New research reveals that two out of three European medtech start-ups have little or no protection in place to stop their competitors taking their market share or stealing their IP.
This is the biggest red flag which is most likely to make investors walk away. Over half (55%) scored just two out of five in this category, 7% scored zero.
The research, which was carried out by startup rating agency Early Metrics, is based on the analysis of 1,774 European early stage businesses over the past two years.
The agency said the five red flags that prevent investors signing up for medtech companies are:
- Have you registered your IP? – 62% of medtechs scored two or less in this part of the rating process, something that will make most investors walk away from the deal.
- Founder’s ability to convince – one in five medtech start-up leaders scored three or less in this category, sounding alarm bells for most investors
- Availability of the leadership team – 42% of medtech startups scored just three out of five or less for this which investors could see as a lack of commitment to the business
- Business networks and contacts – Just 15% received top scores - 30% scored two or less out of five which is an issue for investors
- Speed is of the essence - Just one in ten medtech startups scored top points for this - almost a fifth (18%) scored just one out of five
The research also suggested that almost a third (42%) of founders in medtech startups do not invest enough time in their new business. The first five years of activity are crucial to develop the idea, source the right talent and work out the business model. Hence, investors might be put off by entrepreneurs that are only committing part-time to their venture.
Other results include one fifth (21%) of medtech business founders scored less than three out of five in their ability to convince. It means founders are not effective in convincing award juries, investors, advisors and obviously clients to support the business.
Investors want to see that start-up leaders are connected. Just 15% received top marks, 30% scored two or less.
Operational speed is crucial for medtech. Just one in five (18%) received high scores in this part of the rating process but 82% scored three or less. This is often down to low levels of resource in a new business or lack of time committed by the founding team.
Antoine Baschiera, CEO and co-founder of Early Metrics said: “There are always teething problems for every new business, the important thing is to learn quickly and keep moving forwards. Moving quickly is key and it’s one of the things every investor wants to see in a potential investment opportunity.
“Businesses are complex beasts, in order for them to fly or die we recognise that success is more the leadership team in just as much detail as it does the business numbers.”
