How to Forge a Risk-Managed Path for Medtech Startups
Here are some tips to confidently steer your medtech venture through early challenges and build a robust foundation for long-term success.
Start with feasibility prototyping: Build prototypes iteratively, adding improvements at each stage. Balance core functionality and features to avoid over-complication. You can inspire investor confidence with concrete data from early MVPs.
Focus on rapid, cost-effective iteration: Keep your organization lean to manage resources efficiently. Reach proof of concept quickly by creating value incrementally with swift and cost-effective iterations. Use benchtop tests and lean builds to reduce expenses. Most importantly, build value at each stage rather than planning solely for long-term milestones.
Tackle the biggest challenges first: Use your limited initial capital to tackle the toughest challenges head-on. Prove concepts before scaling up. Validate feasibility with rigorous testing.
Assemble an A team and adapt it when needed: Regularly assess and adjust both internal and external teams for efficiency. Outsourcing prototype building can give you a boost, but be prepared to continuously reassess your CMOs. Pivot quickly if current team members, partnerships, or strategies aren't working.
Don’t get stuck looking for gaps in healthcare: It’s possible to turn scientific breakthroughs into marketable products. Prioritize research and data before market research to build a strong foundation. Root your early efforts in science, technology, and lab work, to make sure you have credible proof of concept.
Prototype and Iterate Mindfully
Osman Khawar, CEO of Diality, transitioned from a decade-long career as a board-certified nephrologist to a medtech entrepreneur. By early 2022, under his leadership, Diality secured $54 million in funding, including a $24 million Series B financing to develop a mobile hemodialysis system that decentralizes dialysis delivery with enhanced patient care.
"Any innovation or invention, no matter how brilliant, inherently comes with its own set of risks," Osman says. Kicking these early-stage risks down the road is a cardinal sin for him—it’s a surefire way to build a product that doesn't meet the required specifications.
Osman’s risk-management roadmap starts with a focus on building iteratively, adding improvements step by step at each stage. "Getting that iterative process going early is really important. Software companies do this well, but hardware needs to improve in this area," Osman explains.
Progressing sequentially gives you the chance to address fundamental questions as they arise, which, in turn, reduces the likelihood of major development issues down the road. He urges startups to, “Design build-test-learn cycles in early-stage development to get some quick answers.” By doing so, you can reduce both unknowns and uncertainties, and give your investors some confidence.
Feasibility prototyping, where you build an MVP (minimum viable product) that focuses on core functionality without additional features, is the backbone of this process—as each additional feature comes with its own risk factors. To achieve a balance between core functionality and improved specs, Osman’s advice is to harness domain expertise, both within the company and externally. "Sometimes your product ends up bulky and bloated because the wrong partner is chosen, or there's investment pressure to reduce risk too quickly. Iteration needs to be understood by your investors. If you don't tell that story well, you can get yourself in a bind," Osman explains.
Overall, by iterating thoughtfully on your MVPs, you can quickly gather concrete data to determine the technical feasibility of your solution and inform future and resource allocation. In line with this, it’s really important to pick partners that understand the value of iterative problem solving to save yourself from the external pressure of juggling multiple important questions at once.
Iterate Faster, Build Leaner
Lloyd Mencinger has a track record of driving success at both fast-growing startups and major strategics like Boston Scientific and Baxter Healthcare. Today, at Aqua Medical, his team is developing vapor-based endoscopic ablation therapy to treat type 2 diabetes and other gastrointestinal conditions.
In Lloyd’s experience, the most important thing to do during the early stages of a startup is to iterate quickly and economically. He shares, "It's really about how fast you can cycle iterations and how capital-efficient you can be.”
In order to avoid wasting time and energy on unnecessary hassles, you’ll need regulatory partners who understand your position. For example when Lloyd approached a large regulatory firm, they insisted on a costly 30-patient clinical study. However, a smaller, well-connected boutique firm was able to guide him to secure 510(k) clearance with minimal animal work and mostly benchtop tests.
Animal studies are great for validating efficacy. However, jumping right into them might cause you to burn capital. Lloyd shares, "We do a lot of things before animal studies because even those are very expensive.” Instead, he recommends, “Try to do benchtop tests, lean builds, different types of quick and inexpensive iterations."
The other thing Lloyd brings up is the lean approach to startup building. "Do not build out a big organization. Do not scale up thinking you need all these things. Keep it super lean because runway oxygen is your life," he advises.
