What Percentage of Start-Up Medtech Companies Survive Six Years? Best Guestimates are 25%-30%

Medical Patents Broker Inc.
By Kenneth Pearce, President

Ideas happen all the time. In most States it’s easy to create a limited liability company. Some of these new LLCs are created by an idea. Some are created by a prototype. Some are created by the medical patent. But only a few are created by proof of concept. And in the medical patent business, because of FDA requirements, the proof of concept is impossible. A conundrum that’s facing every medtech startup is always an obstacle – it’s like flying without an autopilot.

Still, the lure of helping others and billions of potential sales influences many to believe “I can do this.” And a few do.

Historically, the survival rate for startup medical device companies after six years is low. Data shows only about 25% to 30% of these startups survived the sixth year.

SOME HURDLES OF THE SIX-YEAR TIMELINE

1. The Destinies

• Example A: Believe it or not, a few enter this business at exactly the right stage of their lives. For these medical device companies, their inventions seem to be sufficiently different or improved, CMS gives a thumbs-up, and FDA testing is as smooth as faux silk. Modest sales in the first year after certification, doubled the second year, etc. Yes, there are very few who are in the right place at the right time. These types are usually adequately capitalized for the tasks at hand.
• Example B: The "why did I do this" category. A business plan based on hope and the capital investment of others. The LLC is not what the founders thought it would be. There is SEC stuff and investors are vocal. The dang lawyers and the wasted capital on so-called "experts" that did not produce expected results. Where’s the FDA certificate? It’s been resubmitted twice already. Nothing is going as it was supposed to, and the money is long gone to keep going.
• Example C: Keeping a head above water (barely) mode. Fiscally not using others' money until ready to scale. Running a lean, tight ship that survives the FDA swells and moves toward the patient. Keeping employees and experts at a minimum until absolutely needed. Actually building a medical device that is better than current on-the-market competitors. Organically procuring CMS usage. Staying in the game and making some profits to finance the next generation. And, having learned from the previous mistakes, doing it all over again with a different device. Sometimes the second time around becomes an Example A. Some destinies unfold over many years rather than a few.

2. The Scaling and Manufacturing Trap As long as examples A and C stay in the medical invention business, they will likely have the credibility and the credit score for short-term loans, when needed, for scaled-up manufacturing and distribution. They have learned to hire when gross sales demand it. It seems like this business model has been around for thousands of years, and it remains successful today. Over time, this model has the possibility of generating international success.

🎽 The President’s Viewpoint

I am no expert about how best to build a business. In the business world, there are so many things that I do not comprehend. That’s ok. If all of us understood everything, we would all be alike and that would become rather boring – everyone communicating about the same things repeatedly.

Without the valleys, I don’t think we could understand the mountain tops. Success happens when we are on the right stage at the right time.