Great technology means a great investment, right?
It’s never that easy for investors interested in an early-stage tech company. And for investors like me who are enamored with the medtech startup scene, it’s even more complicated.
That’s why I conducted an experiment with my primary physician last year. I wanted to see how real some of these complications are.
So, when I was having my regularly scheduled physical, I gave my doctor a small box containing a blood-sampling kit I got from a startup. I explained that the blood samples use biomarkers to indicate the likelihood of selected cancers emerging in the near future. The technology was proven and hundreds of patients were using it regularly. I just needed her signature to try it out.
She said, “No problem. I’ll check out the contents. Next time you come in, we’ll take your blood.”
I came back two weeks later. She hadn’t opened the box yet. “No problem,” I said. “Next time.”
But every time I returned to my doctor and asked about it, she had forgotten about the test. Finally, seven months later, they took the blood sample and sent it off.
I got the results at the same time my doctor did… about two weeks later. To my relief, they came back negative. The next time I saw my doctor, I asked her if she would be interested in offering the test to her patients.
“Perhaps,” she said. “But I’d need to know much more about the technology.”
It was exactly the response I was hoping for. But in the year that followed, whenever I gently probed her on whether she ever followed up with researching that early-detection cancer technology, she gave me the same answer. “Not yet.”
Eventually, I stopped asking.
A Word of Caution
There have been dozens of medical technology breakthroughs over the past few years. They’re every bit as exciting and potentially impactful as early cancer detection.
Many of the companies offering these breakthroughs meet the criteria that define great startup opportunities. In fact, given the frequency and high quality of medtech innovations, I could have easily recommended far more than I already have in First Stage Investor (click here to sign up).
What stopped me is the same problem I faced with getting my doctor to use the early detection tech: Resistance to adoption.
In the medical community, there’s an ingrained culture of caution — if not outright resistance — to new technologies. And for good reason: Healthcare professionals, administrators and stakeholders deal with life and death. It’s not academic or abstract.
It’s a huge obstacle that early investors need to take into account when looking at a medtech startup. Despite offering products that could potentially eliminate or significantly improve health problems, these companies often can’t win the cooperation of doctors, hospital executives or other healthcare stakeholders.
This resistance to new technology and product adoption starts early. It can stall progress from the very beginning, when startups try to move through the product development and testing phases.
There may be hundreds of health systems and thousands of hospitals, but it’s not easy for companies to access them for testing purposes. Startups often need their founders to leverage a pre-existing network inside the medical community to negotiate such arrangements.
So as an investor, I’m always impressed when a medtech startup is able to set up or begin a pilot of its technology with a target customer. But the challenges only get more difficult from there.
For the testing to yield meaningful feedback, it must be conducted in hospitals of all kinds — urban, rural, academic, community, non-profit, small and large. Only then, and after making the necessary tweaks to the product, can the company proceed to the beta stage.
The startups that get this far are rewarded with a similar set of problems at the marketing phase. A new technology must work well and also be integrated into the physician’s office, hospital or health system seamlessly and effectively from the get-go. It’s often easier for prospective users to say no or “try it with someone else first.”
An Attractive but Confounding Sector
Given a chance, medtech startups offer an array of groundbreaking technologies that are primed to bring healthcare into an advanced new era. But not all startups will get that chance.
The onslaught of healthcare technologies makes the medtech sector one of the most attractive but confounding sectors for early investors. So ask questions. Grill medtech founders on how they plan to resolve the pain points involved in testing and adopting their technology.
Because these companies can make outstanding investments… but only if they overcome these obstacles. The founders with the deepest networks — along with the most sought-after technologies — are the best equipped to overcome these challenges.