Successful start-ups are as much about getting hold of smart people and listening to them as they are about finance

TURNING A clever idea into a commercially viable and useful product isn’t always an easy task. And with the changing landscape in the life sciences sector of shifting markets and ever-squeezed funds, you might intuitively think that medical technology (medtech) start-ups are on a hiding to nothing.

Not so, if you look at the broader picture, according to California-based cardiologist, entrepreneur and venture capitalist Prof Peter Fitzgerald, who spoke yesterday at the MedinIreland medical and healthcare technology expo hosted by Enterprise Ireland at Dublin’s Convention Centre.

No stranger himself to the process of developing medical technologies, Fitzgerald argues that the widening global spread of medtech innovation, alternative funding sources and even the stress of the recession can offer opportunities for medtech start-ups.

“On a global level, the hotspots of innovation in the life sciences – and medtech specifically – are not necessarily as focal as they used to be,” says Fitzgerald on the phone earlier this week from Israel, where he has investment interests. “In the last five to eight years, it has become much more global.”

Centres such as Ireland, Israel, Taiwan, Singapore and parts of India are now seeing a boom in medtech, he says.

“It’s not all in Silicon Valley anymore, and this whole process from invention all the way to execution is really now a global endeavour.”

So how is the medtech start-up sector likely to fare in the changing global environment?

“I think personally that it is going up,” says Fitzgerald, who argues that the recession’s impact could generally help to sharpen innovation.

“I think that inventiveness goes up in chaotic situations, and we have a stressed, chaotic situation. The only thing that comes out of comfort is mediocrity – when things are going well and the fancy cars are being bought and everyone is comfortable you don’t see revolutionary inventions.

“It’s when things are at the edge that you see innovation.”

He also notes that mergers and acquisitions are going up in the medtech sector. “There is a great appetite for transition in these technologies to the large companies from Johnson Johnson to Covidien, at the right stage where they can iterate and commercialise because they are the experts at ultimately getting those technologies to wider patients.”

Fitzgerald has a good vantage point: professor of medicine and engineering at Stanford University, he directs the Center for Cardiovascular Technology. He co-founded venture firm LVP Capital – which has interests around the globe, including Ireland – and he has been a principle or founder of more than 10 companies, the majority of which were transitioned to large medical device companies.

“Nobody ever does things in isolation,” he says. “And I have been lucky enough to work with smart teams where we have invented based upon a need. Usually that need has come out of something that has irritated me in the clinic or a complication that I have seen or an inefficiency that I partake in.”

One idea came from the problem of having to put a hole in a patient’s artery to insert a stent device. Fitzgerald and a team of engineers came up with closure devices to help stop the bleeding, and the devices are now sold by major healthcare companies.

Looking forward, Fitzgerald highlights emerging areas in medtech: they include mobile-phone-based technologies to use healthcare information smartly and tools to help standardise the diagnosis and treatment of patients who need catheter-based cardiology procedures.

But where will the money come from?

“There are going to be funds,” he says. “Even though the traditional VCs are wandering towards late stage deals, we are seeing an emergence of small, focused, smart VCs – doctors or people who have done it before are beginning to move into that area where they were previously squeezed out by the big VCs.”

Such capital may not always be guaranteed for the lifetime of the venture, but maybe that’s no bad thing, argues Prof Fitzgerald.

“Innovators have somewhat become spoiled, they want to be funded to success – but if you achieve your milestones on a small amount of money and increase the value for that capital, you are going to more efficiently get to a better milestone than if you are given a pile of money in the first place.”

He also points out that funding could come from unexpected quarters.

“We are in an IT bubble right now that is about ready to be de-hissed,” he says. “What that means sometimes is that money comes out of sectors that you didn’t quite appreciate and you weren’t looking at when the funding was coming out of the same lanes for 25 years. Those lanes are changing – it’s is going to be non-traditional capital that will be available to be infused into healthcare.”

He also has some advice for start-ups in medtech: get hold of smart people and be prepared to listen to them.

“One of the biggest things I think increases the probability of success is making sure when you start that you surround yourself by smarter people. Sometimes folks who think they have invented the next iPod become paranoid and withdrawn and don’t ask for help, and I can guarantee you that is a recipe for failure. You have to get the older, more experienced and trustworthy people who can mentor you; if you are the smartest one around the table you will fail.”

Inventors also need to take the advice on board. “At the end of the day when your invention gets implemented, it is never what you thought it would be or has the same value or even works the same, so you need to be flexible.”

And keeping the focus on the patient is also key, he adds.

“The young entrepreneur should always keep the patient in their crosshairs. If they begin to confuse the patient and their own personal delusion as they fund or get the company funded, that is a recipe for failure.”

Overall he’s upbeat about the medtech sector’s pulse. “From the ‘30,000 feet’ view, it looks daunting, but it’s not daunting . . . the value inflections are changing, but that is probably sufficient for today. We have to be cost effective,” he says.

“Medtech will survive, and it may not survive as it used to in Silicon Valley, but in Ireland, Taiwan, Shenzhen, Tel Aviv, this is where you are going to see this rise up.”

MEDTECH IN IRELAND A SNAPSHOT

THE MEDTECH sector employs 25,000 people directly in Ireland and had exports in excess of €7.2 billion in 2010 – up 14 per cent on 2008 levels.

Ireland is the second-largest exporter of medtech products in Europe, with Germany the largest. The Republic is now the largest medtech employer in Europe on a per capita basis.

Nine out of the global top 10 medtech multinationals now have operations in Ireland – Boston Scientific, Medtronic, Cordis, DePuy, Stryker, Covidien, Baxter, Abbott and Cook.

Ireland's indigenous medtech sector has been growing in recent years. In 2010 the sector contributed more than €1 billion in sales and €760 million in exports, and employed more than 6,000 people.

Source: Enterprise Ireland