Lloyd also emphasizes the importance of building value at each stage of development rather than solely chasing a long-term jackpot, such as an acquisition. “Take enough money to get to the milestone that will drive the value up in your company,” Lloyd advises. ”You might get bought along the way, but don't count on it. If you're building for acquisition, you may miss the window," he says. Create real value at each step, and ensure the company remains viable.
Follow Your Fear
Sam Mazin has a PhD in Electrical Engineering from Stanford and several prestigious awards under his belt. He’s the co-founder and CTO of RefleXion Medical, where they are working on his invention for improving cancer treatment with SCINTIX, a device that combines PET and CT imaging with radiotherapy.
Any startup is initially worth very little because of the high risks associated with getting to the finish line. By systematically addressing these risks – whether they are technical, clinical, market, or regulatory – you create value. "At the end of the day, you're trying to retire risk, which translates directly to value creation," Sam shares. This is why Sam lives by the motto “follow your fear.”
In his case, RefleXion faced skepticism when trying to raise money for SCINTIX. Building a machine that could rotate a linear accelerator one revolution per second was a huge gamble for potential investors. "We heard a lot of 'no' because the idea of raising $10 million to build a machine that you don't even know will work was daunting," Sam recalls.
With limited capital from a few intrepid investors, Sam and his team had to make every dollar count. They recruited David Larkin from Intuitive Surgical. Sam says, “He was not only a brilliant person in the PET imaging space, but an exceptional engineering leader. He brought a philosophy into the company that I thought was really critical for us to answer these questions early on.” The RefleXion team focused their resources on proving the concept before anything else, which meant tackling the toughest challenge first. By eliminating the deal breakers first, instead of knocking off the easier tasks, Sam laid a solid foundation to achieve the company’s next milestones.
Sam’s advice for others in the field is clear: Focus your resources on the biggest uncertainties first. This gives you and your stakeholders confidence to raise more capital to address the next set of hurdles.
Build a Strong Team and Be Ready to Adapt and Pivot
Carol Burns’ journey from critical care nurse to serial entrepreneur has seen her lead multiple startups to successful exits, including Intact Vascular's acquisition by Philips. As a co-founder of Cagent Vascular, Carol helped spearhead the development of the Serenator, an innovative angioplasty balloon that improves precision in artery procedures using serration technology.
For Carol, starting off, the first thing you need is a strong, but lean, core team. Not adequately assessing the team’s efficiency is a grave mistake. You need to ensure that every team member, whether internal or external, is on the right track and contributing to rapid progression towards company goals.
With a startup, it's all about getting things done. Outsourcing is a very fast approach to prototype building without a doubt, but CDMOs may lack the same level of intimate knowledge as internal team members, and this brings up its own set of risks. That’s why contract partners also need constant reassessment. Carol advises, “Know when to pivot and do it quickly. We had to stop and move on to a different group a couple of times. And it worked. We finally got where we needed to go.”
Carol’s advice is to remember that your team might look quite different as your startup reaches new milestones. It’s important to regularly assess and adjust not just your core team, but also the partners you work with over time and make swift adjustments as needed. Constant evaluation is key for both in-house and external teams.
Turn Scientific Breakthroughs into Marketable Solutions
Dr. Meesha Dogan, CEO and co-founder of Cardio Diagnostics, has more than a decade of expertise in bridging medicine, engineering, and AI to address cardiovascular disease prevention. Cardio Diagnostics' flagship product, Epi+Gen CHD, is a risk assessment test that predicts a user's 3-year risk of a heart attack, aiding in personalized prevention plans. The company is recognized by awards like Nature Research and Merck's "One To Watch."
The mainstream path to medtech innovation is by identifying market needs and finding ways to bridge them effectively. But that’s not how Meesha necessarily approaches innovation. “You don't always have to start with an unmet market need,” she explains. What she did with Cardio Diagnostics is to transform scientific breakthroughs into marketable products—backed by robust clinical evidence, of course.
Meesha’s team prioritized research and data before conducting market research. After establishing the scientific basis, they worked diligently to validate their product and educate physicians and stakeholders about the emerging field of epigenetics. “We worked with Intermountain Healthcare to validate it externally and ensure it showed the same promise in proof of concept,” Meesha says. This is how they transitioned from a successful bench product to a viable commercial solution.
By prioritizing technological breakthroughs and robust validation processes, Cardio Diagnostics has effectively reduced risk and created a product that meets clinical needs in a novel way. Meesha shows us that you can follow the thread in reverse, focusing on innovative technology to create viable solutions. On this path, robust validation through reputable external partners ensures product-market fit.