Venture capital for early-stage medical device companies is drying up. At Advamed 2013, I was able to sit down and talk to Paul Grand, managing director at Research Corporation Technologies Ventures, a life sciences firm focused primarily on medical devices. When I asked him what the three main mistakes startups make when pitching him, he sighed. His first response: “Only three?”
Ouch. So be sure to avoid these blunders when pitching VCs, startup CEOs:
- Not adequately researching the VC before the pitch. (This one shocked me.) Grand said, for instance, RCT invests in companies that will only need one round to be taken to market. Many startups pitch him on the idea that they plan to build three rounds of capital, then once he explains the firm’s position, tries to back pedal and maintain flexibility. “They should have known before the pitch,” Grand said.
- Making the wrong person your business partner. Oftentimes a scientist or inventor meets someone on a plane or at a conference or has a neighbor who says not to worry, they can run the business side, Grand said. Then, pretty quickly, they take them up on that offer. They learn later that in fact, the person isn’t a great business partner and doesn’t understand the medical device industry, but now they own half the business. That sends VCs running.
It could also mean they’ve hired a CEO whose raised a ton of money for other companies, expecting that will attract venture capital. But, Grand said, many venture capitalists in the medical device space are looking for lean startups. The business plans with a CFO, CEO, CMO, COO, etc. for an early-stage company are unnecessary and expensive. Really, at the beginning, you just need the founder and the engineers, he said. - On the opposite end of the spectrum, as Grand put it: “God bless the inventors.” While the scientists and founders are at the center of the industry and have beautiful ideas, often they come to venture capitalists with no go-to-market strategy, saying they’ll plan it when the time comes.
