Getting the funding & stages right for your medtech start-up

Dr James Graveston, a senior medtech specialist at innovation specialists Zühlke UK and former NHS hospital doctor, provides advice for start-ups with a new idea. 

At Zühlke we are often approached by medtech start-ups with early-stage funding looking for help with creating their device or app.

Unfortunately, a significant number of these have a funding-to-milestone mismatch. Usually, they have an unrealistic expectation about how long it takes and how much it costs to develop a medical device but have recently raised a round of funding and have promised to deliver a minimal viable product (MVP).

They have now inadvertently locked themselves into a difficult position: enough money to only get some of the job done, while everyone involved thinks they have the money for the whole job.

Ironically it is often those who have raised “too much” in the initial round who fall into this trap. It is much easier to think you can build an MVP when you have raised £200,000 instead of raising just £50,000 for a proof of concept.

With this in mind I’ll look at the route you need to take to launch a successful medtech start-up: and how, counter-intuitively, lower initial funding may help you get there faster!

The first step is understanding whether you are creating a genuine medical device: something which has a medical purpose and is covered by the medical device regulations in your target market. In the UK the regulator for these is the Medicines & Healthcare products Regulatory Agency (MHRA).

If the answer is “no”, then this significantly decreases both your cost and time-to-market as you can in theory have a couple of programmers knock an MVP together in the proverbial garage and launch it quickly to get feedback and revenue.

But it is a different story if you are a genuine medtech aiming at building a medical device, be it a digital therapeutic, diagnostic, or other software, or even hardware device. The requirements for a medical device are a lot more onerous, which significantly restricts your ability to develop an MVP rapidly and extends your time to market.

The first thing you need, therefore, before raising any money is a clear and specific roadmap to getting it on the market. This will include:

• Setting up a quality management system
• Development and testing using the appropriate standards (e.g. ISO 62304)
• Clinical trials, if required
• Submission to the appropriate certifying organisation (FDA or Notified Bodies)
• Receiving of certification in order to release to market.

This process can take several years and requires staff or consultants who are experienced in these processes.

I therefore recommend, before raising funds or even starting to build an MVP, that you develop this roadmap, with regular milestones that de-risk your start-up to allow funding to be obtained before release of the MVP.

As mentioned, these roadmaps in some cases can be extremely long. For example, a product I have been involved in has taken 15 years to get to market due to the complexity of the studies required to prove it works.

By focusing on this roadmap, with clear milestones which either de-risk the product or bring in revenue through grant funding, you will be much better placed to raise the correct amount of money at the correct time.

It is also worth considering the type of funding sources you look at when you are raising funds. A large percentage of VCs don’t have experience in the medical device space and so don’t understand the issues which delay time-to-market. This can result in pressure being placed on start-ups to release earlier than is possible due to an expectation mismatch between themselves and the funders.

I recommend you find VCs who have experience in this space so that they are more understanding of the timescales and costs involved in releasing a medical device to market.

So, you have your roadmap and the funding, and of course your innovative technology and a great team. If that wasn’t hard enough, you still need something that will seamlessly integrate into the real world of a busy hospital, GP surgery, or wherever it is deployed.

Avoid leading with tech itself, and instead be crystal clear about the problem your technology solves, how and when will it realistically be used, and where it fits easily and conveniently in the patient’s journey.

Equally important is understanding how you will get reimbursed for your hard work. 

Launching your device may seem like a lengthy process, but navigating the complexities of selling it to the NHS will be even more challenging. The intricacies and barriers within the NHS are too extensive to cover here, but I delved into them in this recent article for Med-Tech Innovation News.