Posts Tagged business plan
Lessons for Starting a Medical Device Company in Silicon Valley
Posted by Darshana V. Nadkarni, Ph.D. in Biotech - Medical Device - Life Science - Healthcare on March 7, 2013
Mr. Michael Allen, a serial entrepreneur, (previously in executive roles at Xlumena, Metrika, and Chemtrack), and currently CEO of Vascular Designs, a targeted drug delivery company, talked about “starting a medical device company in Silicon Valley”, at www.bio2devicegroup.org .
Financing is one of the major early challenges that entrepreneurs face. While it begins with a good idea, they also need to obtain some seed financing, and they need a short 2 page summary. Their business plan should be an outline that includes some financial projections, some data about market and market need, information about regulatory path and reimbursement issues. Advocates, typically medical experts, are also needed. With these pieces in place, they would be ready to go for institutional financing and begin to meet the investors.
The VC model has changed, said Allen. Traditional VC model used to focus around a goal with very high end value, in the range of $250 M where 10’s of millions would be invested. It was built around the idea of large management teams in the early phase and a ready sales force in anticipation of the launch, that often never happens. Many VCs who adhered to this model, are out of business. The current model is to focus on a goal to achieve a moderate exit. Team is scaled in proportion to the need, sales force is maintained at small level until product and market are demonstrated. It is assumed that delays are inevitable and cash is king.
Allen talked about his experience and learnings from leading ChemTrak from seed stage to IPO exit, with 6X return. ChemTrak was a diagnostic company, with a single use diagnostic kit to measure Total and HDL cholesterol and other non-instrumented quantitative tests. He also shared lessons in leading Metrika, another diagnostic company that was sold to Bayer, with 1.5X return plus ongoing royalty deal. Metrika’s several products included A1C test, giving patients with diabetes on the spot feedback on their A1C number and e.p.t. pregnancy test. They had some good patents, but mixing electronics, optics, and chemistry was very challenging, said Allen. Allen’s next company Xlumena, is medical device company with products aimed to advance image guided endoscopic therapy. These products allow minimally invasive alternatives for diseases of the organs that surround the GI tract. Summarizing some of the learnings, Allen said, CEO is responsible for everything, no matter who makes decisions.
Allen’s current company, Vascular Designs offers a new treatment option for people suffering from life-threatening illnesses like cancer, through targeted drug delivery, as opposed to systemic approach. Through transfemoral catheter, drugs can be delivered directly into the tumor cells and block the blood supply. It allows for high concentration of drugs delivered, while at the same time, reduces systemic exposure, thus minimizing caustic side effects. This procedure can be performed as an outpatient procedure, takes only about an hour, and nothing is permanently implanted. For success of a venture, Allen stressed, it is very important to hire the right people. He discussed hiring process he follows and also emphasized the importance of spending time and writing a good job description. The talk was followed by Q&A.