Hitting the Target for ViTAA’s Early Stage Financing Strategies

 *A quick note to blog readers: this is the first blog post in many months from my end, as I’ve been very busy with a number of initiatives, including ViTAA first and foremost. Thanks for reading and I’ll be sure to start posting more regularly again.

Financing a MedTech start-up is tricky, to say the least. No business momentum yet, no KOL network, no team - just vision, hope, lots of business potential and co-founders. And to top it off, in ViTAA’s case, a global pandemic with an unclear end in sight!

But first, I had to select the right financing vehicle for ViTAA’s early stage.

The concept of “tech value” at the POC (proof-of-concept) phase is difficult, if not unimaginable. Sobering technical, regulatory and financial risks lay ahead, with no guarantees they will be effectively addressed.

My first endeavour, once I was invited to come on board by Dr. Randy Moore and Dr. Elena Di Martino, was to build a world-class team. I had learned over my many financing activities that the investors’ assessment of the team was critical in the investment decision making.

In a MedTech start-up, several critical positions need to be dealt with, in the areas of product development, business development strategy, and regulatory planning. Harold Wodlinger, Dan Nahon, and Flor del Pilar Arana immediately came to mind.

I approached Harold to help produce a product development plan. His expertise and experience in software development were priceless. Dan Nahon rolled up his sleeves and helped me create an attractive business plan. Flor then joined the team and started to build the critical regulatory strategy so necessary to secure financing and ensure that the products and solutions developed by ViTAA meet the stringent governmental medical requirements for years to come.

With these critical people and plans now in place, we were now ready to execute a fundraising plan.

At this very early stage, it is virtually impossible to assess the tech value of a start-up technology. There are too many unaddressed risks to confuse the investors’ decisions; if technical, regulatory and IP risks are not effectively dealt with, a technology value is worthless. Proper execution of product development is critical to get the financing processes going.

Consequently, early-stage, pre-seed, pre-clinical financings take on the form of convertible debt, meaning investors loan money to the start-up, typically at 8% interest, with a right to convert to equity priced by the lead investor at a Seed Round, anticipated 6-18 months into the future. This is the point when the start-up has virtually eliminated most of the technical and regulatory risks before a FIH ( first-in-human) feasibility study.

My new CFO, Ugo Cloutier, and I cobbled together a first convertible note with a floor of $500,000 and a ceiling of $1.25 million. I am pleased to report that although it took longer than expected (due to the pandemic-related challenges of doing due diligence and raising money virtually), we announced a very successful closing, hitting our ceiling of $1.25m on February 23, 2021. It’s a credit to the entire team that with determination and relentless effort we were able to achieve this success in the midst of the COVID-19 era.

Despite the challenges mentioned above, we managed to build an organization, implement a Quality Management System, develop prototype software into V1 of our commercial product and establish a world class advisory board (SAB) ready to lead the world’s first clinical registry for aortic aneurysms (AA).

Seeing that ViTAA was gaining momentum, both in terms of business milestones and awareness in the Quebec MedTech ecosystem, the obvious next step was to establish another convertible note to further accelerate the path towards the second iteration of our predictive software (V2). This will be the final financial stepping stone to a full-fledged equity round by the end of 2021, at which point ViTAA will likely be well-positioned for strategic commercialization, supported by a robust Series A financing.

Key Opinion Leader (KOL) Strategies and Key Success Factors

In my experience as a MedTech start-up entrepreneur, the most critical business strategy leading to success involves KOL selection, their management and organization. This is particularly true in the USA, where regional and national KOL’s play a dominant role across all aspects of the MedTech commercialization process.

In the infographic above, the business milestones relating to KOL’s begin at the earliest stages of a MedTech start-up, in parallel with confirming a clinical unmet need, translating it into a precise product concept, and determining what is a compelling proof-of-concept. Without KOL input, these critical start-up activities may never be successfully executed!

What is a KOL?
A KOL is either a clinician and/or scientist that has developed and earned visionary leadership in their medical field. They typically have earned peer respect and admiration, and can influence future treatment solutions.

A KOL understands how to work in partnership with the private sector, and understands how to optimize the working relationships with innovative companies in order to achieve prominence with other key stakeholders in the their healthcare ecosystem.

