If you’re a medtech entrepreneur looking to sell your medical device business, Frank Jaskulke is a great contact to have in your network.
He’s VP of intelligence at Medical Alley and the head of its Medical Alley Starts program, which offers resources and support for healthcare startups. His Minnesota-focused organization has worked with more than 360 medical device startups just in the first few months of this year.
Medical Design & Outsourcing recently spoke with Jaskulke about how medtech entrepreneurs can make friends before they need them on the path to an eventual sale of their business.
Know the market and work your network
Medical device entrepreneurs — and especially first-time entrepreneurs — often have a big blind spot while developing their technology.
“They fall in love with their solution instead of falling in love with the problem, and they can get so focused on their thing that they forget there are other people working on solving that same problem — and who might have a better solution, a more competitive solution, or just one they can bring to market easier,” Jaskulke said.
He recommended keeping up with the latest on your market, competitors and potential buyers by reading trade publications like MassDevice and MDO, attending networking events like DeviceTalks and keeping up with associations such as Medical Alley, MassMedic, California Life Sciences and AdvaMed.
Related: Digital health startups you need to watch in 2023
Professional service firms are also a wealth of useful market information because of the broad range of companies they interact with. That includes accountants, attorneys, bankers, marketing agencies, contract research organizations (CROs) and contract manufacturing organizations (CMOs). If your law firm also represents strategic buyers, even better.
“Building those networks, getting that information to understand the market is critical,” Jaskulke said.
LinkedIn also offers information. Say you want to talk with Medtronic or Boston Scientific about your device, but don’t know which of the tens of thousands of employees to single out. Searching profiles on LinkedIn can help you find a particular business unit’s GM or a corporate development executive, while also helpfully identifying mutual contacts who might be able to make an introduction.
Related: Medtronic’s M&A strategy explained by CFO Karen Parkhill
Peer groups for founders can give you a place to make connections, find solutions to your challenges and get referrals to suppliers, investors and strategic buyers.
“It can sometimes feel like the networking is taking you away from your work, but the network is your work,” he said. ” That eventually is a group you’re going to tap to get that key intro, so build those relationships.”
With interest rates climbing and cash harder to come by, it’ll be tougher for startups to go after smaller markets that can’t justify the capital investment.
“I would see startups where they would say their total worldwide market was $50 million or $100 million,” Jaskulke said. ” If I’ve got to spend $30 million or $40 million to commercialize the product in a $100 million market, the math on that is hard to make work versus if I have to spend $200 million in a $5 billion market.”
He’s also noticing earlier engagement in market access and reimbursement efforts, a trend that is more common in biopharma but has been migrating to the device side in recent years.
“The device industry has appreciated how important that is, but we still didn’t see it in a lot of early-stage startups,” he said. “We’re starting to see more and more truly new companies looking at the reimbursement pathways on day one. And not just coding and coverage, but the actual payment rates, the revenue cycle management of the hospitals, and really trying to understand how does this product drive or not drive business at their customers, and then designing a business model around that.”
That commercialization-related effort could be in the form of consultants or in-house market access employees separate from the sales organization. That early investment makes it easier for device developers to get paid down the road, rather than waiting until after they’ve done clinical trials or have secured regulatory approval.
Positioning your pitch
Another trouble spot for first-time entrepreneurs after they’ve identified a specific company or person to pitch is articulating why that company or person would want to talk to them.
“The most effective pitches I’ve heard tend to be ones that start with the problem that’s being addressed and position it in a way that’s relevant for the audience they’re talking about. So if they’re talking to one of the strategics, maybe they’re targeting a large market that’s poorly served or unserved where that company has a gap in their portfolio,” Jaskulke said. “Then they’re talking about the quality of their team and why they can win.”
Jaskulke passed on some advice that he hears from investors at Techstars: “If you are raising money, ask for advice. If you need advice, ask for money.”
The point, he said, is that if a medtech entrepreneur approaches investors or a company like Medtronic or Olympus with a deal in mind, that puts them into deal mode. “For those companies and for investors, ‘no’ is the most common answer.”
Related: Why Affera’s cardiac ablation technology is worth $1B to Medtronic
Instead, engage with potential buyers and investors early on to learn more about the market and build trusting relationships. When it’s time to raise money or do a deal, they’ll be more likely to think positively of you and be more open to having the conversation.
“You can’t surge trust,” Jaskulke said. “You need to build it up over time. … It feels harder, but it’s ultimately easier and more successful.”