How to Build a Strong Network of Investors and Partners for Your Medtech Startup: Interview with DermaSensor CEO Cody Simmons

DermaSensor CEO Cody Simmons knew he wanted to work in the healthtech space as an undergraduate at Brown University. While completing the master’s program at Stanford, he realized his passion for developing and commercializing health technologies.

But at the age of 22, he wasn’t quite ready for a full-time startup role and decided to join the corporate world and spent four years at Genentech — two years in the company’s leadership development program and two years in the U.S. pricing contracting strategy group for oncology drugs. While at Genentech, Cody learned about business analytics; strategy and commercialization; and how high-functioning, high-performing organizations operate.

In 2016, he met entrepreneur and DermaSensor Co-Founder and Chair Maurice Ferré, who asked Cody to join the company and help bring its namesake product — a handheld skin cancer detection tool — to bear.

With Cody at the helm, DermaSensor has raised $27 million to launch the world’s first point-and-click skin cancer detection tool for primary care providers.

DermaSensor carries the European Union CE mark, and is also registered and available for sale in Australia and New Zealand.

Pursuing FDA marketing approval, the company received breakthrough device designation for the DermaSensor product and in 2021 completed the first-ever FDA pivotal study for a primary care-focused skin cancer detection tool.

In this episode of Medsider, Cody talks about the importance of discovering whether there’s alignment between regulatory requirements and payer needs, as well as finding opportunities to streamline your clinical testing plan to meet both sets of criteria; why you should seek out ally investors; and how you can de-risk your technology for potential investment partners.

Guest

Cody Simmons

CEO of DermaSensor

Cody Simmons spent four years learning about business strategy and analytics at biotechnology giant Genentech before becoming CEO of DermaSensor in 2016, where he leads development and commercialization efforts for the company’s novel skin cancer detection tool. In 2018, Cody was included on the Forbes 30 Under 30 list in healthcare.

Key Lessons from Cody’s Experiences

  • DermaSensor learned early on in the development process that it needed to conduct multiple studies to get regulatory approval and qualify for reimbursement. Medtech companies should pinpoint the criteria necessary to satisfy both regulators and payers and whether there’s any alignment between the two.
  • Show investors that you have the capability and competency to establish a manufacturing process and that you’re prepared to ramp up supply when getting to market. Having commercial product ready to go shows the ability to execute your plans.
  • Spend some time each month proactively reaching out to potential investors. Focus on building strong relationships with people in your network who can become trusted allies and provide help during challenging times.

Understand Where Regulation and Reimbursement Align

Early on in the DermaSensor development process, the company set out to better understand both the regulatory criteria to get marketing approval and what payers were looking for so the product could qualify for reimbursement. Through that process, the company learned it could not rely on just one study to satisfy both FDA and payers.

“That was a helpful North Star in a sense [for us],” Cody says.

DermaSensor decided to take a two-step approach to development that involved a large clinical validation study for the FDA regulatory pathway and several clinical utility studies to show payers how the device would benefit patients in the real world.

“[Get] a sense of your regulatory path and [whether there] is some way to align that with reimbursement so you can maybe do one or two studies in parallel versus sequentially. For us, unfortunately, that wasn’t the case, but knowing that in advance was really important,” Cody says.

Cody also suggests bringing in an expert or multiple experts who truly understand and can guide you through the regulatory process, which is filled with nuance. It’s worth investing the time and money to hire someone with domain expertise, he says.

“If somebody only does pharma, and you're a medtech or diagnostic startup, keep looking. There's plenty of folks that you can speak to,” Cody says.

De-risk Your Product to Build Investor Confidence

Getting to market is great and can provide key insights, but investors also want to know that you can successfully set up a manufacturing process that complies with regulations and allows for scalability, Cody says.

“Having that commercial product, even if it’s not the cleared medical device you ultimately want, shows that you just have the … capability and competency as an executive and as a company to execute on that,” Cody says.

Getting all your manufacturing and supply ducks in a row can help de-risk the company for investors. That’s one less thing investors will have to worry about, and it shows you’re prepared for commercialization.

And don’t be afraid to pivot when things don’t go as planned.

DermaSensor had two year-long setbacks. The first was due to a technical issue that led the company to completely change the design and strategy. The second setback was due to production work that led the company to switch manufacturing groups.

Don’t stay wedded to your original plans. Work the setbacks to your advantage, tear up your playbooks, and work within the new timeline, Cody says.

Build Strong Relationships and Find Allies

Cody admits that he underestimated the importance of fundraising and networking when he first got started with DermaSensor. He learned that you need to build strong relationships with potential investors to be successful.

“[You think] if you do a good job building the business and the product, then you don't really need to worry about money … that’s just not true. You’ve got to have people that know you and trust you and who you've been keeping updated on your work, especially in the earlier days,” Cody says.

Cody suggests finding an ally investor — someone who believes in you, your company and technology, and who will go to bat for and open up their networks to you. Don’t be afraid to take an equity cut or give the backer a discount in the first investing round to get them on board, so they can help you raise more money.

In the end, it’s worth the effort because those allies will be able to help during hard times.

“It's people like that, that aren't just strictly financial investors, but who really believe in you and the product and company [so much] that when there are dark days — which there most undoubtedly will be — [they] will still be there by your side and can help,” Cody says.

Spend some time each month going to lunch or getting drinks with people in your network, Cody advises. Allow potential partners and investors to get comfortable with you as a person and as an entrepreneur.

Successful entrepreneurs do a good job of building and nurturing relationships, and they make better salespeople, Cody says.

“A lot of success in this [startup] world comes down to finding people that believe in the company and that will put money behind it,” he says.

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