KOL’s not only excel in clinical research, but also in how to build strategic relationships with VC’s, regulatory bodies and business leaders.

Equally significant, KOL’s are often able to help MedTech entrepreneurs map out the process involved in using a potential new product – that is, how doctors and scientists actually use the solution in their daily work. This is critical in highlighting any current design flaws and in developing a product that is fit for purpose.

How to Identify a KOL?
KOL’s are typically prominent at regional and medical conferences, and often dominate the scientific programs, panel discussions and debates. Most KOL’s are excellent speakers, and present their work in a very clear and compelling manner. Publications in peer-reviewed journals are regularly written by KOL’s.

What makes a great KOL?
In addition to impeccable scientific and clinical skills, great KOL’s demonstrate great social and public speaking skills. The best are not only comfortable with business interactions, but are very comfortable in conversations and relationships with Corporate Strategics and start-up CEO’s, as well as VC’s who constantly rely on their insight for clinical unmet needs and future technology solutions.

Why is a KOL strategy so critical for MedTech start-ups?
Developing a KOL support group (often comprised of KOL’s and Scientific Advisory Board members) is the best way for MedTech start-ups to effectively deal with several critical success factors:

• Developing a clinical validation program for your product that carries weight with clinical and regulatory players

• Giving credible endorsement throughout the VC due diligence
  process

• Providing guidance for start-ups as they navigate through the very complex reimbursement process in the USA
  

How do I build a great KOL strategy?
The best (and most simple) way to build a KOL strategy is to:

1.   Identify your key KOL leader – you need to know who you want before you begin networking your way to him/her. Typically you’re looking for someone with a significant North American presence!

2.   Then, beginning with your existing contacts – reach out and make use of key people in your own immediate ecosystem to lead you to the targeted KOL. The old adage “It’s not what you know, it’s who you know” applies here.

3.   Once you’ve been able to develop a relationship with that key KOL, work with him/her in expanding your KOL team accordingly. Ask them: “Who else do you think we should be including on the KOL team?” Given their prominence as mentioned above, they will undoubtedly have a strong network in every area of the ecosystem, including other KOLs that can help you validate or refine your product. A great KOL team starts with a great leader!

This sounds easy, and I understand it is more doable (given my experience) to tap into KOL’s as valuable resources. But I started somewhere too, and developed these relationships one KOL at a time.

Getting Ready for ViTAA’s First Adventures South of the Border

Having recently been involved as Co-Founder and CEO of a successful start-up, SoundBite Medical Solutions, a shockwave energy technology coming out of the University of Sherbrooke, I am familiar with the fun, work and critical steps and activities that lay ahead for ViTAA - and I know what a green light from key opinion leaders (KOLs) looks like…

We were just beginning the commercialization process as we entered the New Year 2020. Little did I know that the COVID crisis loomed, however.

One last important milestone lay ahead: spending some time with various American KOLs at a very important conference in Houston in early March of this year. Several hundred of the world’s leading vascular surgeons and endovascular interventionists would be there, and with Dr. Randy Moore’s extensive clinical network, I knew there would be no problem setting up appointments with the leading KOL’s.

One thing I learned through my many cardiovascular start-up experiences was that you had only minutes to capture their interest and curiosity.

Doing this for ViTAA – as with any new company -  meant coming into the meeting completely prepared with a technology pitch and a game plan for the USA that made sense to them.

But more importantly, at the beginning of each one-on-one KOL meeting, I made it a point to understand their personal as well as their professional profiles, and would start off with an innocuous question about one or the other (or both) and that any form of business discussion would be deferred to future meetings.

After four very positive sessions with major KOL’s from Harvard, Chapel Hill, University of Alabama and Texas Heart, it became even clearer that the unmet need for better mapping technology was significant. These meetings, combined with several panel sessions on the topics of the clinical complication issues associated with endovascular aortic repair (EVAR), strongly suggested a huge clinical need and associated business opportunity!

My excitement increased by the minute, and reminded me of the feelings I experienced as CEO of CryoCath when I began to realize that AF (atrial fibrillation) ablation was on the cusp of explosive growth. AF diagnosis and treatment was about to be extricated from the shadows, and the millions of AF patients in North America who had been largely ignored by the medical community were about to be saved from years of anxiety (AF patients, prior to the use of ablation, were five times more likely to suffer a stroke) and uncomfortable drug maintenance regimens.

