Startups represent a highly lucrative opportunity for medtech suppliers to get in on the ground floor of a whole new product line, but their low success rate and high-touch needs can make them a dangerous distraction from your main customers.
Kate Stephenson, Dyad Engineering
Enthusiastic and highly committed to their cause, medical device startup founders speak with a deep passion about righting the wrongs of healthcare and the immense potential for profit in doing so.
However, they also tend to be overly confident, naïve about the sheer amount of work their idea represents and perennially underfunded.
The risks and rewards of working with startups are constantly shifting. To mitigate the risks without resorting to a blanket “no startup” policy, there are three strategies every medical device manufacturer and OEM supplier can turn to.
1. Help them help themselves
Among the ways that startups frustrate manufacturers is the common bane of every sales funnel: spending too much time and effort on a lead that never converts into a lucrative customer. Startups are novices at what you are an expert at. Because of this, early conversations with startups tend to be around educating them enough for you to decide whether they are ready to work with you.
These types of conversations are ideal for creating online content around. This content can include a readiness checklist to help potential clients identify what stage of product maturity you work with, along with what documents and information you will need to quote a project. General manufacturing education materials — either your own or links to credible sources — can be invaluable in familiarizing prospects with the processes and language you use.
Bag up your scraps and overstock to hand out at trade shows and educational events. I use these heavily in educating my startup clients about available materials and manufacturing methods.
Finally, if prospects self-disqualify using your content, make sure to offer links to trusted partners who may be more suitable. This will greatly improve the odds of them returning once they are ready for your services.
2. Align on what they can offer you right now
When startups pitch to investors or other potential business partners, the discussion focuses primarily on what future value the company can claim. As the service provider or manufacturer, you should focus on what the startups can offer your business today.
This is a concept I’ve challenged many of my start-up clients to think through as they are pursuing partners for their short-term needs. With odds of future success so difficult to determine, startups can still offer value to your organization in other ways.
There is the reputational advantage. With everything from cars to toilets being pitched as innovative, working with startups developing new products grants their partners a similar aura of creativity and novelty by association.
Startups are also more willing to support publications of projects in exchange for pro bono services, allowing for more detailed case studies than might be acceptable to your cash paying clients.
Startups also allow for experimentation in your own product and processes, without the potential reputational repercussions of failing to deliver to a key client.
3. Be selective and strategic
Startups come in all shapes and sizes with varying needs, strengths and weaknesses. Just like you have a system for managing your main sales funnel, you need to a system to identify what startups work best for you.
You might focus only on startups that are of interest to certain strategics, giving you an onramp into a selective supplier network. Startups that represent the first use of one of your products in an FDA-regulated device represent a major reputational boost.
If your products find use in a wide variety of devices, work with startups whose intellectual property strategy leaves you clear ownership of new manufacturing processes or techniques that you develop while working with them. On a practical note, you may choose to only work with startups who need the machines and equipment that are underutilized by your paid projects.
Just like your ideal customer tends not to just fall in your lap, neither will the ideal startup: those that are funded, have a strong team and offer a major strategic value.
If you really want to make startups part of your business development, you need to include startup outreach in your marketing and sales efforts. This does not need to be a major effort.
Potential strategies include sponsoring startup pitch events, offering a few hours of consulting as in-kind services to a contest winner, or giving lectures at incubator or accelerator programs. It could be as simple as crafting a brochure that explains your existing services, products or funding methods that would be of interest to early-stage companies.
A final thought
Most successful businesses split their efforts between delivering excellence to existing customers and working toward the incremental improvements that will keep them competitive in the next 2 to 5 years.
While this split will keep you competitive for now, it can leave you vulnerable to major disruptions in 5 to 10 years. In life science products, that longer-term future is exactly what startups are aiming for.
Partnering with startups should not be part of your immediate growth strategy. However, the market information they bring to the table, and the new technology you develop with them, can be vital to ensuring your company’s relevance over the next decade.
Kate Stephenson is a fourth-generation machinist and Stanford University engineering Ph.D. with medical device design and development experience spanning more than 60 products. Her research and private consulting practice focus on matching medical innovation with the manufacturing technologies needed to develop, test and manufacture them.
The opinions expressed in this post are the author’s only and do not necessarily reflect those of MedicalDesignandOutsourcing.com or its employees.