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Writer's pictureSteve Bell

So why do so many MedTech Startups fail?

Different estimates from research groups think that between 65% and 75% of MedTech startups fails within the first three years. That is a staggeringly bad hit rate. After spending more than three decades in MedTech startups - it is perfectly clear to me why this rate of attrition is just so high.

Let me try and tackle a few of the major reasons I have seen first hand for the demise of MedTech start ups. But there are many more. And sadly, most mistakes are easy to avoid.


It was just a bad idea

More often than not - the truth will out. I've seen way too many "cool technologies" come out that are just begging and searching for a clinical need to solve. Above all I see this out of University academia, where they do great primary research, but have little business understanding. They have have a great invention - and then go looking for a market. That is just backwards.

Or, I see clinician inventors that have a spin on a device that will make it 0.1% better than the other 500 devices currently struggling out there on the market. But they'd just love a small slice of that pie, and lots of their friends have told them how great their idea is.

I've seen amazing ideas... that are just utterly and totally a disaster of a business idea. And that has been both in startup land, as well as inside the divisions of some big companies.

It all starts with the idea- and no matter how much will you have to bend reality - if it is a bad idea... or a niche idea... eventually that business will fold because there's no market, no one sees value, or when the savvy investors look... they see the emperor actually has no clothes and will not invest in the rounds that count.

If it won't work... don't bother starting it. (You would image this is obvious... right? But the type of people that start the startups, think they can bend the Universe.)


It's amateur hour

I honestly think that most people do not really understand just how hard it is to have a success with a medical device and medical device business. How incredibly massive the task is to bring it to market, and then the almost impossible task of successful commercialisation. I am staggered by the amount of "have a go" amateurs I see that think they can just do a medical device start up - because they have "worked in healthcare". Yet they have no idea what great looks like for a MedTech startup. Yes they can get initial money, yes they can get the thing off the ground. But inevitably their lack of hard core start up knowledge means the blind leads the blind and the company sooner or later (due to a ton of simple, early misses) augers into the ground. Because once the fundamentals are set up wrong... the company is doomed.

I cannot stress enough that even if you have run a big Fortune 500 company division - that does not mean you are qualified to run a start up (go get some training and advice from experts.) It is a super specific sector knowledge that takes years to understand. Plonking "a never having worked in a start up" into the CEO position: because they ran a division of company X, is more often than not, an utter disaster. The skills to grow and milk a big company division - launch a product in a blue chip - are very different to those of building a company from the ground up (doing everything from the start) and raising money, and raising money, and raising money. Many people (clinicians, VPs in big companies, many investors) have never had to invent and build an actual company; follow all the critical steps of creation (regulatory, quality legal, HR, contacts, R&D etc etc) they are forced to learn on the fly and repeat mistakes that are so well known about by the successful serial entrepreneurs in MedTech.

Often more naive are the super gifted clinicians... that somehow think that their clinical skill is transferable to knowing how to run a start up. No. Sorry. It just like it doesn't work the other way around. Someone that has run and built multiple MedTech start ups in ortho cannot just start doing orthopaedic surgery on patients and hope it works out.

Whenever I see a group of first time - never before - amateurs running a MedTech startup... I count down the days to the failure, or the sudden management change (if they are lucky).


You can make a prototype... so what?

Too many times I've seen start ups (in and out of the big companies) have a great idea that cannot be reduced to a reproducible, affordable commercial product (and business if it requires services). Incredible engineers have built devices that only one small factory and two of their employees that are skilled in Swiss watch manufacturing can make the device and build it. The prototype is so complex... and artisanal... but through their unique skill, they can get it to work. But you can produce only six per year at a cost of $20,000 each. Trying to then get to production later (we'll worry about costs later.. is a meme I hear) of a product at $50 COGS and 1 million units per year... well. It just never gets reduced to practicable manufacturing. And in the rare case it does... of course it then doesn't work the same (I mean how could it?)