Because of breakthrough diagnostic and therapeutic technologies like CryoCath, AF ablation in North America grew dramatically from 50,000 procedures per year in the early 2000’s to over 1 million annual procedures more recently. Monetizing this growth paid off accordingly, with industry revenues skyrocketing from $500 million US to over $3 billion in less than 10 years! 

Having lived through that unprecedented era, I can now see that same thing happening with aortic aneurysm (AA), a disease affecting millions of largely ignored North Americans. I say “largely ignored” because there is a lack of safe and effective diagnostic and therapeutic technologies to deal with this potentially lethal disease.

Flying back from Houston (exactly six days before the COVID lockdown) I counted my lucky stars that I was about to experience a second transformational process to better manage a major cardiovascular disease.

ViTAA was on its “launching pad”, much the same way that CryoCath was 15 years ago.

My mind now moved on to the next step - developing and executing a financing game plan.

The Origin of ViTAA, Part II: Getting Started - Critical Steps and Questions to Move Technology from the Lab to the Business World

My due diligence process on critical MedTech start-up issues had taken me several months to complete, but I was pleased to see that all of the “boxes” in the Pre-Seed phase had been checked off favorably.

i)             Was there a Compelling Business Case? Check.

ii)            Was there a significant niche with a critical clinical unmet need? Double check!

iii)          Was there a unique value proposition and solution with a strong supportive scientific understanding of the mechanism of action (MoA) and compelling proof-of-concept?  Check!

iv)          Does the intellectual property have specific claims that clearly describe and protect the unique MoA? Check!

I was now ready to move to the next critical step: organizing a meeting with the three potential Co-Founders, Dr Randy Moore, Elena Di Martino and myself, and to map out the steps towards a business partnership, including incorporation and - most importantly - a fair and unambiguous Shareholders Agreement.

I sensed that both Randy and Elena were a little unsure about the process – completely understandable, given my background as a serial entrepreneur and the fact that neither of them had been through the MedTech start-up process before.

I imagined they saw me as a “double-edged sword” - they saw the benefits of my proven business skills, but could they trust me to not take advantage of them?

To further complicate matters, I was suggesting the re-location of the technology from Calgary to Montreal, where my MedTech network was well established and the Ecosystem was more favorable. I also suggested changing the name of the new company to ViTAA from the original “VariReal”, and to use my tried and proven law firm, Fasken Martineau.

I decided that the best approach was to invite them to Montreal for a two-day business planning session.

My goal was to familiarize them with the strong local MedTech Ecosystem, including some Key Opinion Leaders. I am continually amazed by the strength and intellect of so many MedTech stakeholders in Montreal and Quebec overall, from KOLs in the medical field to the wide array of supporting institutions and businesses. I was hoping that my visitors would also see that the start-up success factors here were abundant.

Most importantly, I wanted us all to develop a mutual trust and respect so critical from the onset of a MedTech start-up.

One of the key KOL meetings was with Dr Kevin Lachapelle, a leading cardiovascular surgeon at McGill who had been conducting similar aortic clinical research on aneurysms. I was already 99% certain that ViTAA’s team and business model was the right fit, but Dr Lachapelle’s favorable response to the work of Drs Moore and Di Martino  convinced me that the business potential was real.

Further KOL feedback from the medical university networks in Montreal and Toronto cemented my earlier suspicions of the of the compelling clinical unmet need and business opportunity.

For me this was the last and most important step before going all in  - another check mark regarding multiple KOL validation of the unmet need!

Towards the end of the two-day session, we hammered out the key details of the partnership in a matter of hours and the process of incorporation. We all agreed that our respective roles in the ViTAA start-up were equally important and critical.

I appreciated the mutual respect and trust that rapidly grew out of our discussions and deliberations. Unlike some other high-powered scientists and surgeons that I had to deal with over my career, Randy and Elena were solid, down-to-earth people! I sensed we were all ready!

We shook hands (this was pre-COVID-19, remember) to confirm the deal, and, ViTAA was born!

Living Through a Real MedTech Start-up: ViTAA Medical Solutions - From R&D to Private Seed Financing and First Commercial Product

It was the Fall of 2015 at the University of Calgary, and I had been invited to speak at a biomedical engineering workshop about the various MedTech start-ups that I had been fortunate enough to lead from product concept through commercialization and exit, including CryoCath, Resonant Medical, CardioInsight and SoundBite.

