Dr Tim Fishlock, head of Technology Transfer at Health Enterprise East, on how MedTech startups can forge successful industry partnerships.
In the field of medical technology (MedTech) the process of translating your idea into a product or service is typically comprised of four distinct phases: research, translational development, clinical evaluation and regulatory approval, and adoption.
To successfully progress from one phase to the next you will need to call on a variety of different skill-sets, many of which will need to be sourced from third parties.
Finding and working with the right partners in this way is crucial for any aspiring entrepreneur, and the success or otherwise of your venture can hang on who you choose to work with along the way. Each of these relationships will have a different dynamic, different touchpoints through the process and will require you to tailor your approach.
Some of your key relationships will be with your funders. In the early days of research and translational development non-diluting grant funding from bodies such as UKR&I, the NIHR and SBRI Healthcare should be your first port of call. These grants can support technology development and make your company more attractive for future investment. Do ensure however that the grant you are applying for aligns closely with your technology roadmap. Not only will that increase your chance of success in the application process, but it will also lower your risk of becoming a so-called ‘grant junkie’, constantly chasing grants that inject cash into your business, but which don’t actually move your product closer to market.
For most, initial bootstrapping and non-diluting grants will only get you so far, at which point equity investment can make sense. Business Angels are vital for early-stage companies that do not have access to venture capital and have no revenues to pay bank interest.
Most angels can be found via the UK Business Angels Association. Angels are sometimes willing to invest relatively early in the innovation process, even during the translational development phase, but more often than not they will want to see some kind of clinical evaluation before parting with their money.
Do be aware that beyond the obvious downside of giving up a chunk of your company, equity investment does come with a number of strings attached. It can, for example, narrow your future options. Investors are looking for a big return, typically through an exit like a trade sale or initial public offering (IPO). They won’t usually be content to just take a slice of your profits each year.
Competition for equity investment is incredibly high. Most equity investors will see hundreds if not thousands of deals in a given year before they fund even one. Although most startups don’t have the luxury of choosing their investors, researching the various groups’ investment criteria is important to maximise your chances of success. Remember, investors are more interested in the experience of your management team, your IP position and the potential return on investment than in the science that underpins your technology, and so your pitch needs to reflect this.
If you turn up to a pitch with the same deck of slides you present at scientific conferences – you’ve got the wrong deck. Generally speaking, your investor pitch should be only 10 minutes, it should explain exactly what your product or service is and what is unique about it. Don’t be afraid to admit past failures. Investors like to know that if you’re going to fail, you’ve already done it with someone else’s money. Most importantly though, show them the exit. Show them how and when they are going to get their money back and at what sort of multiple.
Investors aside, the choice of partner is typically yours to make. But you still must do your homework. Take development partners for example. Not all manufacturers are made equal and whilst it might be tempting to opt for the lowest quote, there are other factors you need to consider. Are they ‘full service’ providing design and manufacture? Do they have appropriate systems infrastructure? For medical devices, do they have a quality management system conforming with ISO13485 requirements? Also, look at the company they keep. Is your prospective partner well connected, are they able to demonstrate a track record of long, enduring professional collaborations with reputable parties?
No matter who your partner, following a few ‘golden rules’ should help maximise your chances of success. Make sure you have a non-disclosure agreement and T&Cs that clearly lay out roles and responsibilities so there are no misunderstandings later on. Assumptions can be very dangerous and friendly understandings often backfire. Don’t ignore the intangible but very relevant aspect of personal chemistry: not everyone can work together and that’s ok. Better to part early and amicably than to end up in court together. Also think carefully about timing. Approach an investor too soon, armed with a half-baked business plan and you’ll be shown the door. A door which may never open again. Approach a patent agent too late and you could have lost your IP position and investment proposition.
In short, the innovation process is not something you can do in isolation, it’s a team game. Building that team can at first feel daunting but with these rules in mind, and keeping sight of your own objectives, you should find that you’re able to consider potential collaborations clearly, to find the best possible partners for your enterprise.