How to Pitch in MedTech: Fundraising Tips from an Engineer Turned Investor
Avi Roop is a MedTech veteran who has been on both sides of the table when it comes to fundraising and investing in new medical technologies. In his current role, Avi leads the technical and business analysis of medical device investment opportunities for the technology investment and management company Research Corporation Technologies, or RCT. He has more than twenty years of experience in surgical and interventional device markets and possesses extensive experience in early-stage development, from unmet need identification to early commercialization. Having begun his career as an engineer, he has been named on twenty-nine issued patent families.
Jaunt Founding Principal, Aaron Call, sat down with Avi to talk about what he looks for when evaluating medical technology companies and new MedTech products. Avi provides fundraising tips and advice related to how MedTech executives and entrepreneurs can increase their chances of funding by delivering a pitch that hits all the right notes with investors.
Fundraising Tip #1: A Value Prop that Defines the Unmet Clinical Need
Aaron: Avi, thank you so much for meeting with us today. You began what is an impressive career as an engineer and, since then, became a MedTech investor yourself. When you are in a pitch meeting and looking at a new opportunity, what do you and your partners need to see before even considering investing?
Avi: When we look at companies, the first thing we need to see is how they are defining the unmet clinical need. What is the basic circumstance? What are they doing and why? When expressing your value proposition to investors, you have to be able to clearly and concisely state what the heck you’re doing. If the world needs a better X, it’s for what reason?
Your concept should be so clear that you can boil the company down into one or two sentences – an elevator pitch. This is important because it keeps you on track. It defines the vision for the whole project and keeps your concept crystal clear to investors.
Aaron: I’m so glad you framed it up that way. So many people miss that. And, frankly, sometimes it’s hard to explain why you’re going after X and why the world needs it in a very succinct way. But you have to.
Avi: Think of the book Good to Great. Of course, there are other similar business books, but the premise is that a lot of successful companies articulate their big idea in a concise way that everyone can work from. Think about Walmart, for example: everyday low prices. Walmart has made an internal promise and public agreement that they will have everyday low prices. That is the defining mission of the company. And if you’re at any level where you’re making executive decisions, you can always check yourself. Does this go in the direction of being the low-cost leader or not? And it turns out that, a lot of times, it’s actually pretty straightforward. MedTech is no different.
When it comes to new medical technology, everything can tie back to that value related to the change in healthcare that you are spearheading. It can help your marketing team ensure messaging is effective and aligned. It serves as a guide for the engineering team. Once you develop something that is deemed to be safe and effective and that follows your message, stop and go to market. And sure, you’re going to learn and enhance the product, but it’s a way for the development team to decide when to cut the cord.
But back to fundraising. After you articulate your value proposition, you have to prove that it is sound. So now you’re building the story as to why you need A, B, C, and D.
And consider the flip side: if an investor asks about clinical value and the value proposition, and the MedTech executive can’t articulate it clearly, it often breaks apart. And from there, as an investor, I pause. It doesn’t mean the product is a bad opportunity, but it does mean that I as an investor am not clear on the mission, company, or project. I can’t immediately see the path.
Aaron: Which puts the pitch at a disadvantage.
Avi: Yes. And look, I’ve been guilty of this same thing in the past. I worked for a startup and our statement of unmet clinical need shifted over time. And it was always a problem. In hindsight, because we didn’t have a crystal-clear mission statement or vision, it meant we were hunting for one. And usually, when you’re hunting, you inherently don’t see a home for the technology. So how can investors?
Fundraising Tip #2: A Product Story with a Defined Strategy for Launch, Real World Feedback, and Refinement
Aaron: So, let me say something that I think you’ll react to. You know, 9 times out of 10, the junior entrepreneur, or even seasoned executives, present their great idea. They talk about the technology but they skip the clinical need and their “why.” Then they skip ahead again and say, “this is a billion-dollar market.” Again, no proof of the clinical need. No specifics on payments or value proposition or the math behind that market valuation. They leave out the hard work that goes into building a company and those other critical pieces.
Avi: Yes. Look, the way to think about taking a product to market is to imagine an end zone. To score in that end zone, we’ve got to do a couple of things. We have to prove to ourselves first, that the product is safe and effective. And then you have to unhook yourself. I’m guilty of this too. I have to consciously choose to not fall in love with my own ideas. I have to think of it from the outside – as if I’m just going to apply some potential technology solutions to solve a problem. And we’ll test them.
