Nick Tippmann, VP of Marketing at Greenlight Guru12.03.21
If you have gone through the process of raising capital for your medical device company, you know how much of a challenge it can be. It's also a process you'll run several times over the course of your company's life, from your seed round to a series C, D, or E. Fundraising is a process that never ends. Once you raise one round, you're focused on the next.
How do you know if you're ready to start raising that next round? Many medical device start-ups have the same question, so we asked experts how to know when a medical device company is ready for their next round of funding.
Casey McGlynn, Partner at Wilson Sonsini Goodrich & Rosati, says setting goals can be somewhat situational, depending on where your start-up is at financially. He adds, “You need to set goals and achieve those goals to make investors wake up and realize that your company deserves their attention and money.”
McGlynn believes that a funding strategy should be milestone-based. He says, “Each round of funding should take your company through to the next major milestone. A milestone that will make it obvious to investors that a new round at a new price per share is justified.”
And what are some of those milestones? McGlynn says some examples include, “Working Prototype, First in Man, Completion of Successful Clinical Trial, Regulatory Filing, Regulatory Approval, Product Sales Launch or some other Major Sales Milestone.”
Cassak also makes the point that it’s always important to have discussions with existing and potential investors, even if you have cash on hand. He says, “The last thing you want is to be raising money when you absolutely need it or when you can see you’re running out because the time it takes to raise your next round can, in many cases, be unpredictable, and desperation is never a good fundraising mode.”
Knowing exactly when your medical device start-up should start seeking another round of funding is an important skill to master. If you are an early-stage medical device, MedTech, or digital health company interested in learning about best practices, expectations for raising capital, and additional insights on medical device fundraising, check out the 2022 Raising Capital for Medical Device Startups Industry Report from Greenlight Guru.
Nick Tippmann is the vice president of marketing for Greenlight Guru, a medical device quality management software (MDQMS) that provides an industry-specific solution to help device makers around the world use quality as an accelerator to move beyond baseline compliance and achieve True Quality. Nick is lauded by colleagues, peers, and medical device professionals alike for his strategic contributions to Greenlight Guru from the time of the company’s inception. Previous to Greenlight Guru, Nick co-founded and led a media and event production company that was later acquired.
How do you know if you're ready to start raising that next round? Many medical device start-ups have the same question, so we asked experts how to know when a medical device company is ready for their next round of funding.
1. You Hit Most of the Goals You Set with Your Last Round
When you raised your last round of funding, you likely set goals and milestones associated with the funding. Hitting milestones is a positive signal to investors that you have traction, which makes an investment feel less risky. After you have reached your first set of milestones and you are set to achieve your next round of goals, it’s a good time to start seeking out investors.Casey McGlynn, Partner at Wilson Sonsini Goodrich & Rosati, says setting goals can be somewhat situational, depending on where your start-up is at financially. He adds, “You need to set goals and achieve those goals to make investors wake up and realize that your company deserves their attention and money.”
2. You've Identified the Key Milestones Another Round of Funding Could Help You Hit
David Cassak, Co-Editor-in-Chief and Managing Partner at Medtech Strategist, says, “First, start-ups should have detailed plans about how they’ve used capital already raised and what they plan to do with the new funds – plans that should guide them in preparing for their fund-raising efforts.” He goes on to explain, “For some companies, and depending on where they are in their development timeline, fund-raising can be a constant, never-ending process.”McGlynn believes that a funding strategy should be milestone-based. He says, “Each round of funding should take your company through to the next major milestone. A milestone that will make it obvious to investors that a new round at a new price per share is justified.”
And what are some of those milestones? McGlynn says some examples include, “Working Prototype, First in Man, Completion of Successful Clinical Trial, Regulatory Filing, Regulatory Approval, Product Sales Launch or some other Major Sales Milestone.”
3. You Still Have 6-9 Months of Runway Left
“You want to balance dilution and future returns against taking too much money, but my sense from talking to many CEOs is that they more often regret not having raised more money when they could have than having taken too much,” says Cassak. He adds, “Plus, for many CEOs, the burden of always being in fund-raising mode can weigh on them.”Cassak also makes the point that it’s always important to have discussions with existing and potential investors, even if you have cash on hand. He says, “The last thing you want is to be raising money when you absolutely need it or when you can see you’re running out because the time it takes to raise your next round can, in many cases, be unpredictable, and desperation is never a good fundraising mode.”
Knowing exactly when your medical device start-up should start seeking another round of funding is an important skill to master. If you are an early-stage medical device, MedTech, or digital health company interested in learning about best practices, expectations for raising capital, and additional insights on medical device fundraising, check out the 2022 Raising Capital for Medical Device Startups Industry Report from Greenlight Guru.
Nick Tippmann is the vice president of marketing for Greenlight Guru, a medical device quality management software (MDQMS) that provides an industry-specific solution to help device makers around the world use quality as an accelerator to move beyond baseline compliance and achieve True Quality. Nick is lauded by colleagues, peers, and medical device professionals alike for his strategic contributions to Greenlight Guru from the time of the company’s inception. Previous to Greenlight Guru, Nick co-founded and led a media and event production company that was later acquired.
