The past several blog posts have reviewed in some detail the critical steps, challenges and milestones for a start-up persevering through its Pre-Seed and Seed phases, ultimately translating an unmet need into a product concept and then a First-in-Human (FIH) clinical feasibility study.
Having now proven the safety and clinical feasibility of effectiveness in humans, the entrepreneur and his/her team now face the biggest transformational process in the start-up’s brief history - from R&D focus to customer and commercialization focus!
How does one begin?
The thinking and strategies supporting a Series A financing for your start-up should have begun at the moment you demonstrated compelling proof-of-concept (POC), close to when your fund-raising activities for Pre-Seed and Seed funding began.
Why so early?
After having positioned the start-up for angel and VC funding after the compelling POC, the business plan and pitch must focus on the next three critical Medtech business milestones:
· A Seed financing round supporting FIH clinical feasibility study and regulatory approvals, followed by…
· A Series A funded pivotal study and…
· Early strategically-driven commercialization sales and revenue
Depending on the associated clinical risk of the product, and if your regulatory strategy is well driven in place, the pivotal study and the early commercialization could be performed as one programmed effort.
This is typically called a “post-marketing surveillance study (PMSS)”, where compelling and statistically robust efficacy outcomes are obtained while actually selling the product to the various study centres. St. Jude Medical (now Abbott) pioneered this approach from 2012-2015 when they supported 2 PMSS studies, FAME and FAME II, that demonstrated superior clinical and economic outcomes when using their FFR (fractional flow reserve) technology with stenting procedures.
This could be a very cost-effective way to not only validate the clinical value of the product - but also to validate the business case!
I first practiced this relatively new strategy, often supported by the FDA and Health Canada, with CryoCath in Europe from 2005 to 2007 with the game-changing cryoballoon ablation system, Arctic Front.
At the time, obtaining the commercial CE Mark was typically achievable after the FIH studies, then performed in a handful of centres in Canada and Europe. After the CE Mark, CryoCath organized a multi-centre PMSS across Germany and other selected centres in Western Europe. Once the Germans published outstanding safety and efficacy results across 10+ centres and 300+ patients, CryoCath’s exit to Medtronic for $400 million followed soon thereafter!
Along with this example of strategic commercialization, there are several other approaches, which I will get into in upcoming blog posts.
Another compelling reason to include your Series A business and financing strategies into your Seed Round pitches relates to investor anxiety and need.
Angels - typically the leading investors in a Seed Round - are intensely interested in what the Series A round is going to look like. How large and what will be the milestones associated with this money? They’re assessing the risk and the dilutive effect that the Series A will have on their Seed investment.
It is critical to effectively understand dilution- and risk-obsessed investors, juxtaposed with safety- and efficacy-obsessed KOL’s and early principal investigators (PI’s).
If the entrepreneur understands and caters to these needs and anxieties - success is more likely to follow!
Finally, always remember that the one major pitfall to avoid throughout the entire Series A financing and business milestone process is a lack of readiness: Don’t commit to anything before your quality system (and your instincts) tell you that the product and the company are fully prepared and ready for the critical early commercialization process!!