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Starting a business in the orthopedic industry is a challenging — and yet, often rewarding — endeavor. The startup world isn’t for the faint of heart in any industry, and numerous speed bumps can pop up when bringing an idea to life in orthopedics.
Genesis Innovation Group, a medical device development and investment organization that supports early-stage innovators, helps orthopedic entrepreneurs focus their creative power into successful product launches. We spoke with Rob Ball about common challenges or pitfalls entrepreneurs face in orthopedics. Ball is the CEO of Shoulder Innovations and a Director of Genesis Innovation Group, the firm behind Shoulder Innovations, HAPPE Spine, Magnesium Development Company and more.
Assuming that an entrepreneur understands the basic steps to get a product to market, we asked Ball what actionable advice he would give to help them do that more successfully. In his own words, below are the five tips he has for startups in orthopedics.
1. Appreciate (and Have Patience With) the Process
In terms of anticipating the process, you must prepare yourself from the beginning and understand that within every single day will come really good news and really bad news. You have to learn to deal with the fact that despite being microscopic in size, things that seem massive in impact aren’t always so massive. It helps to have a little bit of patience with allowing the process to play out and not take every element of good or bad news as confirmatory or otherwise in the process.
Build and execute your plan. Understand that it’s not about your plan going in the wrong direction that you have to be disappointed about; it’s about how you respond to assumptions you made that were incorrect, then learning and adjusting. It’s more about how you respond to those circumstances and less about the actuality of the news or events.
2. Pitch to the Right Investors and Partners
Not every investor is well-suited for every stage in the lifecycle of a business. What you express as your goals and objectives should be a function of your audience in that stage of your investment.
You should certainly cast a grand vision but break that down into smaller pieces. Those pieces need to be appropriately associated with the investors who would share your same goals at the stage you are in as a company.
For example, a first-time fundraiser is unlikely to gain traction with venture capitalists managing a large fund. It’s unlikely to lead to a successful interaction due to the fit with your company’s stage and needs. You’re going to hear a lot of “No,” and those most commonly relate to stage and fit, not whether your technology is good or they believe in your leadership.
Focus your interaction with potential investors as first a screening exercise and then a selling or pitching exercise. You can paint with a broad brush in terms of who you approach as a first step, but quickly identify those who are not a fit for your business. There’s no reason to spend a lot of time engaging diligence with an investor who is not really a fit for your market, investment stage, technology or risk level.
Prepare your presentation from the perspective of the investor’s objectives. An investor who will invest in a pre-seed or seed round has very different objectives than one who will invest in a revenue-stage, fully regulatory-cleared, clinically validated device. Express the opportunity and the potential in terms that fit with their objectives.
An early-stage investor may want to see a 10x or 20x return on their investment, but they’re willing to be patient. Whereas, a later-stage investor may be satisfied with 3x to 5x, but they typically want to see a more clear line of sight on an exit or liquidity event.
3. Understand the Product Claims You’re Seeking to Make
The claims you make around your device can dramatically impact the regulatory strategy, and thus the timing to revenue and the amount of capital you may need to raise. Suppose you’re going to make a claim around porous in-growth. The clinical burden associated with validating that claim is fundamentally different than a regulatory device that’s not making a claim around porous in-growth, but happens to have a porous-like surface on the implant.
Sometimes we go into regulatory conversations with an idea that everyone understands the goals. However, the details matter in terms of identifying the claims you need to make about your device and the evidence you will have to produce to justify that claim. The research burden or regulatory hurdles are then considered as a function of the claims that need to be made.
The claims are directly related to the market opportunity. You don’t always have to make a claim about “better than” or “more than” or “less than.” Sometimes, you can have a device that you think can provide a “better than,” and you can allow clinical data over time to prove that fact.
For example, if you’re going to express that using your device will save time in the operating room, for you to claim that it saves time in the operating room requires clinical evidence that it actually does save time in the operating room. However, it’s frequently valuable to allow the market to conclude that on its own, which would lower the burden in the regulatory process.
Visit FDA.gov and read up on the regulations. You will learn a lot and understand the process. However, don’t underestimate the amount of normalized practice that’s not written in the regulation. As a medical device entrepreneur, you’re obligated to fully understand what you think the regulatory pathway is, but don’t forget the practical, experienced advice you can get from a demonstrated expert. That expert will bring knowledge based on experience you simply can’t come to understand by reading guidance documents. You’re going to need both sources of information to optimize your pathway.
4. Focus on Successful Demonstration, Not Just Speed
In the very early days, focus on patient outcomes and successful procedures, making sure those early interactions with the healthcare world go well, rather than how fast you can jam revenue into the system.
New entrepreneurs often feel that if they accelerate their growth rate and revenue, they will have more cash to drive the business. In reality, that’s normally 180 degrees from the truth. Higher-growth businesses require greater amounts of capital to sustain those growth rates. Typically, there’s a direct relationship between how much capital you need to deploy in the business and the growth rate. The higher the growth rate, the more capital is required.
The best way to cause a significant hiccup in the company is to present a device to market that doesn’t perform as intended. Take your time and go carefully, with less sensitivity to revenue. Once you have raised your confidence level for both yourself and your advisors as an entrepreneur, you can seek to press a little harder on the gas pedal and be more aggressive from a revenue generation standpoint.
There can be a tendency to write operating plans or forecasts that you feel obligated to demonstrate or show rapid revenue growth. However, you won’t grow rapidly if you fail to achieve positive outcomes in your earliest clinical experience. Demonstrate that the device works as intended, that you’ll be able to deliver it, and that it provides a sufficiently compelling benefit. Recognize that any new device represents a risk, and you’re asking a practitioner to accept that risk in exchange for the benefit your device provides. Make sure that the exchange is fair.
5. Show Up With Your Team
Every now and then, an entrepreneur will show up alone to describe their business to an investor. While it might be fun to look at your cap table and note that as a solo entrepreneur you own a large portion of the business, it’s truly rare for a lone ranger to own 100% of something worth more than zero. The entrepreneurial team and investors need to understand each team member’s strengths and weaknesses, so they can walk the pathway together, complementing each other’s strengths and weaknesses.
We’re all capable of generating a relatively myopic view of the world. That myopia is, by definition, incorrect, and failing to offset that tendency with the opinions of strong teammates will lead to failure.
Presenting a strong, talented team also makes the process less stressful and makes you more credible. You’ll be able to share the experience with other people. You’ll experience joy from successfully developing a company and helping patients, but just as much joy from the engagement with others. Don’t lose sight of the fact that the process is very much about the people with whom you spend your time on a day-to-day basis.
Rob Ball is CEO of Shoulder Innovations and Director of Genesis Innovation Group. Heather Tunstall is a BONEZONE Contributing Editor.