Afterwards, I met Professor Elena Di Martino, a PhD in biomedical engineering and a vascular research scientist. We discussed her exciting research being conducted on aortic aneurysms (AA) with Dr. Randy Moore, also from the U of C and a highly accomplished vascular surgeon. The concept involved the potential of using AI-powered software to map and predict AA rupture.  

Over the many years in the cardiovascular field, I had become aware of the extreme morbidity and mortality challenges of unexpected AA ruptures. Thousands occur each year in North America, with a survival rate of less than 5%.

The only biomarker in clinical use to monitor AA patients and decide on when to intervene are CT imaging data of aorta size. Until the aorta reaches a certain diameter, patients and their attending physicians hope that premature rupture does not occur.

My interest was immediate and positive. The first criteria for a start-up, the Clinical Unmet Need was clearly there. But was there a Compelling Business Case as well? I needed to perform some business due diligence - and to revisit my MedTech start-up model and process.

I told Elena at that first meeting in Calgary that I was interested and would get back to her after I did my own homework. I flew back to Montreal that same day and started reading online info and talking to my cardiovascular KOL (Key Opinion Leader) network across North America.

The outcome was clear: there was a large, growing market with billions of dollars being spent on monitoring and treatment, often unnecessarily and/or with poor clinical outcomes. Add in a North American incidence of over 1 million new AA cases per year and double digit growth due to the ageing population, and we were looking at a clearly compelling business case!

I called Elena back and asked her to go over with me the research that she and Randy had done. I wanted to understand the product concept a little bit more, and most importantly, whether the U of C Research Team had demonstrated compelling proof-of-concept (POC) - defined as a functioning prototype performed on a lab model as close to the human condition as possible.

Elena happily took me through their work and the prototype mapping software results correlated highly with post-surgery test results.

I have relied on a strong sense of finding promising MedTech research and technology over the years, and in this case I found their concept extremely promising.

Next, some critical questions needed to be dealt with: Was the science and mechanism of action (MoA) of the product clearly understood and supportable, and was the background IP and foreground IP potential sufficient to support a true VC-backed start-up? I worked closely with with my long-time IP colleague and specialist, Jean-Nicholas Delage at Fasken Martineau and together we examined in detail the competitive IP landscape.

The answers, in the course of doing further due diligence, were clearly favorable - and ViTAA Medical Solutions then started down the exciting path from a product concept to a commercial start-up a reality!

It’s enjoyable to be able to put my own strategic commercialization model into real-world practice – the first two boxes in the slide above cover much of what I’ve written here today.

In the coming weeks and months I’ll be able to share with you the progression along each step of the way as we move ViTAA towards full commercialization.

A Start-up Entrepreneur’s Guide: Transforming Crisis into Opportunity

As I look back over my 30+ years as a MedTech Start-up entrepreneur, there were countless moments where I faced technical, regulatory, clinical and commercialization challenges requiring urgent response. Reflecting back on these events, I cannot think of any one of them that resulted in a permanent start-up failure. Was this due to good fortune,  good preparation or both?

Regardless of the nature and origin of the problem, crises management requires calm, collected leadership and teamwork, especially in the earlier, more fragile phases of a start-up where business foundation and momentum are in their primitive stages. Ultimately, the best form of crisis management is anticipation and preparation.

In the case of the COVID-19 pandemic currently ravaging the world, places like Japan, South Korea and Singapore have weathered the COVID-19 pandemic much better than other Western countries (such as Italy, Spain and the US).

Why is this the case? There are several societal and political reasons which are beyond my scope, but it’s clear that we must acknowledge this key factor: All three countries that are faring better also anticipated the pandemic well ahead of the rest of the world, and were far better prepared to mitigate the spread of the virus when it happened.

How can we apply these same learnings to the MedTech start-up world?

In the case of Japan, South Korea and Singapore, all three had learned from previous pandemics, where they were affected severely. And all three prepared for the worst-case scenarios in the face of the uncertain spread of a virus or disease. 

