After outlining several of the major Medical Accelerator, Incubator Labs, and Development Communities, this Executive Summary shares MIDI CEO Gregory Montalbano's insight into what an Accelerator or Incubator can and should be doing for its MedTech Startup entrepreneurial members. This Summary is related to critical questions, decisions, and challenges that MedTech startups are confronted with during their R&D development journey and early company formation and is intended to help support MedTech's entrepreneurs while mitigating risk.
Incubators and Accelerators have become prominent within MedTech due to their evident and quick-to-realize value. In essence, they help bring people together and give startup and emerging companies access to otherwise hard-to-obtain resources. Before any MedTech entrepreneur begins pursuing support and engagement from an Incubator or Accelerator, it's essential to clarify precisely what a particular organization's program can do for them.
Incubator Overview:
Incubator programs are designed to increase early-stage companies' chances of success by offering mentorship, financial investment, and additional support such as office space and access to technical resources, labs, etc.
Members of incubators typically pursue guidance and support around maturing their business models, technology, and other foundational elements of running a company. Those companies may remain in the incubator program for several years. The end goal for any incubator member is to graduate with the proper skill set to run and grow their own company successfully.
Incubators' structures can vary between their business models. For example, some Incubators function similarly to nonprofits, while others offer investments in exchange for partial equity of their startup members. Other incubators tend to focus on startups within their geographic region, while some focus on startups in a particular area of the MedTech industry, such as Digital Healthcare.
Accelerator Overview:
Accelerators are often thought of as synonymous with Incubators, but in truth, they are different and are multi-faceted. MedTech Accelerators are like a short-term, intensified incubator for startups with clearly defined goals for each entrepreneurial member participating. Startups participating in a MedTech Accelerator should be offered direct access to mentorship, networks, one-on-one coaching, and typically but not always, some level of funding.
Three months is not long enough to help a company accelerate. This is based on the complexity of developing devices and applications for the healthcare industry. MedTech Accelerator programs typically offer a more appropriate time frame, usually six months. Participating in these short-term programs is meant to accelerate promising startups with the idea to achieve growth more rapidly than they could on their own.
Early entrepreneurs need to remember that Accelerators can have a dual purpose. The first purpose is serving as the organizational method to "Accelerate" a startup. The second purpose is to serve as the mechanism for existing medical device manufacturers and healthcare organizations looking to identify and evaluate innovation within their marketplace.
Any successful MedTech company that has participated and transitioned from an Accelerator will tell you the value of connections within a network is number one. An Accelerator environment that allows its early entrepreneurs to forge strong relationships is often just as beneficial (if not more) than being funded.
Accelerator Types:
Accelerators can be diverse in their structure and serve specific startups and industry needs. Each Accelerator model possesses its motivations for supporting its programs, time, and capital investment, as well as implementing its metrics for measuring entrepreneurial startup success.
Five Accelerator Model Types are:
Independent Commercial Model:
Typically owned and run by a group of shareholders that are not tied to specific goals of any MedTech organization and governed by a CEO who sets the policy and process for selecting incoming startups, an Independent Commercial Model Accelerator can be a for-profit or a nonprofit organization.
These accelerators generally receive operating capital from sponsors, affiliates, or their management team and take equity in their startup members as the primary means of corporate income.
In these cases, equity may get diluted over time and may not generate returns for years. For that reason, Independent Commercial Model accelerators need to ensure a constant revenue stream for long-term financial viability. Such revenues may come in the form of conferences, consulting services, and the use of the physical space and shared services.
An entrepreneur's advantage for choosing an independent model is that there are no strings to any pre-existing organization. The potential downside of this model is that the Accelerator organization has a strong incentive to maximize the number of sponsors. Thus the entrepreneurs may find too many development and company influencers to support an ideal productive and meaningful collaboration.
Enterprise Based Innovation Model:
Enterprise Based Innovation Model accelerators select only startups with devices or technology that have a strategic value to their organization. These programs consist of a group of companies, which in most cases are a core part of the organization's innovation strategy. Grants or seed capital can be offered to entrepreneurs in addition to mentoring from the company's executives, subject matter experts, and affiliates. Additional incentives include access to equipment and other support services, including co-location worksites.
The value to the entrepreneur is the availability of resources. Another significant advantage is the opportunity to develop and validate a medical device with a market leader, a benefit that can't be ignored.
