As we move through the Commercialization diagram, many activities and milestones have to fall into place in a timely and focused manner if a MedTech start-up is the get through the actual “start-up” process successfully.
After looking at unmet clinical/user unmet needs in recent weeks, we’ll now get into the second phase of the process, entitled “Pre-Seed”. All the milestones shown in this phase must be successfully completed if the start-up is to successfully move forward to the next phase.
These critical milestones include :
- a fully-functional prototype (FFP)
- a compelling proof-of-concept (POC)
- an IP plan including a provisional patent application
- an internationally-acclaimed scientific and clinical advisory group
It is important to note that the critical roles and potential gaps of the entrepreneur and his/her start-up team start to percolate to the surface during the Pre-Seed Phase.
Failure to identify roles and gaps in the team could result in failure. Is there marketing leadership to describe what the “minimal viable product” (MVP) needs to be? How close to the MVP does the functioning prototype have to be? Does the team have the technical skills and resources to build a functioning prototype and the modelling expertise to plan and build a compelling “proof-of-concept” (POC) model?
A compelling POC is absolutely critical to a start-up entrepreneur and the team. The closer the functioning prototype is to the initial MVP, and the closer the bench/animal model is to the ultimate human application - the more likely that investor interest will start to materialize.
In the case of my latest start-up, SoundBite Medical Solutions, the compelling POC was an actual .014 wire, attached to a functional shockwave generator prototype, that was able to cross an ex-vivo human artery containing calcified and fibrotic plaque - as close as possible to a real-life situation.
Money Matters
It is also at the Pre-seed stage that dilutive financing from friends, family and angels comes into play - one of the key challenges and first step facing every start-up. It takes money to design, build and properly test a prototype product. It takes money to create a compelling proof-of-concept study. And it takes money to build a compelling IP strategy and plan.
Early-stage, Pre-Seed money from friends, family and angels typically comes in the form of a convertible debenture (often discounted from 25 to 50%) based on the eventual share price negotiated between the start-up company and the seed round lead investor.
Rarely is technology priced at the Pre-Seed phase. This is largely due to the numerous technology, regulatory and product development risk factors that have yet to be addressed by the start-up entrepreneur and his/her team.