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.