Risks for the Enterprise Based Innovation entrepreneur can include building a medical device that serves only the specific needs of the accelerator. This can occur by having the device's end-use and market application narrowed too early. Additionally, some entrepreneurs may be required to give some equity to their corporate benefactor, which may be less desirable for future investment or acquisition by competing companies.
Product Sector Amplification Model:
Like the Enterprise Model, this Accelerator type serves a particular purpose, which is to enhance a specific medical device or application. Generally, they are intended to increase the visibility and viability of an existing device platform from a large corporate entity or encourage the development of a product eco-system within a specific healthcare sector.
The advantages and disadvantages of Product Sector Amplification Model programs are essentially the same as the Enterprise Program, except much more specific and thus may impose a higher business risk.
Economic Development Model Accelerator:
Typically funded by local government, corporations, and others interested in building medical device companies and jobs in their region, Economic Development Accelerator programs typically require local engagement and favor local entrepreneurs. The purpose is to create an "economic and geographic concentration area" of health care businesses that target MedTech, Biotech, or Digital Health sectors.
While the program content for this model may be similar to other accelerator programs, the mentors, partners, and entrepreneurs that populate them tend to be locally based.
The advantage of the Economic Development Model is access to local mentors, partners, and collaborators. Typically, with economic development, these programs may offer non-dilutive capital, long-term low rents, and other perks that encourage companies to remain in the vicinity.
University Affiliated Programs:
These Accelerators can vary greatly, from tech transfer programs to full mentoring, development, and funding vehicles. Basic programs have co-work locations and mentoring services drawn from the University Community. The more advanced programs provide virtually all of the services that would be afforded to startups in independent commercial programs, including industry connections and capital sources.
Typically, these programs do not take equity in the companies they support, but alternatively, a relationship between the startup and the University tech transfer office can exist. This provides the University with a longer-term potential source of revenue beyond royalties.
To Start a MedTech Company or Not To Start a MedTech Company
….that is the Question:
Every entrepreneur must take a step back at the beginning of their discovery process to evaluate the when, where, and whys as related to time, energy, and financial investment, most notably around what technology.
The decision to launch a new MedTech company around any technology application should have several key factors that the entrepreneur must ask and consider. These Key Considerations help focus a Startup's Discovery, Definition, and Decision-making process.
Questions Entrepreneur needs to Ask and Answer during their Startup Journey:
Other Key Considerations for the Early MedTech Entrepreneur:
In addition to the questions listed above, startups must consider other aspects during their startup journey.
IP is a significant asset of a startup company. Startups need to keep in mind that obtaining a patent, particularly outside the United States, may be prohibitive after public disclosure. It is crucial that any startup file a patent application on the invention before it comes public.
Startups need to seek mentors, input, and networks. Find a good mentor and work with them regularly, network with other entrepreneurs, review ideas with potential investors, and evaluate the commercial aspects of your device or application with your potential customers.
Plan your business with a robust business plan early. It's ok if you pivot over time but start by developing an understanding of the market potential, competition, funding needs, and path to regulatory, productization, and profitability.
Pursue funding early and often to create opportunities. Commercializing medical technology requires quite a bit of capital. It's essential to Introduce your company to venture capitalists, angel investors, friends, and family in the beginning. They are all connections you are going to need. Before kicking off significant fundraising, it is necessary to determine how much funding is required and from where it will come.
The Playbook for Preparing and Presenting to a Potential MedTech Investor:
When meeting with an investor, an entrepreneur must be very clear about their device or application's purpose. Sometimes an informational exploratory meeting may work best, as long as the investor understands that this is the intent of the meeting.
Suppose the primary purpose of the meeting is to request funding, and the startup's presentation and the team is not adequately prepared. In that case, follow-up meetings, as well as funding, are improbable.
A Startup should Include the Following Points in the Pitch Meeting:
The startup must make its presentation interesting, engaging, and informative.
Tell a story and include examples, be memorable, be passionate, and most importantly, practice your pitch!
To learn more about the featured accelerators, incubator labs, and development communities accelerating cutting-edge medical technology of tomorrow, click on the link below to listen the MIDI Podcasts titled “The Ultimate Medical Accelerator & Incubator Lab Series” located within the MIDI Innovation Vault:
https://info.midipd.com/podcast
If you have any questions or comments about MIDI, any of the featured programs, or would like to schedule a complimentary consultation with Greg Montalbano about your business, you can reach him by phone at 1-631-467-8686 or email at innovation@midipd.com.
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