A MedTech start up is NOT a prototype house. That is not the point of the startup. Built with the hope of selling the three patents and half a dozen prototypes that worked in a rubber model to a major strategic. Time and time again (mainly from Universities) I see this pattern repeated. In 2024 the start up has to be able to go "all the way" on its own, to be any form of credible business worth buying.


Blind leading the blind

This is one of my pet peeves in our industry. I see so many incubators, accelerators in MedTech and I look at their management teams and advisor boards. I see people that have worked or currently work in Pharma or BioPharma. I see general investment consultants. I see "start up advisors" with no pedigree. I see people that have run previous incubators, or people from Governmental start up initiatives. That have never run a startup let alone a MedTech startup.. Sometimes if luck favours, I find a MedTech pro from one of the big companies. But seasoned MedTech startup pros are so few and rarities o these boards. I think this is one of the biggest failings of our industry.

I struggle to understand how anyone that has not lived, breathed, bled and died in a MedTech start up can have much (if any) real insight to the day to day struggle, short cuts, traps and mistakes. Sitting on MedTech company boards does not mean you know how the sausage is really made, day in and day out.

The Pharma one hurts me the most. With all the respect for colleagues in Pharma and biopharma - what do you know about MedTech and MedTech start ups?

I have done 30 plus years of MedTech devices and I am the first to admit I know absolutely ZERO about how I would start up a Pharma company or a biotech company. None... nothing. It just does not translate at all. Yet I see time and time again early companies being advised by successful Pharma people. And I just ask - why?

If you're in a MedTech start up - the people you need to listen to are MedTech start up people that have smashed startups into the ground and then had successes as well. In MedTech !!!!

Big company colleagues can certainly advise about what will happen when a device comes into their company. They can absolutely advise on what their company could be looking for, what good clinicals look like etc. But unless they have run a MedTech start up... they cannot know what it means. It is nothing like nurturing a big business, or launching products by a company with 95,000 employees and a 100 year brand name. These are two different worlds under one name of MedTech.

If you follow the advice of the big company execs... then expect your startup to do equally as well as their start ups do inside their business units. Get my point?


It takes way longer and costs way more than anyone thinks

Most start ups run out of funding at a critical time. No matter how well you plan... it always... always takes longer than you think and costs more than you plan. These are untrodden paths... so make some guesses - get a detailed plan - then double everything. Everything. Double for the worst and plan for the best.

You do not want to be at the edge of getting an FDA clearance, or running a pivotal trial and you run out of cash and time. At that point the trajectory is down hill. When you've done this enough... you see a plan and you just know - double it.


The cost is in commercialising

The image of a start up is often about the R&D team working diligently to develop that breakthrough product. It's all about the technology and the innovation. Innovation, Innovation, innovation.

Wrong.

My experience - the innovation is the tiny tip of an iceberg. The Quality and the Regulatory with their mountains of documentation are what absorb the huge amounts of time and resources in the "D" phase. Engineers will spend more time fixing stuff than inventing stuff.

But commercialisation is the monster that everyone forgets about until it's too late. It is the massive (and I mean massive) lift in terms of hiring, cost, time, resourcing. It is all too often the afterthought of the start up. "Okay we have a product... now how are we going to sell it? And who will buy it?"

Commercialisation is when you know if you will survive or die. If you idea was not just an idea... but an idea people are willing to buy.

Commercialisation strategy is often too late, underfunded (How much????!!) and undervalued in what makes a start up product successful. In 2024 if your start up does not have a well thought out path to commercialisation and profit, at about the same time are doing the first R&D: Most likely you should be carving your tombstone for the cemetery of the 75% plus of failed start ups in MedTech.


And so many more reasons...

For more real world insights into "How to Start Up in MedTech" follow Steve over at How to StartUp in MedTech

Steve has over 30 years experience in MedTech start ups and has been part of raising over $1.5B in funding, and was a leader in creating Europe's biggest MedTech Unicorn. His insights and "no B.S." advice can mean the difference between success and failure in MedTech Startups.

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