Similar to pandemics, the field of medical innovation is full of uncertainty and unexpected developments. Both internal and external developments require rapid and effective response by the entrepreneur and his/her team. Ultimately, effective anticipation and preparation of extreme developments can prevent them from becoming crises.

In the MedTech startup world, potential crises typically fall into three “buckets”:

·      Financial crises – most often this means running out of cash

·      Clinical crises - when the human studies do not produce favorable outcomes.

·      Leadership crises – when the entrepreneur and top team members fail to anticipate,
plan and react appropriately.

We can see the parallels in the third bucket – leadership – unfolding before our eyes. Stumbling, ignorant, unprepared leaders are causing real suffering to their people; while proactive, thoughtful and prepared leaders are seeing less of an impact from COVID-19.

Allow me to take you through two critical – and possibly catastrophic to the business - situations that I faced while building CryoCath, and how I managed to avoid them from turning into crises.

CryoCath, December 24, 1997
It was Christmas Eve and I was trying to close my first-ever financing  (Seed, $12.5 million) involving 7 different investors and their respective lawyers with their respective term sheet requirements. Just one day prior, an eighth investor (for $2 million) pulled out of the syndicate for unknown reasons. Often, a syndicate can be something of a “house of cards” – if one investor pulls out suddenly, it can cause the others to also pull out.

In short, the deal was in jeopardy a day before the planned closing, with the Christmas holidays and an empty bank account facing me!

Fortunately, I had begun to have some doubts about the eighth investor several weeks in advance, given some of the questions they had thrown my way. Anticipating their potential cold feet, I quietly shared my suspicions with the lead investor, BDC, and began thinking through a contingency plan to mitigate a last-minute withdrawal.

So on the morning of the 24th, I called each of the remaining investors and calmly and transparently explained the looming crisis (CryoCath was just weeks away from running out of money).

Rather than jumping ship however, the remaining 7 investors joined forces, and committed to not only maintain their investment commitment, but to fill the $2 million gap created the day before. I had identified the right investor – BDC – as a lead investor in this financing, and spoken to them ahead of time. So when the crisis hit, they were a steadying force that helped to pull the rest of the syndicate together and come up with the additional funds.

My openness and trust in them, along with proper preparation, were translated into their loyalty and support of me and the company.

At 8 pm on Christmas Eve, we closed on the full financing. I drove home in a celebratory mood, with $12.5 million worth of cheques in my pocket. This was testimony to the fact that anticipation, transparency, humility and determination could generate a great outcome - when just 24 hours earlier, my world might have been coming to an end!

CryoCath, June, 1999
Each Monday at CryoCath, I would start the week off with a meeting of the management team (at this point, the company had grown to over 75 employees, six of whom were direct C-Suite reports).

At one of these particular meetings in June 1999,  the makings of my first clinical crisis was about to unfold. I had heard rumblings (over several months) from my CSO that clinical efficacy results from our first ever pivotal IDE study in the USA were borderline concerning. This trial, involving a randomized double arm study with over 250 patients in 12 North American sites, had a budget of over $5 million and we were already 50% into the trial. There were millions of dollars and 12 months of hard work at stake! Typically, a failed pivotal clinical trial is a death sentence for a MedTech start-up!

Thankfully, we had anticipated the potential problem of insufficient cryoablation power before the start of the trial. We formed a special task force to develop a corrective action plan at the time, and were able to implement a solution within months. Result: the FDA trial and the company were saved from a disastrous crisis!

Remember, the best way to overcome crises – aside from avoiding them in the first place - is to anticipate them.  

Let’s take the COVID-19 crisis lockdown as an opportunity - an opportunity for you and your start-up team to step back, reflect on the innovation and financing challenges ahead, and anticipate what might go wrong. In this way, looming crises can be mitigated and even avoided.

Doing Better in Times of a Global Crisis

Over the past two weeks, I have struggled to accept and adapt to the constantly changing and challenging  world of the COVID-19 crisis. What do I write about in my series of MedTech start-up blogs, while at the same time thousands of people around the world are suffering medically and economically? It’s definitely not business as usual, and pretending that it is would be inappropriate.

At the same time, as a MedTech entrepreneur, I am constantly asking myself how, what and why. And in the case of COVID-19, the two prominent questions dominating my mind are:

• Why is washing my hands with soap and water so critical to the dampening of the spread of the virus, and what is the science behind it?

