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Writer's pictureSteve Bell

Don't underestimate commercialisation of a new MedTech device

Time and time again I see MedTech startups be way too focused on the R&D side of things. They think that if they build a cool device, get it made, get it cleared ... then within two to three years - they will have a big company swoop in and just buy it.


Sorry to burst your bubble but it doesn't work that way (Average is 10 years now... so you are going to need to be able to commercialise your predictor die.)

If you look at this analysis of why medtech startups actually fail you can see the main reasons below


CBInsights of why MedTech startups fail
CBInsights why startups fail

You can clearly see the top reasons and you may start thinking "What's that got to do with commercialisation?" So let me explain why those reasons tie directly back to commercialisation, and how that one key issue will always kill your startup if you get it wrong.


Ran out of cash / Failed to raise new capital

On the face of it, you may say... what does that have to do with commercial? They just ran out of cash... or couldn't raise new cash. But stop for a second and start to join the dots. People run out of cash because they spend too much, or they fail to have enough income.

Spend to much = underestimating how much it costs to commercialise.

Income is sales = commercialisation.


Both are a direct impact of commercialisation. (And yes some do run out of cash before they get to launch - but hold that thought.). If you said you were going to sell 1000 things, and it was going to cost you $1Million to commercialise and sell those 1000 things. Suddenly it costs you $5 Million (because it is just way more expensive than everyone thinks), and you don't commercialise well, so sell just 500, at a lower price. Basically you are screwed and your profit will be hammered - 5X cost to commercialise and 50% of the revenues (or worse if price got hammered). That is a 10X bigger cash issue than you estimated. So - you run out of cash. It's really simple.


And if you are in that spiral of missing forecasts - costing way more to commercialise and getting lower pricing - would you be surprised in no one wants to invest in you. They either think you're delusional, think you have no control, or you have a failed business model. All of these mean that as you burn through your cash faster - you can't raise more to fill the hole. Double whammy and company death.


Ahhh but we never got out of R&D so how can commercialisation be the killer? Simple: If you didn't have a great commercialisation plan that is credible... you're not raising your Series A or B to go from research to commercial. A crap plan is a crap plan - and if it is an "lower importance afterthought" to R&D... You are doomed.


No Market Need

If this is your issue - then you didn't follow the golden rules of building stuff that people need and helping solve major pain points. But it can be that you just have terrible commercialisation plan (As sometimes people haven't got enough vision to know they have a need. Remember, most people didn't think they needed and iPhone - right? Take it of a someone today and they are lost.) - So you do have a great need - you just don't know how to market it. It is often that you don't know how to properly "commercialise" into that need and help people understand the need. Commercialisation is based on two things - market Push - where you go and "sell" into the market. But often for a un-recognised need - you need to create market PULL - which is the marketing side of commercialisation. Mess this up where the need has to be skilfully articulated and... you are dead.


And if you cannot articulate your go to market strategy, your unique selling proposition and your marketing strategy - most investors will also scratch their heads. Because if the clinicians find it hard to understand the need and value (Digital health products being a great current example) then investors will also struggle. Either way - get this wrong and you don't raise money... or you don't sell product. Both are death sentences for the company.


Got outcompeted

This is primarily about poor commercialisation. And of course you could have just built an inferior product to what the market has - but even that can be overcome by clever pricing - right pricing - and creating a competitive offering in other ways. What it usually means is - a bunch of R&D folks - non professionals in commercialisation - clinicians that have been customers not sellers - created a product - and ignored the massive 80% of the start up battle - solid commercialisation. Right channels - right messaging - right strategies - right tactics and $$$$$$$$$$$$$$$ (is that enough $$$ signs). In a company that spends $50 million on getting the product ready for Market - excpect to spend $300M plus to commercialise in the right way. Hire the right professionals and do some big big marketing.

If you got outcompeted it probably means you didn't have the right commercial plan, , budgets, and expertise.


Flawed business model

Commercialisation 1-0-1 is having the right business model - and it must be FROM DAY 1. Your business model is not a tag on to your idea and product development! Let me say that again... your business model is not a tag on to your brilliant idea!!!!

Instead it is the BUSINESS and business model that drives the development of the product. The need you are fixing must be a compelling business (Big enough and profitable enough). Then you put the "idea" at the core, and once you understand where it fits into the business model; only then do you develop that idea to meet the needs of that business model. Example: You have a market that can only pay $300 for a device - but instead of understanding that, you started from the product. So, it was designed without restrictions on the engineers, and the cost of the product soars to $280 per unit. How the hell can you sell it at $300... you can't. So what happens to the business model that's built after.... you do cost plus pricing to hit the 80% margins everyone wants - and now no one is willing to pay the crazy price yo build into your business model. (Feel familiar?).

There are 100 traps you can fall into if you start with an R&D company and bolt on a business. You will end up with a flawed business model - it is why so many medtech startups fail. Instead if you have a smart idea - build out what does the business and business model have to look like for success. And then constrain the engineers, features and costs to build a product that will fit into that business model. You have a chance.


If it cannot fit into a profitable business model - no matter what - abandon that business and get a better idea and build a better business. That's why it is critical you do all this commercialisation work so early - very very early - not later when you're about to get regulatory clearances - and then think "Okay - how are we going to commercialise this syringe that costs $8000 a piece?"


So what can you do?

Erm... get professional help early on. Stop thinking this is a lab project. Stop thinking the R&D is the important starting point. Build credible commercialisation plans that are scalable - credible and bankable. Build a viable business model and then make product to meet that need.


Head over to my course on www.howtostartupinmedtech.com and get step by step guidance on how to build your company with commercial at the core of it. All of the above issues that cause startups to fail can be minimised or even avoided. You just need to know how.






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