Medical Device companies tackle monumental challenges on a daily basis. At the onset, it’s all about the seed funding to get started. Products have to be designed to meet strict functional tolerances, satisfy an unmet clinical need, meet harsh regulatory requirements, be cost effective to the end user and eventually provide a return on investment, as quickly as possible.
In today’s economic environment, with nationwide unemployment at an all time high, companies are holding on to their cash and investors are holding on to their wallets. Multinational, as well as, medium and small device companies alike are under “revenue attack”, due to the inclusion of the 2.3% Excise Tax, that was initiated in January of this year. The reality of this tax is not 2.3%, but some denomination higher, once they pay their expenses and overhead.
Given these circumstances, what are Venture Capitalists and Angel investors looking for in today’s medical device company, before they will consider investing? The first question is – When will I get my money back and in what multiple? PMA devices are having a tough go these days, because no one wants to wait seven to eight years and invest upwards of $ 50-100 million, before they see their first nickel. What then is the right combination of events that can enhance the exit strategy of a start-up company? If the exit strategy is to be acquired by a Multinational Device Company, then:
- Acquire a solid Intellectual Property position.
- Develop a 510k product that addresses an unmet clinical need.
- Align your company / product with thought leaders in the clinical space.
- Develop realistic milestones that are achievable.
- If outsourcing Product Development and Manufacturing, work with a well known medical device contract manufacturer, who has built products that were acquired by multinational companies.
- Align Regulatory Strategy with FDA requirements.
- Keep your organization lean.
- Use well traveled consultants where applicable.
- Publicize ongoing clinical results.
- Don’t jump at the first offer.
Take a deep breath and get ready for the wild ride, because there is no easy way to accomplish these tasks. If your plan is realistic from the start and your tasks are implemented on a timely basis; chances are you may get “taken out” with a great execution and little bit of good fortune.