There are roughly 27 million entrepreneurs in the United States and only 1,000 active venture capital firms. While VCs are not the only avenue for a startup to receive funding, it is one of the more popular methods of funding compared to bootstrapping or seeking an angel investor. The reality is that when it comes to startup culture, many conversations revolve around securing proper funding.
 
The questions associated with this conversation often focus on how much funding is needed to meet business goals or how long the entire process will take. However, startups—especially those operating in a hyper-competitive landscape like medical device companies—should be asking how they can make themselves more attractive and pique initial interest from investors.
 
Securing funding is a long, tedious process, especially in the medical device industry, where competitors are popping up all the time. Still, proper positioning can accelerate the process and chances for success.
 
So how exactly can you help your company stand apart during the funding process? Check out these five tips to help you get started:
 
1. Outline the  Business Case
A vital rule of thumb to keep in mind throughout the fundraising process is to keep it simple. The business plan and go-to-market strategy doesn’t need to be a million pages long drafted with incredible detail. Instead, place emphasis on solid market research and proof of concept.
 
Be sure to start the process with thorough market research asking the six questions below to get you started:
 

• Why is this medical device necessary?
• Does this medical device have a proven clinical need?
• Are there any other existing devices similar to mine?
• Who is the end-user of the medical device?
• Who will purchase this medical device?
• What is the market size for the device?

 
Following the collection and analysis of market research, it's time to put together your proof of concept or prototype. The medical device doesn't need to be in its final stages, but it should be able to show investors trustworthy evidence that supports a secure investment. Showcasing a prototype helps communicate the vision of the device throughout its initial development and helps establish a firm understanding of long-term goals with external stakeholders.
 
2. Solidify the Foundation with a Robust Regulatory Strategy
Medical device companies are notoriously small organizations, at least in the beginning. In fact, 80% of medical device companies in the United States have 50 or fewer employees. Many of these organizations fall into the startup category, and startups are frequently searching for funding opportunities to cover operational expenses.
 
In my personal experience, one of the biggest roadblocks I've seen medical device companies face is the establishment of a strong regulatory strategy. A robust regulatory strategy is one of the most valuable assets you can bring to the table during the fundraising process. This artifact can be easily leveraged to highlight critical milestones, and other deliverables investors will want to see and consider in their overall valuation.
 
For example, the main goal of the executive summary within a regulatory strategy is to showcase the two key aspects below:
 

• The organization knows how to position the device to pique interest.
• That the organization has the necessary knowledge and experience to secure funds.

 
The regulatory standards within the medical device landscape are continually evolving, and organizations are expected to adapt as quickly as the change happens to keep patients safe. For example, ISO 13485:2016 and EU MDR are examples of new regulatory requirements that have recently been rolled out, and the third revision to ISO 14971 was just released at the end of 2019. Regulations and standards will only continue to evolve as expectations of modern medical devices rise, and a well-defined regulatory strategy can eliminate the possibility of noncompliance.
 
3. Consider the Pre-Submission Tool for Getting to Market
In the US market, FDA rejects the majority of 510(k) submissions the first time around. Due to this, some device makers find themselves considering a Pre-Submission. What does this mean exactly? The Pre-Submission program allows companies to request feedback from FDA on potential and planned medical devices, drug submissions, and biologics early on in the pre-market process.
 
Early input from FDA can help early-stage organizations gain valuable insights into how they can meet certain expectations with their submission. Additionally, this can benefit companies from an investment perspective if they’re able to show investors that they've already met with the FDA, which helps to establish credibility from the onset of the funding process.
 
When done right, this method will yield more certainty as to whether or not a device will receive market approval. For a potential investor, being able to communicate and justify the level of risk and likelihood for success and ultimate return could be the biggest selling point in their decision to invest.
 
4. Know Your Investor and Risk Scenarios
It's no secret that risk is at the forefront of nearly every investor's mind. Investing is all about making money without taking too many lofty chances. However, in medical device funding, investors are concerned about three types of risk in particular:
 

• Technical risk: will the idea work?
• Business risk: does the device have a market with a need?
• People risk: are the right people on staff to make it work long-term?

 
Being familiar with these types of risk and knowing what investors are looking for will help companies maximize their chances for success.
 
For example, some investors look for minimal risk, while others will accept high risk for high potential rewards. Knowing what your ideal fit with an investor would look like will make attracting them much easier.
 
5. Use the Right-Sized QMS
One factor that is often overlooked by companies, but seldom by investors, is the company's design control documentation and risk management processes that are in place.
 
Performing a comprehensive evaluation of the medical device QMS has become commonplace for investors during fundraising process. If the company has no QMS technology or missing methods, then the deal just ripened from an M&A perspective.
 
Quality design controls are proof that the device is safe and meets requirements and user needs--a QMS must-have regardless of the product stage, company size, or exit strategy.
 
Evaluate your QMS before raising funds and establish processes around risk management that align with the latest standards like ISO 14971. This will help to ensure proper design controls and document management are in place as a result.
 
During the funding process, think like an investor. What will it take for them to write a check? Now keep that in mind and demonstrate your technology in a way that meets those standards.
 
Investors crave success, so if you can show that a device will most likely make it to market and be successful, there's a good chance funding will be secured.
 

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Jon Speer is the founder and VP of QA/RA at Greenlight Guru a medical device quality management MDQMS software and a medical device guru with over 20 years of industry experience. Speer knows the best medical device companies in the world use quality as an accelerator. That's why he created Greenlight Guru to help companies move beyond baseline compliance to achieve True Quality.