• How do I make productive use of the hours and days of being sequestered in my home?

Here is part of the note to my family, friends and business colleagues that I shared the other day:

“Eureka! Finally, I now understand the science around why it is so critical to wash our hands many times daily… and though you might have seen this elsewhere by now, I would like to share it with you:

A COVID-19 virus particle is one millionth the size of a human cell… so small, in fact, that it needs to feed off proteins provided from a new cell it is invading in order to make copies of itself (replicate) and further proliferate. These new proteins sit on a fatty lipid membrane surrounding the virus particle. This membrane, so critical to virus life and proliferation, breaks up when it encounters soap and water, and results in the death of the virus particle. This is why hand-washing is such a valuable barrier to infection…we not only wash away but we destroy the virus. Makes much more sense to me now!

Also, I thought I would share with you a message full of hope and inspiration that I recently received  from Philip Robb, Chairman of the Board of the Forest and Stream Club here in Montreal, when notifying its members of a temporary closing:

‘Finally, here is some inspiration as you work from home. In 1665, the University of Cambridge closed due to an outbreak of the bubonic plague. Isaac Newton had to work from home and he used this time to develop calculus and the theory of gravity. Shakespeare used the times when the theatres were closed due to plague outbreaks to write his sonnet sequence. Our own goals will be more moderate, but there is something to be said for the power of thinking and learning when you find yourself in a period of unexpected isolation.’”

And for the MedTech entrepreneurs across North America, let’s start thinking about strategies and technologies to better predict, mitigate - and even prevent - the next pandemic. This will indeed make the world a better place.

So, let’s imagine, invent, create or discover something! And please wash your hands regularly!”

The Art & Science of Strategic Commercialization

Historically, in the business world, salespeople and sales activities were typically seen and described as both critical and tactical. A question was asked and an answer given. A tactical sales plan was prepared and then executed. Sales goals were typically short-term.

Along those same lines, MedTech start-ups were encouraged to start sales and  grow them as fast as possible. Start-ups that didn’t achieve acceptable sales milestones were considered failures. VC’s focused on quantity vs quality of sales.

Times have changed! Today’s MedTech startups need to be much more strategic in their sales plans.

Why? There are two main reasons:

1.    The cost of a MedTech start-up generating global sales of a single product has become prohibitively expensive and unaffordable. VC’s can’t and won’t fund this commercialization strategy.

2.    The major Strategics, including Medtronic and others, are becoming increasingly desperate for new technologies and growth opportunities. According to a recent article by the Boston Consulting Group,  established multinationals (aka Strategics) must:

- Drive growth through disruptive innovation and expansion into emerging markets.

- Use mergers and acquisitions to increase scale and build complementary offerings.

This is where strategic commercialization comes into play. In a nutshell, strategic commercialization is a highly targeted sales process where a limited number of customers enter into a partnership process that clinically validates the product, its rate of adoption in a competitive clinical setting at a certain sustainable price point.

So, here are the steps and considerations a MedTech start-up needs to consider as it approaches the strategic commercialization stage:

·      Identify and secure up to 20 highly targeted KOL early adopters for initial sales

·      Obtain agreement for continuous two-way collaboration and communication

·      Continuous clinical support to optimize clinical success and feedback, ideally
organized around a PMST (post-marketing study) leading to a publication

·      Key endpoints around safety, efficacy and adoption

·      Determine mutually acceptable commercial price-point(s)

·      Fine-tune/iterate the product and support team process through real clinical
feedback

·      Position for strategic exit

Let me expand on the final point. An exit/purchase to a Strategic buyer will be greatly facilitated if the strategic commercialization process validates KOL acceptance, happiness and clinical adoption at an attractive price point.

Using these metrics, a Strategic buyer, using its global marketing and distribution infrastructure, can readily calculate the global market value of the start-up’s technology. And then… a deal is born!

Series A Financing: A Deep Dive into Critical Success Factors and the One Major Pitfall to Avoid

The past several blog posts have reviewed in some detail the critical steps, challenges and milestones for a start-up persevering through its Pre-Seed and Seed phases, ultimately translating an unmet need into a product concept and then a First-in-Human (FIH) clinical feasibility study.

Having now proven the safety and clinical feasibility of effectiveness in humans, the entrepreneur and his/her team now face the biggest transformational process in the start-up’s brief history - from R&D focus to customer and commercialization focus!

