Over the last 3 years, I have had to opportunity to meet startups during both conferences and individual meetings. Their context was most of the time similar, cash challenges to continue the journey:
- Investments were less accessible in the MedTech segment
- Step from development to industrialization was underestimated most of the time.
I’ve also learnt a new comment: “we have to pass through the Death Valley”. Preparation & planning (including a global identification of risks & potential mitigations) are key for always unexpected events.
During these meetings, we have shared the importance of the finance situation of the company, and always discussing the ‘very famous monthly cash burn’, a good survival indicator for everyone.
And according to CBINSIGNTS , it is true that the first reason startups fail is ‘ran out of cash/failed to raise new capital’. Is it really the cause or the consequence of something else?
There are other multiple reasons to explore as suggested in the above picture, and more than one for each individual failure.
Based on this highly valuable information, I would cluster them differently and share my own experience & recommendations.
Total of the scores is 195, lets cluster them in 4 related items:
- Business plan: 38%
- Development & process: 26%
- Human resources / team: 13%
- Finance: 23%
- Business plan
- At the origine of projects, always a smart scientific & medical team understanding the potential value of their innovation for patients & clinicians.
- But global market needs, competition, route to market including Regulatory aspects, reimbursements & inclusion in guidelines e.g. are less considered at the beginning of projects leading to either flowed business model or get outcompeted (Time to market & unique value proposition).
- To be honest, I have reviewed some very optimistic & aggressive business projections, even more, sometimes completely disconnected from reality of the field & competition, creating some doubts for investors about the real startup knowledge of their global ecosystem.
- Development & Manufacturing
- From development to commercialization & due to the complexity of development, a startup will face numerous challenges that are underestimated in term of time and hurdles: development itself, connectivity, cybersecurity, compliance to RA/QA, prototyping, suppliers’ selection, industrialization, human factors, supply chain etc…
- Even feeling the above, startups strategy may consist in keeping as much as possible all activities ‘in-house’, and less dependent to external partners. Main driver is sometime difficulties to understand the value provided versus an external development cost or support.
- In addition, a good product development also includes a development to cost, to manufacture, & to service leading to a strong competitive commercial offer at the end.
- Human Resources
- CBInsight highlights ‘not the right team’: I would suggest more specifically:
- not all functions or expertise within the team.
- Not enough collaboration and focus within the team.
- or a poor process for deciding, or too many people involved for all decisions, small or big ones.
- CBInsight highlights ‘not the right team’: I would suggest more specifically:
- Finance
- Thinking now about the finance challenges & main reasons to fail (ran out of cash, failed to raise new capital or disharmony among team /investors), my experience and personal feeling is that there always are accessible investments in good projects. Even in a shrinking context for MedTech, the main startup duty is to create a confident environment by respecting milestones & deadlines with the perception of all actors are understanding their ecosystem, associated risks and how to mitigate them. ‘Investors’ are weekly receiving dozens of opportunities to consider and are experts in a rapid selection either internally or with external consultants for a rapidly review those projects.
In conclusion: How to mitigate risks with 3 main easy-to-implement recommendations:
- Focus in your own areas of expertise & smartly invest in external support.
- Challenge your ideas & complete the picture with different points of view for your business model and plan.
- Partner partially or in total for the project with a global MedTech CDMO