Entrepreneurs in the medical device industry face a changing regulatory landscape, skeptical investors, and a healthcare system resistant to change. But there are ways to overcome the challenge.
Investors, regulatory experts, and CEOs shared their experiences and advice last week at… Medical Devices Summit 2022 On the campus of the University of Washington Bothell.
Hanson Gifford, CEO and Managing Partner at investment firm The Foundry and Partner at Lightstone Ventures, said he looks for companies with a large potential market opportunity and a compelling solution. Gifford said in an onstage interview that a specialist or additional producer might not cut it.
said Gifford, who has helped launch more than a dozen medical device startups. “You have to give them a real incentive to change.”
Read on for more tips and ideas from the speakers and attendees at the meeting, sponsored by the Life Science Washington trade group.
Building relationships with the largest companies
Medical device startups can be overlooked by traditional investors, Gifford said, in favor of tech companies or digital health companies.
“But the one investor who can’t get away from the medical device space is medical device companies,” Gifford said. “And they have more and more money to work directly with early-stage companies, including early-stage startups.”
Gifford added that startups strike deals with larger companies that keep the door open for future acquisitions by anyone. He said it’s important to continue talking to potential partners as the product evolves.
“Tell them about your product, tell them what you’re going to do in the next six months, and then come back in six months,” advises Gifford. “Build that relationship, because companies don’t just buy a tool, they buy a relationship with the entrepreneurs.”
Well-known healthcare collaborators and researchers can also tap potential strategic investors or distribution partners, Gifford added.
Collect the data
The lawyer said that the path to selling a startup to a larger company is becoming more and more difficult Janice Hoganan organizational expert and managing partner at Hogan Lovells.
“It was like if the innovating company gets most of the work done through the FDA process, or comes very close, that’s good enough,” Hogan said during a panel discussion on trends in regulation. Now, startups generally also need to collect data to prove they can convince insurers and other payers to offset their products.
Paving the way for payment was something the buyer would take, Hogan said. “Today that doesn’t seem to fly anymore. It really devalues going out,” she said.
Contact the organizers
Hogan said the FDA is building its capacity to evaluate AI products and will soon release more guidance documents on the software. It may also tighten its reporting requirements for granting a 510(k) permit, which is the regulatory path many devices on the market take.
“We live in a really exciting time because the agency is very actively changing the way they handle products that have a digital layer. I would also call it messy and challenging.” Arna Ionesco Stoll, CEO of Seattle-based smartphone-based medical diagnostics startup Wavely Diagnostics, during a panel discussion on artificial intelligence in medicine. “I think it’s important for companies to be smart right now.”
Meeting participants said companies need to engage early with the FDA and come forward with a plan.
“There is a great deal of education that needs to be done in order for the agency to do its job effectively,” he said. Gabriel Joneswho was also part of the AI panel and is the CEO of Proprio, a Seattle startup developing an AI computer vision platform to support surgeons.
Build software infrastructure carefully
“Today, every device company should transition to becoming a digital health company if it isn’t already,” Jones said.
Startups should assign engineers early on to work on back-end data, such as communications with large cloud providers, Jones said, “even though it’s painful to take one or three engineers out of a clinical solution.”
The economic downturn means that some former employees of big tech companies may snag jobs at emerging medical device companies. And while not many startups can offer the same high salaries, they do provide a stimulating opportunity to make a difference in healthcare.
Jones advises startups to hire and use their engineering talent carefully. “A few great machine learning engineers from the right background can make a huge impact,” he said.