I often advise executives to back to the key requirements, key risks, key hazards, and ask themselves if they need the level of technology that they are working on. Because maybe they can split the product into Gen One and Gen Two. Maybe you they do something simpler for Gen One because, if you’ve done this before, you know how incredibly painful it can be to get through design verification, validation – the works. So maybe make it really easy on yourself to get started. Get something going and then learn from the market. Live to fight another day and deliver the phenomenal product in phase 2. But for now, build a strategy around launching product version 1.0.
Aaron: Amen. On that same note, that’s what I learned from my own participation in a $600 million dollar exit. It’s about getting a product out there that checks some of the boxes. It has to check the box on safety, most of the boxes on efficacy, and solve the unmet need. So, stop there, get that out there, and let the market tell us if we’re winning or if we need to go a different direction. Selling fast and failing fast is largely ingrained in me.
Avi: I agree. You have to fail fast. Because to your point, Aaron, you learn that the market will teach you because you cannot replicate the real world. You have to get your product out there. Because, no matter what, in the real world, things are going to happen that you never expected.
It’s all about the value of the minimum viable product. It’s easy to get sucked into the minimum viable product as an end to itself. But it’s not, because you have to be cognizant of the rest of the product story. That story is about the meat of our product, which is really about safety and efficacy. But get comfortable with those things as a prologue, then take your first shot on goal. Then refine and do your best to solve real world lessons in concert with growing your company.
Fundraising Tip #3: A Clear, Quantifiable Economic Opportunity
Aaron: So, to recap, companies need a clear, easy, well-distilled value proposition that becomes the focus for their organization and serves as a great way to help investors get on board with the unmet clinical need and how they will solve it. They need to ensure that the story of their product is clear, and that they outline a strategy for launch, real world feedback, and refinement. What’s next?
Avi: Then we go to point number three. Investors need to believe that there’s an economic opportunity. We need to talk about reimbursement and payment and how this will be economically viable. It’s obvious, but we need a very clear story that says, for example, that “this technology will be able to deliver a gross margin of 70% or greater underneath X reimbursement scheme.”
And, look, it’s okay if there is no reimbursement, but if there’s no reimbursement, then you’re selling a company that is super disruptive and revolutionary (which carries with it some of its own risk). But most of the time, there’s some evidence of payments somewhere, so prove to me that you can manufacture, fabricate, finish, package, sterilize, and ship the technology for basically 20%-30% of what you’re going to sell it for as based on some reimbursement scheme that you’re presenting.
And side note: don’t put the technical detail at the beginning of a pitch because investors don’t care. The truth is that, in most cases, they believe you! There is an unspoken rule that most engineers get a free pass. You don’t necessarily have to argue to investors that your technology will solve the problem. What you need to work on is the rest of the story. Like market value and reimbursement.
Aaron: Or payment.
Avi: 100 percent. And that can be the next disconnect. Because a reimbursement and payment scheme will never match every patient, right? Which means that your next conversation is about market segmentation. Prove why it’s a big opportunity and here’s the market segment we’re going after. And that’s where this payment or reimbursement schema fits. And, next, here are the things we can do to expand into the rest of the market, or some greater segment of the market. Or maybe it’s okay, this one segment is lucrative enough to provide the right ROI.
Then add more detail. How will you get unit sales and market share? In terms of competitive landscape, who else is in the market? And how will you get a 35% market share, for example? Or why will you only ever get 5%? Detail who the other players are, their level of dominance, and the gaps that you will fill. Then talk about growth and cover market development, training, pricing and all the things you will do to get to that growth level.
Even if it’s a very early-stage product, you need to have some answers. If you’re a later stage project, you need to have detailed arguments behind growth, market share, distribution strategy, and penetration. You need to know how you will train people, including doctors and sales reps. In short, you have to tell your product’s future story in detail, so investors know not only what to expect, but that you know exactly how you will get there.
Aaron: And that really is the crux of the pitch, right? Telling a product story that takes them on a journey from market need to profitability. And that story sums up everything you’ve touched on today: clearly demonstrating the clinical need and how your product addresses it in a concise, clear way; outlining a strategy for launch and then those 2.0 and 3.0 versions that are driven by real-world data collection; and finally, showing that your product is economically viable with market validating proof of concept and that granular detail related to market segmentation, reimbursement, and more.
And as a diligence partner, I will add that one of the fundraising tips we give is that the data and insights MedTech executives and entrepreneurs use to back that story up is just as important as the crafting of the story itself. If an investor knows that the diligence behind the story is sound, it makes their decision that much easier.
Avi: One-hundred percent. If you nail all of that, then I definitely want to talk more about investing.
As the diligence partner for MedTech executives and entrepreneurs, Jaunt applies these fundraising tips to ensure that our clients’ pitches provide investors with the data, vision, and product story they need to make a confident investment. Contact us to schedule a consultation.