In my last blog post on start-up success, I discussed the right timing for commercialization and the necessary, if not critical, steps for a start-ups to prepare for this challenging business milestone.
In the case of first-generation Medtech entrepreneurs, the pressure put on them by investors typically drives them to rush through the preparatory process, and even cut corners to register initial sales and pacify the various early-stage stakeholders.
As the costs of widespread sales generation and support continue to mount, entrepreneurs must look to other metrics to demonstrate to the investment community that their product(s) are clinically effective and are achieving user adoption, particularly among the key opinion leaders (KOLs).
This is especially relevant to the Strategics which offer the start-up entrepreneur their ultimate exit opportunities. With the Strategics, demonstrated product adoption by their KOLs is their ultimate criterion that drives their business interests and M&A deals. Meaning: Be strategic in your sales approach and make sure you appeal to these key players above all else.
The other element that the start-up entrepreneur needs to respect, particularly in the USA, is the critical importance of early-stage KOL adoption before moving to other broader segments of the market.
Other than “early adopters”, physicians inevitably follow what their KOL’s evaluate and support. Failure to respect this adoption model could be catastrophic. I learned this with two of my start-up experiences, Resonant Medical and Xltek (now Natus), where early-stage sales circumvented the KOL hierarchy.
With Resonant, I had to come in as interim CEO and change the target indication from prostate to breast cancer. With Xltek, we had to revisit the GP versus the KOL strategies, and recalibrate. Thankfully, in both cases, corrective actions were taken in due course, and both experienced successful exits within 2-3 years.
So what is strategic commercialization? It is the disciplined step-wise approach to sales generation by firstly engaging a limited number of KOL and early adopter sites (approximately 10-30), intensely providing clinical support through their early use phases (called the “learning curve”), making sure all users are happy - thereby optimizing their day-to-day clinical adoption.
The real benefits to strategic KOL commercialization versus a non-targeted “spray and pray” approach are:
There is considerably less capital required to demonstrate clinical user adoption in key sites, which is so critical to both the Strategics and investors in general
There’s considerably less commercialization risk
It’s respectful of the KOL hierarchy
It sets the best stage for a broader financing (including an IPO) for full-scale commercialization
Using this strategy will put you on the best path to success.