liability from patient harm
Assuming that you have solved these common problems and you’ve accomplished a scalable device, you’re now ready for full commercial launch: Stage 3.
Once you’ve had clinical success and are given clearance/approval by the FDA, it’s time to demonstrate that you’re ready for the next stage of funding: commercialization.
Stage 3: Commercialization—moving the product into the market
Everything you’ve worked hard on can be meaningless until you turn your efforts into sales.
If you do it right, investors are happy.
Do it wrong . . . and you may be getting a pink slip.
What does Stage 3 look like?
- You need a go-to-market strategy–a plan to acquire customers.
- You have to execute on the plan to acquire customers.
- You need to create a sales and marketing engine to acquire those customers at scale.
- You need patience to persist through a (sometimes) long sales life cycle.
- You must continually manage investor expectations (investors can be impatient!).
- You must scale up production to meet customer demand.
Can your current CEO tackle these challenges? If so, congratulations! If not, read on.
This stage can reveal that the leadership that was appropriate for Stage 1 or 2 may not be appropriate for Stage 3.
At this point you need to determine if your leadership has the ability to raise the funds and at the same time lead and execute the commercialization of your product.
Consider a CEO who understands and can produce a well-conceived go-to-market strategy that takes into account the most effective means to deploy the product into the market.
Prepare by having a thorough commercial plan for all the channels and costs (sales force, distribution partners, trade show presence, white label partners, etc.).
A CEO at this phase needs to have a solid understanding of the customers’ needs and wants, sales cycle time frames, and runway to revenue.
These are the typical skills you need to accomplish Stage 3.
Stage 3 skills
- Evangelizes the company value proposition to the market
- Acts as the face of the organization
- Creates a sales and marketing engine
- Executes go-to-market strategies within the selected target markets
- Builds relationships with key customers and supply chain partners
- Manages investor expectations (and anxiety)
- Oversees all operations (including financial burn rate and business activities to meet revenue targets)
- Knows exit strategies
Summary
Let’s wrap up with a cheat sheet, shall we?
In Stage 1, your goal is to raise sufficient capital to launch Stage 2, the product development stage.
Early-stage startup CEOs should have a grasp of what investors need and want from their viewpoint (not the founders’ viewpoint) in order to fund the company.
In Stage 2, you’re developing a product for market release.
That’s why it’s important to never neglect addressing market need and acceptance, especially in fast-moving and evolving markets.
In Stage 3, you’re advancing into the world of commercialization.
This is where you’re moving your product into the market, generating revenues, and preparing for exit.
Ready to advance your startup to the next stage?
If so, you can send a message to me by going to a secure online form here.
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You will receive an email with a calendar invite that includes meeting time choices that best fit your schedule.
During our discovery call, we will:
- Review your exact business situation
- Discuss your goals and objectives
- Design the best pathway to address your goals
- Realize the steps necessary to reach those goals
- Brainstorm specific strategies best suited to your needs
