Funding a Medtech Startup in Uncertain Times

Craig Davis is no stranger to the high-stakes world of early-stage medtech. His journey began as a partner at the family office LaSalle Investments. During this tenure, the firm played an instrumental role in the foundation of companies such as Merge Healthcare and OrthoScan, both of which later emerged as billion-dollar corporations. 

Later on, as a senior member of a team backed by the private equity firm GTCR, he successfully rolled up companies in the urologic device space. He was also one of the partners at Healthios — a boutique healthcare-focused investment bank. The skills honed in these positions equipped Craig with the know-how and the audacity to plunge into uncharted territories as the CEO of NovaScan.

NovaScan is a company revolutionizing cancer diagnostics with a low-cost, single-use device capable of real-time cancer detection and stratification. Their platform technology uses electrical impedance to calculate cold frequency — a parameter that dramatically increases as cancer develops and advances. The device can instantaneously analyze tissue cells either in vivo (inside the body) or ex vivo (outside the body).

With NovaScan's technology, clinicians can confirm the presence of cancer in mere seconds, thus improving diagnosis speed and patient care. Moreover, the platform also allows for stratification, enabling clinicians to identify potentially aggressive cancers early on. Currently, the scope of detection encompasses skin, breast, lung, pancreatic, and esophageal cancers. 

NovaScan is still in the clinical stage. However, Craig and his team have been actively gathering data for lung and GI applications at the Texas Medical Center and soon at the University of Chicago. The device has shown promising results, with sensitivity and specificity of around 90%.

Craig and his team are working toward clearance and partnerships to bring their groundbreaking technology to the market. In their capable hands, the future of NovaScan is brimming with potential.

Key Learnings From Craig’s Experience

• Early-stage development calls for efficiency and creativity. It’s possible to go off the beaten track and find quicker paths for product iteration, resulting in more time and money.
• When it comes to clinical trials, the magic formula is a fusion of rapid data collection, smart setup, and perfect execution. Shaking things up by moving trials to unconventional venues — while keeping study integrity intact — can speed up the data harvest. 
• The bar in fundraising is high, but entrepreneurs who show resilience, adaptability, a solid exit plan, and a willingness to do what it takes will capture investors’ interest.

Fast-Tracking Early-Stage Development

Drawing upon his rich experiences across the life science ecosystem, Craig’s ideas around expediting medical device development while ensuring efficiency are not just theories but proven techniques in the field.

For example, Craig admits that gaining regulatory approval is often time-consuming and expensive. One instrumental strategy to minimize delays and ensure product utility is to find the most efficient path at the outset, such as considering outside IRBs. This type of strategic move can help cut the approval time from 12 months to as little as three weeks, allowing you to focus on other early-stage initiatives: rapid data collection and product iteration.

In this stage, it’s crucial to thoroughly understand the clinical data collection process. Test your device in different settings, including outside hospital environments, whenever possible. As Craig puts it, the ultimate goal is to "fast-track the process to begin to collect more valuable information as you're thinking about developing in those early stages."

Finally, Craig encourages founders to be cost- and time-efficient when prototyping and developing by leveraging local resources like incubators or accelerators. The right facilities don’t only have the physical resources, but also the know-how that can aid a startup in building quick prototypes, iterating fast, and moving swiftly through early-stage development. 

Optimal Strategy for Clinical Trials

Clinical trials are the backbone of medtech product development, and they can be time-consuming and costly by nature. 

To streamline clinical trials, Craig advises being quick and responsive when collecting relevant data. When you choose your battles wisely, you can efficiently navigate through bottlenecks often associated with regulatory approval procedures. 

To do that, Craig brings attention to the importance of innovative thinking when planning and conducting clinical trials. For instance, NovoScan chose to run its GI trial in an Ambulatory Surgery Center (ASC) rather than a traditional hospital to optimize for speed. While this data might not be used directly for regulatory submission, it provided invaluable insights that informed ongoing refinements of their technology and fine-tuned their algorithm.

However, fast doesn’t mean sloppy, Craig underlines. On the contrary, documenting these early-stage clinical efforts properly, even if they aren’t pivotal or directly used in a regulatory submission, is of critical importance. Solid documentation will likely present a positive image of the company and its diligence to both FDA and potential investors.

Mastering the Ropes of Fundraising

In the world of startups, financial dynamics continually change. As a founder or CEO, you need to improve your skills and step up your game at every level to keep up.

Craig acknowledges that even though venture firms are still investing, due to the financial uncertainties, securing early-stage investment has become a more demanding job than ever before. However, he also affirms that there’s money out there. Even though the bar has risen, if you have what it takes, you can still get funded. Success is attainable for startups that can demonstrate resilience and dynamism. 

Having raised an impressive amount of capital amidst changing circumstances with NovoScan, Craig underscores that it's less about the financial landscape and more about the entrepreneur's tenacity and flexibility to adapt.

When it comes to clinching deals with potential investors, Craig’s first advice is to have an exit strategy, something he refers to as finding a ‘home’ for the technology. He says: "Find that there's an exit out there, i.e., make sure there's some way that your investors get their money back." When you reassure them there’s money at the end of the tunnel, things get increasingly easier.

Secondly, Craig advises budding entrepreneurs to showcase tenacity, willingness to learn, and a sense of when to pivot. He remarks that forecasting figures are often unreliable at such an early stage. What matters is the person behind the startup and their ability to navigate the uncertain terrain of launching a new venture. "You're going to stumble. It's going to be a bumpy ride. They always are," Craig shares.

Securing the trust and support of investors is no easy task. Craig’s advice for startup founders is to show they're ready to "do whatever is required when the going gets tough" and demonstrate persistence and diligent follow-up. Startups are a test of perseverance, and as Craig asserts, it's the one who can ride out the storm who will find success in the medtech startup arena.