How to Scale Your HealthTech Startup in 2 Easy Steps
The truth is - and I’m sure you already knew this - scaling your startup is hard. However, there are a few patterns that have emerged for me that mark a firm focused on the absolute essential tasks to 1) raise the capital and 2) execute to deliver on key milestones. Here are a few thoughts on some actionable steps to maximize your chance for success. A few caveats first; my advice will be very specific to what I will call HealthTech (Medical Devices, Digital Health Solutions, and Diagnostics). I will also reference organizations local to Southern California, a Top 5 hub of Healthcare Innovation. I am writing for the company past the Friends, Family and Fools (FFF) round and has 1-2 persons currently, or prepared to be full time and “all in” with the startup. Finally, I have a particular focus on keys to success for firms led by underrepresented ethnic groups: African-American, Latin(X), Native American, etc., note - they have broad applicability.
Polish and Pitch 100
One mark of a well-funded startup is a concise and well-delivered pitch. This is not grown overnight. I think the best pitches are either honed by a serial entrepreneur or born out of a first time founder participating in a value-add accelerator. Signs of a great accelerator include:
a) A focus in your domain area
b) Access to dozens of potential advisors, mentors, management;
c) Modest or no equity stake in the firm;
d) Dozens of opportunities to pitch in front of investors
e) Highly ranked/regarded
* Bonus- They provide capital and/or strategic co-development opportunities
After or just before graduation from an accelerator, build a funnel of 100 serious sources of capital: Angels Networks, Prior FFF investors, Strategics, High Networth Individuals (HNWI), etc. I choose 100, because research suggest that of those 100, 50 will engaged in diligence and 25 will negotiate term sheets. Assuming a lead investor or investor group writing a check of $250K-$500K and and remaining investments averaging $25K, you can build the momentum you need to close a $1MM-$2MM round of funding. Some accelerators with this DNA include: ScaleLA, MedTech Innovator, and Magnify @ CNSI. ScaleLA has a particular focus on community, which can be a real differentiator for founders looking to tap new or nontraditional sources of capital. Some active Angels in LA include Tech Coast Angels and Pasadena Angels.
Community and Capital
I use the word Community to describe
a) People with the capital and inclination to fund your enterprise
b) Organizations that bring HNWIs together for conferences, investor days, etc.
Sourcing this community is not easy, but can be accelerated by starting with who you know. I am a fan of Adam Grant and his approach of adding value for colleagues in meaningful ways to nurture and develop strong relationships. I also like subsequently mining LinkedIn and seeking introductions to HNWIs with a clear articulation of why you want to connect. Proposing speaking roles at high-impact conferences (e.g. Biocom, SoCal Bio, LAVA StartUp Mill), and participating in high-impact bootcamps are time well spent. A day-long boot camp hosted by a corporate law firm with a large life science practice may net 2-5 new meaningful relationships. Also consider crowdfunding platforms with attributes that derisk the cap table for institutional investors.
An organization with a particular focus on connecting capital to companies with diverse management teams is MedTech Color (MTC). We formally launched last week at the Advanced Medical Technology Association (AdvaMed) conference with a gathering that included investors, large medical device companies (ex: Danaher, Johnson and Johnson and Medtronic) service providers (ex: Experien Group, McDermott Will & Emery) and early-stage firms (ex: Alerje and MemStim).
The are many challenges scaling a HealthTech enterprise. Ultimately the continued growth of a firm beyond prototype, out of the university and on to revenue generation involves focus on building a community to raise capital, execute and meet meaningful milestones. I’m looking forward to participating in a more in-depth discussion on how to scale your MedTech enterprise next week at Magnify. I hope you can join me then.
Kwame Ulmer will be kicking off our first ScaleLA office hours session on October 19th. If you are interested in coming on by, be sure to RSVP for a 45-minute time slot here.