One major rookie mistake when making the rounds for a Series A: Approaching the most active investors before you’ve had time to practice. A panel of medtech CEOs and venture capitalists spoke on the challenges in raising a Series A round at this week’s MedTech Investment Conference. Here’s what they had to say:
1. Hang back before you approach the most active investors
There are multiple active investors in the medtech space, with firms like New Enterprise Associates, BioStar and Emergent Venures leading the pack. However, it’s not prudent to approach these firms at too early a stage.
“Rolling back the clock and getting the chance to do it again, I would not go to that group early on,” said Scott DeFelice, CEO of Oxford Performance Materials. Rather, it’s worth it to initially pitch for a Series A with an investor group that’s unlikely to actually give you funding.
“Get yourself a chance to refine your pitch and presentation,” DeFelice said. “They’ll ask smart questions that will make you rethink how you’re pitching it, and what your business plan is.”
That way, when you meet with active investors, you’ll have a solidly vetted pitch.
2. Hang back before you approach the corporate investors
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
“I’ve pitched Series A opportunities to corporates for every deal – and had no luck,” said serial medtech entrepreneur Danny Sachs. “They’re very interested, and invite you back over and over (you spend a ton of money flying around and meeting various people), but then they come back and say you’re too early.”
It’s better for medtech companies to approach the Medtronics and Boston Scientifics of the world for Series B, he said.
3. Hang back before you pitch a mediocre idea
Falling in love with your own idea’s totally natural. You generate a concept, you seed that into a fledgling reality, and now you expect that investors will be as enamored with it as you are. But that’s just not the case.
“You can get an idea in your head, and think it’s great,” DeFelice said. “The reality: It’s probably pretty good, but not the best thing ever.
Before you head out pitching this purportedly brilliant idea, it’s important to run it by a few folks who have long-running ties to the medtech industry – former VCs are a great start, for instance. They’re unbiased. See whether a faction of physicians see the potential in your idea.
“And if you really believe in what you have, you have to endure and adapt,” DeFelice said. “If you’re not willing to slog it out, don’t do it.”
