8 min reading time

Some incubator exits have made great headlines.

St. Jude Medical bought CardioMEMS. Stryker bought Concentric. Both were incubator graduates.

I suspect these two are outliers. How do most participants fare?

Your answers will be good background for the group. I’m visiting incubator Innovyz (http://medgroup.biz/innovyz) next week in Adelaide, Australia as a mentor for eight participating companies. I’m eager to see what I’ll find.

Innovyz Program Director Greg Eaton came on board 12 months ago, when the government and ANZ bank were the principal funders. Participants stayed for only three months. Greg changed all that: The program is now nine months and is primarily funded by industry.

I asked Greg, “Is that because you’re so confident you’ll make all the money back?”

“Absolutely,” he answered.

“What is the typical success rate for a medical device commercialization company?”

Greg a few colleagues and estimates the typical med device success rate is less than 60 percent. Sometimes they just fail; other times they exit too early. He believes Innovyz will see success rates of 80 percent.

“Why,” I asked.

“Because over our five-year, 45-company history, 39 are viable enterprises today. They’ve raised a combined $26 million. Half have been acquired.”

“How?”

Our four-pronged formula is simple:
• We assume the company is broken.
• We select people we like and who are willing to learn.
• We assess whether the technology is global.
• We own 10 percent of the company. Innovyz profit and wages hinge on their success.

For the group, what is your understanding and experience with medical device incubators?

For whom are these programs ideal? For whom doesn’t the time and resource commitment make sense?

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A SECOND OPINION

I asked my friend Allan Daisley, Program Director for ZeroTo510 Medical Device Accelerator (http://medgroup.biz/zeroto510k) about incubation successes. He said,

“Regardless of industry, most startups fail and 90% of all new products fail. Yes, the ones that succeed are outliers.

The device industry poses unique challenges that make failure more likely – like having to survive the pre-market period where lack of FDA approval/clearance means that the product is not making money, but the burn rate continues.

I think incubators and accelerators do have a role to play. The ones that are successful have found a way to effectively and significantly raise their clients’ chances for success.

With all the complexities of the medical device industry, that’s no small feat, and requires a LOT of resources. In my experience running the ZeroTo510 accelerator for the past 3 years, I’ve found that the biggest determinant of success is the team, and its ability to execute.”

Do you agree with Allan?

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Make it a great week.

Joe Hage
Medical Devices Group Leader

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Julie Omohundro
Principal Consultant at Class Three, LLC
Excellent topic. So far I’ve been fairly unimpressed with incubators/accelerators, but I also haven’t had a chance to examine them in any depth. At a glance, they seem to serve numerous interests beyond those of the start-ups and often don’t seem to know much more about what a start-up needs to do to succeed than the typical start-ups does.

Greg Eaton
Management Consultant | Technologist | Mentor | Strategic Adviser | Board Member | Corporate ReEngineering Expert
Great comments – thank you Joe for starting this particular theme.
I agree with the mentoring comments but I would like to add a little here.
Mentoring to us is so, so important – in fact, it is our greatest tool. We structure deep and meaningful mentor sessions but emphasise relationship building, openess and trust. We encourage and facilitate long term mentor/candidate commitment but do not mandate or enforce this. We find that personal, self setting relationships, with energy and knowledge transfer in both directions, work the best and result in the greatest outcomes.
Ciao
Greg

Steve Weisner
President & CEO of Nihon Kohden Innovation Center at Nihon Kohden
Transforming an incubator from a science project with prototypes to a viable commercialized product is what I do. Too many startups make the assumption that once they get FDA clearance they can ship. Unfortunately most incubators and startups lack the expertise to perform proper software/hardware design, develop quality systems and transition to manufacturing. That being said, if the ‘successful’ projects from incubators are consumed into a larger organization then they are better positioned to succeed.

Russ Reiss
Cardiothoracic Surgeon
Product-market fit, resources and Team, Team, Team. Accelerators can help but most startup will fail regardless of how great the accelerator curriculum is unless they have the aforementioned components. What really helps those at the margin is excellent ongoing mentorship. IMHO there are way too many accelerators amassing resources from many sources and providing an incomplete product. Startups need the most help in the dark hours that occur long after the accelerator is over. Residing in a high quality incubator with ongoing mentorship probably has more value in the long run. N.B. Not all accelerators are created equal, unfortunately it’s now become a buyer/investor beware scenario.

Bill Schnoebelen
President at Circuit Case Engineering
Does anyone know if these incubators offer engineering and manufacturing development resources? Having short product design cycle would allow a company to fail fast and adapt fast.

Caroline Hoedemaker
Acting Chief Executive Officer at Neurodel Allianc
Just some other additive thoughts to add to the mix:

Sharing and Commitment are two words that I actively use – because they are key components to the Team Building process.

“mentoring and adult supervision” will only get you so far.

Caroline Hoedemaker
Acting Chief Executive Officer at Neurodel Allianc
Having now run a Life Science accelerator (note – not incubator, the tTAp, techacceleration.us) for over a year, building the team, sharing, and focus on the end game are such important components, that without them the probability of success significantly decreases. Allan has a strong program, and one I speak about when talking about this arena. He is lucky to have the support of Tennessee. Australia is also interesting because their capital equity system enables solicitation earlier to a broader audience. For those in the Mid Atlantic region, our structure provides the same support.

