What Do Investors Consider While Making a Decision
You have a great idea.
You have a plan.
You know you are solving a problem.
You have a team.
You have a goal.
What do you need next?
FUNDS.
To make a difference, especially in the MedTech space, you need grant money as going through the various phases before the solution goes to the market is quite an expensive affair. How do you ensure that you get the grants you need and put your idea into execution?
To understand this in-depth, we spoke to Mr Prash Chopra, a member of the investment committee at MSMF NH Villgro Bionest initiative who wears multiple hats. Here goes.
The Three Ps For a Pitch
When asked about what interests him in a pitch from an entrepreneur, Prash said, “I try to spend no more than 30 seconds on a pitch, and there are three things that should come across very clearly. The first is ‘purpose’, and it should be tangible, not something dreamy. Second, the ‘passion’ should come across because most start-ups with great ideas fail in execution. And the third is ‘product’ — how is it that a meaningful goal is to be met by a passionate team and make them business-viable?” When you are creating a pitch, ensure that it reflects:
A. Purpose
- What specific healthcare problem are you trying to solve?
- How is it going to make the field of MedTech better?
- What is your ultimate goal?
B. Passion
- Entrepreneurship in Healthcare is 5x tougher than in any other area (too many stakeholders, subjective metrics etc.). Look for teams who love it (what’s their “why”) and won’t give up.
- Ensure your words depict how you truly feel about the product.
- Believe in your product.
C. Product
- Ensure you have data from surveys and other research to support your product’s market demand.
- Create a revenue model upfront. Know who will pay and how much. Have data to support it.
- Have a clear IP strategy. How is your product different? Why will it pave a unique, protected path to monopoly in a small niche market?
- Create a clear manufacturing strategy. Who will build the parts? Who will integrate them? Do your suppliers and OEM partners all have the required design and process controls in place? Can they scale with your demand?
- Create a clear regulatory strategy from day 1. Know how you will get your product through
the overseeing agencies (safety, efficacy). Will you require a clinical trial? What is your plan B? (Side note: safety should be non-negotiable.) - Create a clear go-to-market and growth strategy from day 1. Will you have the freedom to operate without infringing on others’ IPs? Do you need to partner with existing IP owners in the space? How will you sell? Will you need to sell direct to patients (non-prescription), or will you need a large region-specific sales network (like most traditional med-tech manufacturers)
Piece of wisdom: What is the biggest mistake entrepreneurs make? Prash enlightens, “The claim that you have all the answers without fully understanding the opportunity. Not being humble enough to know what you don’t know.”
Contents of a Great Pitch
When you create a pitch for an investor, ensure that it answers all of the following questions and addresses the points. Prash advises that a pitch should have these touch-points.
- Who is the end-user?
- Why should someone spend time or money on it?
- Clear metrics & numbers for go, no-go decisions. Adding more to this point, Prash shared, “Let
me highlight three numbers that must be there.
One margin per customer, per use.
Two, customer acquisition costs.
Three, year-on-year growth rate.”
There needs to be a mature, realistic financial model to support your metrics. The model should capture your bottom-up capital needs, timeline, and top-down revenue threads. Both of these tied with a timely fundraising strategy will allow any potential investor to put future value in your mission. Side tip: Look up early-stage company valuation models (e.g. discounted cash flow method). - How would the venture scale, and what is the revenue model? “Is it software-based? If it is a device, is there a disposable around it? Would you have to push to sell to enterprises? In short, there has to be a clear business model. It is difficult but can be done”, says Prash while discussing the importance of this.
How Much Funds Should You Ask For?
To ascertain and arrive at the right amount of funding you need to kickstart and then later scale your
projects, consider a few things like:
- The data insights you have gained through surveys.
- Your low-end & high-end needs.
- Know how much would the venture cost, short-term and long-term.
- What are your immediate needs to sustain your enterprise?
- Know how much you would need in the next round of funding.
Side tip: The founder(s) is constantly selling their vision and fundraising. Be ready to do that. Build relationships early. Do not wait to contact investors eight when you need funds. The best of investments happen over a long term relationship. The hearts align first. Then the deals happen.
Things to Be Wary of After Getting Funding
- Lack of understanding of scalability.
“Social enterprises, by definition, try to address elevating the standard of care. As soon as you say that, you take away — and I’ll say this bluntly — the great part of a free market enterprise exists, historically. It’s a challenge,” Prash comments. Know that your product should be financially viable and fit-to-scale, along with being a social enterprise for it to work and be considered for funding. - Losing direction by treating investment as free money.
Prash articulated the importance of this well, he said, “The minute some entrepreneurs gain access to grants, they lose their fire. The entrepreneurs think they have money now. They forget that it is a loan,” and added, “My advice there is until the three Ps are completely nailed down, I would not want to bring scale or growth or aggressive investors on board. Use the grant money for what it is; it will help me keep the foundations solid. Then think about growth. The key is in timing the fundraise.”
Go Get Them!
A quick tip: To create a financially viable model, have another stakeholder other than the marginalised communities for your product. It could be hospitals too.
Follow these tips to secure funding for your MedTech solutions and help create a better healthcare system in India. Now more than ever, we need innovation in the field, and funding is the backbone of ensuring that happens.
All the best!
About Mr. Prash Chopra
Prash is the founder and CEO at Lucid Surgical, USA. He also serves as an advisor at UCSF Innovation Venture and MSMF TBI. He believes in enabling and spearheading bold healthcare missions that elevate the standard of care for everyone without fragmenting the universe with unicorns.
https://www.linkedin.com/in/prashantchopra/
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