Sergei Azernikov

Recently, I was seating on a panel of a med tech meetup in Orange County. The discussion was around disruptive technologies impact on the medical device industry. One of the questions that the moderator asked us was to name your favorite startup and what makes it successful. That question made me to think and reflect on some of my personal experiences in startups I worked with through the years in various capacities. The purpose of this brief analysis is not to promote or bad-mouth anybody. Therefore, I’m not going to provide actual names for the companies I’m referring to. Instead I’m looking for some patterns that are common I believe for many startups out there. So, here is what I’ve seen so far…

The first type of a company, probably the most common one in the tech world, is the startup founded by one or two engineers. Technical founders are naturally focusing on technology and solution rather than the actual business opportunity. Because that’s what they have been doing all their careers, developed technologies. That’s what they are presumably good at. The major driver for those people is to solve a challenging technical problem, which may or may not be important. Consequently, it is not obvious how to monetize what was developed. Competition from established companies obviously doesn’t make life easier. With effective marketing channels and access to customers, these companies can easily overwhelm a small startup even with inferior product. At that point, attracting investment and talent becomes a very challenging task for startup founders.

When the company is founded by a seasoned entrepreneur, it often starts from a big vision, which makes it easier to pitch to investors and attract talent. This vision however, may be detached from reality, impossible to achieve and/or too abstract, to the point where it is very difficult to translate it into actual products or services. Founders with previous successful exit history and connections in the venture capital world may still be able to build a company based on their personal credibility, but in the long run, if the vision doesn’t materialize into a revenue stream, the future of the company becomes unclear.

Medical device companies are often founded around an idea for a certain product or procedure. The first challenge to overcome here is the FDA regulations. I’ve seen examples where devices where developed and became obsolete while waiting for 510K clearance. It is especially critical for software, which is changing often and quickly. FDA is actually making efforts to improve the situation, but it is still an issue. Another obstacle to deal with is the adoption rate and readiness of the market. Clinicians are conservative by nature, it is part of their training and rightfully so. Certain clinically proven procedures that have been around for many years might be extremely difficult to substitute. Even if there is a published data that shows advantages of the new approach for the patients. So, the medical device start up must have deep enough pockets to survive through the period of slow adoption and skepticism.



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