Category Archive For "For Startups"
As the premiere destination for healthcare startups, we’re fortunate to be able to see, evaluate, and invest in the very best. But along the way, we also see the mistakes that startups make. We discussed the challenges that face direct-to-consumer healthcare startups, and that opened a new line of discussion. Could we apply that method to startups from other specialties as well?
It makes sense to start with the segment that we see most often at AngelMD — Medical Devices. Launching a Medical Device startup is challenging. In my career I have had the opportunity to be involved in many early-stage device companies. After reflecting on those successes and failures, I have developed a list of six key factors to building a successful medical device startup.
1 – Quality First
The first element of a successful medical device business model is to design and build your device from day one with an FDA quality system. This will dramatically shorten your device development and approval cycles.
According to the FDA, The Quality System (QS) Regulation is in place to ensure that manufacturers “establish and follow quality systems to help ensure that their products consistently meet applicable requirements and specifications.” Rather than dictating how a manufacturer must produce a device, QS provides the framework that all manufacturers must follow, allowing the manufacturer to fill in the details themselves.
Navigating QS Regulation isn’t a skill set that we would recommend to someone without experience. If no one on your team has medical device development experience, it is critical to secure an expert consultant to help put that quality process in place.
2 – Know the Codes
The second element of a successful medical device business model is to create a product with a known reimbursement code. Many entrepreneurs, including physicians, are shocked to learn of the complexity associated with securing a new CPT code required for reimbursement.
In order to establish new CPT codes, an individual, a physician, or a specialty group must submit a coding change request form. The CPT Advisory Committee then reviews the proposed code. The change request must address the following:
- A complete description of the procedure/service (e.g., Describes in detail the skill and time involved. If this is a surgical procedure, include an operative report that describes the procedure in detail)
- A clinical vignette which describes the typical patient and work provided by the physician/practitioner
- The diagnosis of patients for whom this procedure/service would be performed
- Copies of peer reviewed articles published in the US journals indication the safety and effectiveness of the procedure, as well as the frequency with which the procedure is performed and/or estimation of its projected performance
- Copies of additional published literature which you feel further explains your request (e.g., practice parameters/guidelines or policy statements on a particular procedure/service)
- Evidence of FDA approval of the drug or device used in the procedure/service if required.
But that’s only half of the story. In addition, a device startup needs to address the following questions:
- Why aren’t the existing codes adequate?
- Can any existing codes be changed to include these new procedures without significantly affecting the extent of the service?
- Give specific rationale for each code you are proposing, including a full explanation on how each proposed code differs from existing CPT codes.
- If a code is recommended for deletion, how should the service then be coded?
- How long (i.e, number of years) has this procedure or service been provided for patients?
- What is the frequency with which a physician or other practitioner might perform the procedure/service?
- What is the typical site where this procedure is performed (e.g., office, hospital, nursing facility, ambulatory or other outpatient care setting, patient’s home)?
- Does the procedure/service involve the use of a drug or device that requires FDA approval?
If CPT Advisory Committee approves the creation of a new code, there is still a six-month lag in its implementation. New CPT codes are released bi-annually on January 1 and July 1. If a code is approved on January 1, it is not made active until July 1.
It’s worth noting: AngelMD only considers providing capital to startups that are able to leverage existing reimbursement codes.
3 – Will Someone Use This?
The third element of a successful business model is a medical device that generates a financial or clinical return on investment. The market is moving toward pay-for-performance and it is critical that medical device startups are able to intersect with this market dynamic.
In years past, when fee-for-service was still the status quo, it might have seemed like a good idea to come up with “yet another device.” In modern healthcare, with performance-based reimbursement, the focus has to shift. During the clinical testing phase, it is important to measure positive impacts on healthcare delivery costs or improved patient outcomes.
4 – Stack Your Team
The fourth consideration is the composition of the management team. In the AngelMD network, physicians are actively involved in the early stages of startups. Unfortunately, that isn’t the status quo. The healthcare industry as a whole sees far too many companies that have a goal in mind, but no team to get them there.
In the larger startup world, it’s become more common to see non-technical founders who then find a technical co-founder to help them build their dream. The same should hold true in the med device world. If you are not coming from a medical device background, it’s important to select a business partner that has medical device experience that can complement your own skill set. Ideally, that person will have direct experience in a segment that your device is targeting.
5 – Know The Costs
The fifth element to consider — and you should evaluate this both early and often — is the projected cost of manufacturing. More than a few medical devices have failed because of the inability to manufacture the device at a price that is still cost effective.
6 – Find a Guide
The sixth element of a successful medical device company is to secure a ‘sherpa’. The role of the guide is to help the company navigate through the FDA’s approval process. FDA regulations are constantly changing, and the approval cycle can be shortened by having an expert to manage your company’s submissions and interactions with the agency.
A simple understanding of the FDA’s regulatory process isn’t enough. For example, there are changes that are specific to digital health, diabetes management, and a wealth of other device categories. There are also incentivized paths available that can help to shorten the approval process for some types of devices.
There are challenges to launching a new medical device, but physicians and entrepreneurs have never been ones to back away from a challenge. By arming yourself with the tools to be successful, and knowing the potential pitfalls, you’ll be better prepared for the journey ahead.