How does one begin?
The thinking and strategies supporting a Series A financing for your start-up should have begun at the moment you demonstrated compelling proof-of-concept (POC), close to when your fund-raising activities for Pre-Seed and Seed funding began.

Why so early?
After having positioned the start-up for angel and VC funding after the compelling POC, the business plan and pitch must focus on the next three critical Medtech business milestones:

·      A Seed financing round supporting FIH clinical feasibility study and regulatory approvals, followed by…

·      A Series A funded pivotal study and…

·      Early strategically-driven commercialization sales and revenue

Depending on the associated clinical risk of the product, and if your regulatory strategy is well driven in place, the pivotal study and the early commercialization could be performed as one programmed effort.

This is typically called a “post-marketing surveillance study (PMSS)”, where compelling and statistically robust efficacy outcomes are obtained while actually selling the product to the various study centres. St. Jude Medical (now Abbott) pioneered this approach from 2012-2015 when they supported 2 PMSS studies, FAME and FAME II, that demonstrated superior clinical and economic outcomes when using their FFR (fractional flow reserve) technology with stenting procedures.

This could be a very cost-effective way to not only validate the clinical value of the product - but also to validate the business case!

I first practiced this relatively new strategy, often supported by the FDA and Health Canada, with CryoCath in Europe from 2005 to 2007 with the game-changing cryoballoon ablation system, Arctic Front.

At the time, obtaining the commercial CE Mark was typically achievable after the FIH studies, then performed in a handful of centres in Canada and Europe. After the CE Mark, CryoCath organized a multi-centre PMSS across Germany and other selected centres in Western Europe. Once the Germans published outstanding safety and efficacy results across 10+ centres and 300+ patients, CryoCath’s exit to Medtronic for $400 million followed soon thereafter!

Along with this example of strategic commercialization, there are several other approaches, which I will get into in upcoming blog posts.

Another compelling reason to include your Series A business and financing strategies into your Seed Round pitches relates to investor anxiety and need.

Angels - typically the leading investors in a Seed Round - are intensely interested in what the Series A round is going to look like. How large and what will be the milestones associated with this money? They’re assessing the risk and the dilutive effect that the Series A will have on their Seed investment.

It is critical to effectively understand dilution- and risk-obsessed investors, juxtaposed with safety- and efficacy-obsessed KOL’s and early principal investigators (PI’s).

If the entrepreneur understands and caters to these needs and anxieties - success is more likely to follow!

Finally, always remember that the one major pitfall to avoid throughout the entire Series A financing and business milestone process is a lack of readiness: Don’t commit to anything before your quality system (and your instincts) tell you that the product and the company are fully prepared and ready for the critical early commercialization process!!

Series A and Series B Financing: A Quick Overview

How do you change a company from being focused on R&D partners and subcontractors to one that now has to listen and cater to the needs of the customer?

The answer begins with the complete understanding of the two remaining and critical phases that now remain:      

Phase 1:    Series A financing to support the critical business milestones leading up to early strategic sales and commercialization

Phase 2:    Series B financing leading up to and positioning the Company for a strategic exit (either an IPO or an M&A deal).

These last two stages are the most critical in value growth. Whereas the first four phases may result in a “tech value” of “$20-25 million, the last two, if properly executed, could catapult the value of the business to 10 to 20 times that amount. Start-ups with this potential are the ones that VC’s are constantly looking for!

Although I have always said that any successful start-up needs to start with a clear understanding of a customer unmet clinical need, it is the execution of the commercialization process where the rewards can be achieved many, many times over.

Transforming your start-up from a technology and product development focus to one that places customer demand and happiness at the core is easier said than done. Nothing kept me awake at night more at CryoCath than this transformational process, and nothing challenged me more.

By the time that CryoCath was ready for this process, over five years and $15 million of R&D money had been spent. We had close to 80 employees that were used to spending money, but not making it. Just generating the first customer invoice was an incredibly exciting but challenging activity! The concept of “customer service” was a new and very foreign role that required lots of teamwork and training.

We’ll look at the financing stages more in-depth in the coming weeks, but as you approach these last stages – and in fact well before then – it’s worth keeping in mind that ultimately, the customer is central to everything you do.