Richard Roth
Medical Business Development & Entrepreneur
With so many incubators now in existence and more popping up, has anyone put together (or run across) an updated comprehensive list which they are willing to share? This would be a valuable resource.

Michel Decré
Consultant in technology innovation and career, with a passion for people, innovation, and entrepreneurship.
Dear Joe,
Very interesting discussion !

You may like to collect Sjaak Deckers’ opinion about this, who lead the business accelerator of the Philips Research Innovations Programme for Healthcare. Several spinoffs came out of that programme, Sjaak becoming CEO and co-founder of Sapiens Steering Stimulation BV with Hubert Martens and myself. Sapiens was acquired by Medtronic last August, http://newsroom.medtronic.com/phoenix.zhtml?c=251324&p=irol-newsArticle&id=1960861

I believe Sjaak will be able to provide good analyses about that Philips Medtech programme.

Allan Daisley
Managing Director at Startupbootcamp Digital Health Miami
Some good thoughts!
A few other things to think about once you have the team down (and I find that incubators/accelerators will more likely thrive if they are present):

1. A rolodex of good mentors (not all are created equal)

1. Tight association with investors (seed, series A being the critical ones. There are many who will invest growth capital after you’ve got customers and revenue, but few who will come in before)

1. A good ecosystem that provides deal flow and supports its entrepreneurs (academia with good technology output, industry with enough health care companies/providers to make good customer discovery and mentorship possible)

1. A state/city that makes a friendly climate for startups. Sure helps make things easier

6. Finally, if you can put a good Entrepreneur in residence program together, it will make a serious difference in your number of successes. Most entrepreneurs can’t make that jump from product building to company building without some ‘adult supervision’

Tim Hopper
Helping Medical Device/Drug Delivery/Combination Products Companies Accelerate Commercialization Timelines
We have had great success with our in-house accelerator/incubator.

InField Medical successfully brokered a technology to a large critical care medical device company here in the states (I am prohibited from mentioning who), but can tell you they are in the critical care monitoring market.
InField Medical is also in final negotiating stages for two other technologies with large medical device companies: a passive needle safety device and a passive disinfecting device
We also incubated a vascular access anti-reflux technology within InField Medical and have successfully licensed the technology to one of the largest medical device companies in India.
At Gilero, we incubated Yukon Medical www.yukonmedical.com just a bit over 3 years ago and it is now a revenue generating, profitable company.

Our rule of thumb? Laser focus on technologies and markets we know, we know when to say yes to a technology but more importantly, we are not afraid to say no to a technology, and we do that a lot more.

Goldy Singh
VP Regulatory & Clinical Affairs at Profound Medical
Joe, this discussion is close to my heart, as I have first hand experience of challenges of small start-up. I agree with Mr. Nemati that FDA is often blamed for the new technologies not making to the market. It’s not that simple. Good science is not always good medicine. You need a visionary team who can evaluate potential of a technology and able to translate into value proposition. Collaborating with subject matter experts (not trying to do everything on their own), while using your money wisely. Executing plans in timely manner. There are many more factors that must align perfectly to bring a new technology to the market before it dies off. In my opinion, team and trust are the major factors.

Frank Rumore
CTO, Princeton Technical Sciences
Fail fast, fail cheap. New product development incubators like Philadelphia’s www.NextFab.com help you do that.

Babak Nemati
Strategy Consultant for the Medical Device Industry. Senior Management Executive, Entrepreneur, and Consultant.
Hi, Karl: Yes, I agree with you that there is a tendency for money to follow entrepreneurs with past successes in terms of venture creation and exits; the point that is often lost, however, is that the second or third time entrepreneur who has the experience, may also be operating in a different mindset on the third one, largely because of the favorable windfall of prior exits, so the ‘hunger factor’ is not quite there anymore. I’ve met a lot of entrepreneurs in what we do, with past successes, but few have been able to replicate a significant success (as measured by a strong exit) a second or third time. So, I agree with you that looking only inside the club for your next investment bears considerable risk and downside. Hope you are well!

Ramon Navarro
Profesional independiente en el sector Plásticos
FOR MR. HAGE: i would like to conect with you trough this way let me know it it is about a patented medical device thanks DR NAVARRO

Karl Pope
Epidemiologist at University of California, Berkeley
Babak, interesting work. In highlighting successful incubators, you point out the sad fact that to have access to funds you have to be part of the club. It highlights why there is so little diversity in the field.

Babak Nemati
Strategy Consultant for the Medical Device Industry. Senior Management Executive, Entrepreneur, and Consultant.
Joe: Interesting discussion. I did a systematic study of medical device incubators a few years back for the National Science Foundation, and in general I would agree with Allan’s perspective. Greg’s 80% is way far on the optimistic side, and I think it also greatly depends on the metrics for success. In our evaluation for the NSF, at the end of the day, the key measure of success was something very obvious … it was all about the people and the team within the incubator. Successful ones, like the Foundry and Exploramed, etc., all had very direct links to sources of funding, and could raise capital fairly readily based on their credibility and reputation, and also had a direct link (strong relationships) with the major acquirers (the ultimate customers for most emerging medical device companies). The big challenges now for most medtech companies are the significant contraction of venture money for this sector, and the overall trend to require emerging medtech companies to show early market traction before they are considered ready for exits. Both significant hurdles. In my view the regulatory landscape is not that onerous, as is the reimbursement environment, so the FDA is often blamed disproportionately about the troubles of this sector than they deserve.