For medtech-ers taking cues from the internet startup world, a noteworthy new philosophy has crept into the lexicon of new web ventures: The Lean Start-Up. The basic tenant of this methodology, coined by Eric Ries, is that a startup is just a conglomeration of hypotheses,and job one of any startup is verifying these hypotheses as quickly as possible yet with a disciplined approach. For web products, this entails rapidly building a “minimum viable product” and testing it with real customers. Based on the results of these mini market experiments, the company can tweak the product or pivot, a.k.a. change course altogether.
While this works in the fast-paced web world, it is much more challenging to build a “minimum viable” medical device and test it on actual customers (we use animals or employees for that). Despite this reality, medical device startups should be constantly and rigorously testing their assumptions as early as possible, and not only the product-related ones, but also the business model, competitive positioning, and the like. In fact, the backstories of some quite admirable med-tech start-ups reveal surprisingly bold “pivots” that, while presumably painful at the time, ultimately led to success.
Probably my favorite pivot of all time. Conceptus was originally founded on (and named after) the idea of enabling conception by opening blocked fallopian tubes with a novel catheter technology. What they found during early testing was that their catheters easily accessed the fallopian tubes, but alas… the technology was much better at blocking the fallopian tubes than propping them open. Problem. Instead of going back to the drawing board on fertility treatment, though, they pivoted 180 degrees to focus instead on minimally invasive sterilization. Fast forward to the present (admittedly 15+ years post-pivot), and the company is pulling in $100M in annual revenue on their Essure female sterilization product with a healthy $600M market capitalization.
In 2011, Medtronic paid a whopping $800M for the venture-backed, pre-revenue medical device company Ardian, the ink barely dry on the CE mark for Ardian’s minimally invasive renal denervation technology. While this novel treatment for severe hypertension fetched big bucks on the promise of a whole new lucrative vertical for Medtronic, it’s worth nothing that hypertension was not the problem that the company initially set out to solve. Originally, the clinical target was fluid overload resulting from heart failure, and the technology platform was neuromodulation vs. the current RF approach. A big pivot occurred somewhere around Series B, reportedly as a result of both technical and market challenges with the initial vision.
Wisdom from Ardian co-founder Howard Levin: One of the hardest things is knowing when to switch or modify an approach. You want to stay in there long enough to know if it’s right or wrong, but you also want to be flexible enough to change when change is warranted.
1. Intuitive Surgical
Now probably the hottest medical device company on the planet, back in 2000 Intuitive Surgical launched its da Vinci robot with 3-D sites set on an application that even today does not on appear on the robotic menu – cardiac procedures.
From Intuitive Surgical’s 2001 10-K: “We will place significant emphasis on marketing the da Vinci Surgical System to leading surgeons who are considered to be the “thought leaders” in their institutions and fields. These surgeons typically perform complex surgical procedures that are currently not adaptable to MIStechniques. For example, cardiac procedures, of which over one million are currently performed annually worldwide, are among the most difficult to perform using MIS techniques.”
Intuitive did not find the expected market traction in cardiac procedures, nor in general surgery where it went next, but finally found a home below the belt with prostatectomies and hysterectomies. (Side note: a lot of key regulatory and clinical decision-makers happen to be in the prostate-concerned demographic, a potential plus for technologies in this field.)
In the real world, successful start-ups rarely achieve success along a linear path. They pursue their vision aggressively, struggle, learn from early failures and mistakes, pivot, and ultimately get somewhere good. This makes me understand why investors are so focused on the start-up teams, not just the great technology and market story.