Like the late Peter Drucker, I find anything written by Jim Collins compelling. He is a keen observer of human behavior through the lens of companies. One of his more poignant insights was that of the Flywheel concept. He first articulated this concept in his bestseller “Good to Great” and has now expanded on it in a short form book (monograph) appropriately entitled “Turning the Flywheel.”
As Collins writes:
“Once you fully grasp how to create flywheel momentum in your particular circumstance, and apply that understanding with creativity and discipline, you get the power of strategic compounding. Each turn builds upon previous work as you make a series of good decisions, supremely well executed, that compound one upon the other. This is how you build greatness.”
The concept is powerful as a framework for understanding why some businesses build momentum while others idle or die. As an investor I particularly love anything that leverages the concept of compounding.
Collins shares the story of how Amazon embraced and honed their flywheel and went on to become a juggernaut. The flywheel behind Vanguard also presents a solid reference.
But flywheels aren’t easy. If they were, every company would get them right. Rather, they require rigorous thought, experimentation and iteration. If there are five key elements of the flywheel and only three of the five are operating efficiently, then the flywheel doesn’t work.
Each of the core elements has to contribute to the momentum,
I suspect there are a lot of flywheels in training out there that need some consideration and polish, but with effort could transform a mediocre business into a force. Part of that consideration and polish is implementing a core system like OKRs that can help a company keep itself guided toward its true north.
This post is being written as a book recommendation for both startups and investors. Every business owner needs to be considering whether or not there is an opportunity to build a flywheel effect into their business. Similarly, every student of business, otherwise known as an investor, should have a clear grasp of this concept in order to determine if an investment candidate has a flywheel embedded into their business model.
This is the second part in our series on OKRs. To read the first part, click here.
OKRs are a proven tool for managing organizational performance as chronicled in John Doerr’s book “Measure What Matters.” Over the past few years, I have been able to exercise this management platform as a business leader, investor, and consultant at seven different companies. Each company has been a bit different in its implementation of the tool. All were able to dramatically improve their business performance. One of the best ways to embed OKRs in the fabric of the organization is to make them the foundation of your planning. You should address the OKRs at annual planning and during monthly business reviews.
One of the first challenges that companies face is the planning horizon associated with OKRs. In general, I would suggest that the objectives are annual, and the key results are a mix of monthly and quarterly measures. The CEO plays a key role in establishing the objectives for the organization while each functional area owns the key results.
The CEO should distribute the objectives a couple of weeks in advance of the annual planning meeting. Each functional area should then develop their key results, aligned to the corporate objectives. The sequence of the review of OKRs should follow “digital production line” of the organization. They should start at product creation, carry over into commercialization, play a key role in execution, and also embedded in the business support functions of the organization . The management team should use this process to ensure that the inputs and outputs of each function align to the greater objectives for the organization.
The OKR system should be a foundational part of the monthly business review. Each functional area should recap their performance based upon their function’s OKRs. This streamlines the monthly business review while focusing the management team on improving performance across the organization. The sequence of your review should follow the “digital production line” much like the annual planning process. An OKR dashboard should label those key results in green that are on track and those not achieved in red. Yellow is not allowed. If a team must mark a key result as red, then that team or individual should develop a corrective action plan. The corrective action plan should include the following sections:
- Problem statement
- Reflection on prior activities
- Root cause analysis
- Action plan
If you follow this planning discipline, it will be relatively easy to embed the OKR system in the fabric of your company. At AngelMD, we encourage our startups to leverage this powerful management tool. The best ingredient to a great idea is great execution.
We’re always looking for ways to improve your AngelMD experience. Today we’re letting you know about some improvements that we’ve made to your Startup Dashboard.
It all starts with the design. We’ve given your Dashboard a makeover that focuses on making your life easier. You’ll now see a larger version of your logo on the left side of the page. If you want to edit your company information or your settings, you can do so by clicking on the three dots to the right of your logo. You can still access your settings from the top right, but we wanted to make it easier for you to keep your profile up to date.
The right side of your Dashboard now includes a snapshot of your visitors from week to week. Now you’re able to see the results of your work on AngelMD at a glance. Not getting the eyeballs that you want? Make sure you are posting status updates and sharing information through your profile.
Speaking of posting startup news, it’s now easier than ever. The new interface in the middle of your screen gives you quick access to share a message. If you make a mistake, don’t worry, this isn’t Twitter. You can easily edit a post by hovering over its top right corner and clicking the three dots to bring up the Edit or Delete options. Your new Activity Analytics will let you know, at a glance, who has been watching what you’re sharing.
If you’re curious about who will be seeing those updates, that’s now easier to track as well. You can now see all of your company’s connections across the AngelMD network. Investors, Advisors, and Followers are all available from the box on the right side of your Dashboard, with the option to quickly follow someone back if you so choose.
To finish out this round of updates, we’ve also given you a whole new set of controls for promoting and tracking your funding rounds. We know that raising money is time-consuming, so we wanted to make AngelMD the easiest way for you to meet your goals. You can add funding rounds, and then track them directly from the sidebar so you can the information you need when you need it.
We love getting your feedback, and we look forward to hearing what you think about these new Dashboard updates. Have something on your mind? Drop us an email and let us know.