By Cole Bunn, Senior Research Analyst, LSN
At the outset of your life science startup company, you may have great technology and a well-thought-out business plan, however oftentimes your company ends up looking much different than you had imagined. The long development timelines and capital-intensive nature of the life science sector usually doesn’t allow for much in terms of testing product/market fit, meaning these startups had better have done extensive research on their target market – various stakeholders, investor sentiment, market dynamics, end user and patient preferences, regulatory environment for target indication, and other important factors. However, at times even the most prepared company may encounter the need to pivot.
In the startup/venture tech community, the term ‘pivot’ is often used to describe the need to be open to strategically changing the company’s direction in response to market feedback. Even in life sciences, it’s essential for entrepreneurs to stay ahead of industry and regulatory developments and continually scrutinize feedback from potential partners and investors. This allows a company to more easily identify the reason their message is not gaining traction with investors and adjust accordingly, whether it be positioning, strategy, product/offering, or their business model.
Pivoting doesn’t necessarily need to be a complete shift to a new market or product, although that is what typically comes to mind. Relatively small tweaks or adjustments can have a significant impact, and might help reinvigorate your campaign.
Aligning Strategy with Market Drivers
While your product may be better, faster, cheaper than the standard-of-care, if you’re not correctly positioning your company with the big picture, you may run into some problems garnering interest in your venture as investors/partners might overlook how you fit in and thus your company’s potential. As an example, a medical device company in the urology space struggling to gain interest in their financing round saw a significant uptick in interest after rebranding their company as an infection control company rather than simply a medical device company. As the U.S. healthcare system is making changes to how healthcare services are delivered and hospitals are paid, the ACA made it such that hospitals are penalized for not meeting standards on hospital-acquired infection rates. Pivoting to better address this development allowed the company to clearly show how they could provide solutions to a defined problem as opposed to being another medical device company with a better product.
Sidestepping Negative Perceptions
Another potential roadblock is an unfavorable outlook on your technology type or indication. Regardless of how innovative your technology is and how compelling your data may be, if you’re targeting a highly-crowded space or an indication with a low success rate, such as most neuro indications, potential investors may write you off before even hearing the pitch. This may require you to completely rework your messaging so that you quickly and clearly point out the key differentiators of your technology and accentuate ways in which your mitigating the specific risks that have plagued similar, failed approaches. Additionally, it’s important that you pursue someone at the firm who has expertise in your specific area, if possible. These individuals are much more likely to take a serious look at your project rather than immediately shutting you down based on something such as an aversion to the space you’re in.
The bottom line is that the market dictates everything, and not properly addressing or even ignoring what it’s telling you won’t help you succeed. It’s important to note the cause of each pushback you receive; if you’re repeatedly receiving pushback on the same issues, it may be possible to make an adjustment, or if necessary a complete pivot, before you’ve depleted all your resources pursuing an un-fundable opportunity. That said, while not completely disregarding any input, it is advisable to give less weight to the declines from groups who have no expertise in your specific field as they may not have thoroughly understood or evaluated your proposal.
It’s critical to be completely in tune with new developments such as regulatory changes or moves by competitors; understanding what these changes mean for your company could provide opportunities for a pivot. It’s also important to be vigilant in documenting and evaluating the feedback you receive; this feedback could aid you in determining when and how to change direction to keep moving forward.
On June 19, more than 600 healthcare entrepreneurs and investors entered the exhibition hall at the Westin San Diego Gaslamp Quarter. They were greeted by 30 Innovation Challenge finalists across therapeutics, medical device, diagnostics, and healthcare IT sectors. The 30 companies, hand selected by LSN’s scientific and commercial review team, competed directly on merits of innovation and commercial viability. Here, LSN would like to present the top 3 winners who attracted the greatest amount of “RESI Cash”.
