If you’ve been following our funding series for innovators seeking to spin out new medical technologies from higher ed “environments” like Georgia Tech, you’ll have seen:
- The Top 5 Medtech and Life Science Funding Resources for GT Faculty, Researchers and Investigators – at Phase Zero,
- THE Place to Start, and Follow-On, for University Sourced Medtech Innovation Funding, and
- What to Do, Where to Go and Why for Newly Funded University-Based New Medical Technologies.
At this point you’ve unlocked and spent roughly $400k in non-dilutive funding. IF you have spent it well you will have increased the value of the technology and reach a meaningful inflection point or points.
If the resources consumed by this time – including SBIR, STTR and GRA funds for example – point to continued solid commercialization potential, it will soon be time to seek additional funding. The problem is, this point is squarely within, if not the entry point to, the valley of death for new medical technologies.
For those not familiar with this “location,” one NIH publication describes the Medtech Valley of Death as, “the gulf between finding a promising new agent and demonstrating its safety and efficacy in humans. Venturing into these badlands can be challenging for academic investigators who lack experience in drug development, [new medical technology or device development] and regulatory processes.”
Depending on the regulatory pathway and classification – which should already be confidently established in Phase Zero – successful regulatory approval and commercialization of new medical technologies varies in funding requirements between low to mid six figures for FDA Class I devices, low seven figures for those with FDA 510(k) pathways, and potentially many, many millions of dollars for FDA Class III devices like the CardioMEMS HF System.
What seasoned medtech investors expect to see from their next investment
By this point the innovator and his or her team should be ready to spin a company out from any university purview and into a realm. This makes it easier for investors and potential acquisitive organizations to invest in its continued development pathway requirements. While there is meaningful funding through SBIR Phase II, venture funding will likely be needed as well.
Where will the next round of funding come from?
There are a growing number of venture funding sources available to the Atlanta and the southeast medtech ecosystem compared to five or 10 years ago. A few of those entities by name include Keiretsu Capital, VIC Technology Venture Development, Portal Innovations, Healthquest Capital, Hatteras Venture Partners and Epidarex Capital among others. They will all have their particular areas of interest with respect to technologies, disease states or conditions and “pathway location” or “milestones achieved” requirements for investment.
One thing they will all almost certainly have in common is high demand for a high level of de-risking already achieved by the technology or company in question. How do innovators meet those demands and unlock these “new-to-them” funding sources?
First and foremost, they should leverage the work we have done to date – assuming they have indeed enlisted GCMI for pathway activities up to this point. They should be prepared to present solid evidence of the aforementioned de-risking including a clear regulatory and commercial pathway especially including how and by whom the technology is going to be paid and high confidence in the market and competitive landscape – basically all of our Phase Zero boxes need to be checked with confidence.
Medtech innovators seeking investment including venture funding at this stage should be prepared to present verified proof of concept data to prospective investors. For an invasive, implantable technology, that likely means presentation and demonstration of a prototype and proof of concept testing data in an animal to show the technology is at least feasible for more rigorous testing. It needs to show that it works as the team believed it would work. For a diagnostic, you should be prepared to show testing data from an early prototype has generated expected results.
Regardless of the classification or regulatory pathway, innovators seeking venture funding for new medical technologies should be well into serious design and development activities, including quality management systems and design history files as well.
Beyond investors, what about acquisitive organizations?
You might have been advised at some point that the JNJs or Medtronics or Avanos of the world will be prime targets as your investors at some stage. While these entities do indeed innovate through innovation and in some cases run their own incubators, they regularly require fully approved, de-risked technologies with existing commercial sales prior to any acquisitions.
However, being ready for, and hopefully acquiring, a first round of venture funding is an excellent time to make them aware of your technology, your new company, its status and next milestones. If you are truly in their therapeutic area of interest, they will watch if they know they should be watching.
If you’re still not sure about your technology’s potential to improve healthcare, if you’re not sure about its pathway, if you’re not sure where funding exists and how to unlock it or what steps to take next, let’s talk. It’s never too early. Email info@gcmiatl.com and the right member of the team will get in touch with you.