MIT Sloan Health Systems Initiative
HSI Spotlight: So You Think You Want to Start a Medical Device Company?
On March 25, HSI hosted serial entrepreneur Jason Troutner, LGO ‘19 (MBA and MS Mech. Eng.) to speak during the lunch seminar, “How the generic startup truisms fall short in the world of medical devices”. Troutner used examples of four of his start-ups, two of which are still viable companies, to illustrate some differences specific to the medical device arena.
Be Driven by the Problem, Not Cool Technology
To illustrate the second difference, Troutner’s first medical device start-up team began during his undergraduate years. The team focused on gamifying physical therapy for ankle injuries. They were in their engineering dream world and used many types of technology. Unfortunately, they were solving a problem nobody thought was a problem. They were driven by technology, not by a market need. The path to market for a new medical device is a long one. At the same time, it is rare that the founders are also the potential customers for the product. Troutner emphasized that these two conditions mean it is essential that the team has the right empathy for the users of their product and are solving a problem that exists for them. Without this connection, the team is likely to lose motivation.
Minimum Viable Prototypes Don’t Really Have to Work
Troutner showed the audience a slide he called the Wall of Early Prototypes. Two were of projects that passed the “go” decision, but it was not immediately obvious which ones they were. In many start-up companies, say a software company, the prototype is a working beta site that potential investors can try out. Not so with medical devices. The minimum viable prototype exists to answer a specific market question. Troutner talked about Cast21 as an example. Cast21 produces a viable alternative to a plaster cast. It is lightweight, waterproof and breathable. The protype was made out of copper wire and green playdoh. When the team brought it to a conference, someone had to stay by the booth to make sure nobody touched it because it would fall apart. The prototype couldn’t be examined by attendees, but the Cast21 team were still able to use that opportunity to gather the market intelligence they needed to move the product forward.
Get Wholehearted Buy-in from All Stakeholders
A third startup created a terrific product that was enthusiastically endorsed by the intended users, yet the team (Troutner and two doctors) did not go ahead with creating a company. The product was a surgical needle driver that was easier to use than the traditional method when suturing a patient. Surgeons enthusiastically supported the device. However, surgeons were not the ones buying it. Procurement departments, whose incentives are not aligned with surgeons, could not see a case for the more expensive item. Sterilization personnel did not like the product since it was so difficult to sterilize. Troutner emphasized that all of the people who need to say “yes” for a device to go to the next step have to be onboard. All the stakeholders must be excited.
Market or Tech Risk, But Not Both
Troutner’s current company, started in September 2020, Teal Bio, produces reusable N-95 respirators for healthcare workers. Talking about this company, he illustrated his last point about the differences between funding medical device companies versus other types. Most start-ups have market risk or tech risk, but medical devices have both. They need money to make the device work and money to make sure somebody wants it. And, the timeline from idea to market is long. All of this makes venture capitalists nervous. Troutner’s advice is either to be Elon Musk or to find a way to bring one of these risks close to zero.
With Teal Bio, he and his team took most of the tech risk in academia and in a teaching hospital. Their research article about the technology was published in BMJ. By greatly reducing the tech risk, Teal Bio was able to show convincing evidence to investors that this product really could be produced. Luckily, their primary investor knew the respirator market very well and believed that the market would still exist when the device became available to sell.
In summary, Troutner’s advice boils down to four questions a medical device startup entrepreneur should ask themselves.
1. Are you driven by the problem?
2. Does your minimum viable prototype resonate with potential customers?
3. Is everyone who has to say “yes” on board?
4. Can you bring either market or tech risk close to zero?
Throughout his talk, Troutner made it clear that the road to a product on the market could take years. It’s imperative that the funding team cares enough stay for the long haul. He also talked about connection and empathy repeatedly. It is not enough to lob cool technology over the transom. Medical devices must be driven by a real need and resonate with clinicians and patients.