How to Compete with Industry Goliaths

Key Learnings From Joe’s Experience

• Don't be afraid to explore unconventional ideas if your product and the market conditions warrant it. For example, you may want to really lean into sales and distribution strategies tailored to your product's strengths—like building a broader ecosystem around your device. This may attract other parties not directly in your stakeholder loop, generating value outside of your direct product sales.

• To outmaneuver incumbents, adopt a lean, adaptable commercialization strategy based on the advantages of your product. As a startup, don’t make the mistake of scaling your salesforce prematurely. With a focused, low-cost initial launch, you can gather vital market feedback and refine your approach. And if your technology is novel, invest in education – adoption hinges on stakeholders understanding how to fully utilize your offering.

• When it comes to M&A, you want your company to be purchased, not sold. Focus on building a strong, desirable business to attract buyers organically. Befriend potential acquirers, including competitors, and foster trust over time. 

Joseph DeVivo’s expertise in medtech first took shape at US Surgical, a company that changed surgery around the world twice: first by bringing surgical stapling into medical practice, and second by commercializing laparoscopy. “In a way, that's where I feel I did my residency. I have a tremendous amount of mentors there,” Joe shares. 

He then moved into a leadership role at Teladoc Health, a telemedicine company that enabled specialists, such as neurologists, to remotely diagnose and make critical treatment decisions by facilitating tele-consultations between physicians in large hospitals and patients in rural settings. 

Butterfly Network shares a similar mission with Teladoc: to democratize healthcare and improve patient care with its handheld, imaging device that incorporates ultrasound technology into a semiconductor chip, disrupting the market that is known as point of care ultrasound (PoCUS). “It's the future of imaging, and it's the future of care,” Joe reckons. The device has the potential to bring high-quality imaging to office settings, underserved demographics, and remote areas across the world. 

Butterfly iQ3 is the company’s latest chip-powered PoCUS device with superior image quality, rapid data processing, advanced imaging tools, and ultrafast scan times. "Our image quality is so good now that we're getting into a lot of subspecialties. This is allowing us to tap into the $8.5 billion portion of the ultrasound market," Joe shares with enthusiasm. 

The company has established its own ecosystem for software development and sharing: Butterfly Garden is where AI developers can launch their apps for Butterfly’s ultrasound devices and sell them to Butterfly’s users – much like the Apple app store model. For example, practitioners can find applications to streamline different procedures that can be performed with the Butterfly device. “It's very similar to the Apple app store, where you have this supercomputer device that you have in your pocket that becomes more valuable with each application.” With Butterfly Garden, practitioners can find apps tailored to specific tasks, like detecting birth defects in the womb or assisting with cardiac ultrasound analysis. 

Today, Butterfly is a leading ultrasound provider with the largest global app base for this type of hardware, making it an attractive platform for AI developers. Commenting on Butterfly’s ecosystem, Joe says, “It's a business model that works once you've hit scale.” Launching a similar app store or a development kit without a substantial user base won’t attract developers who, naturally, are seeking the largest marketplace to sell their software.

Think Outside the Traditional Sales Cycle

When it comes to commercialization, Joe has followed two different but equally successful strategies with Butterfly. 

First, Butterfly found success early on by commercializing directly to end-users without a field-based sales team. While this approach is somewhat atypical in medtech, Butterfly’s position was aided by the fact that its ultrasound probes are very user-friendly. Today, a high percentage of Butterfly’s sales are made by doctors who purchase the device online. 

By establishing direct relationships with doctors worldwide, Butterfly built a strong value proposition and rapidly scaled its operations across a diverse customer base. Today, the product is available via eCommerce in 18 different countries and languages. 

Secondly, on top of engaging directly with physicians online, Butterfly’s direct sales force sells to hospital systems, medical schools, clinics and other out of hospital settings in the United States and in key international markets. With distributors and global health partners extending reach further across the globe, Butterfly devices can currently be found in over 100 countries.  

Commercialize with Precision

Joe's approach to commercialization is all about measured steps instead of the high-burn, high-risk trap that most startups fall into. 

“Sometimes only one salesperson is enough. Start small, test, and learn,” Joe suggests. A lean initial model allows you to be adaptable and saves money as you learn and grow. “The biggest mistake I see people make is: They just go boom, and they deploy all kinds of resources. Next thing you know, they're burning a million dollars a month,” warns Joe. 

Direct market interaction is also key. You often get more pertinent information on pricing, what customers might love or hate, and educational needs. 

For example, Butterfly competes against giants like GE, Phillips, Siemens, and Fuji. But their direct-to-physician e-commerce sales model creates a competitive advantage. “When you sell directly to a doctor and into their practice, you start building a brand, you start building awareness,” Joe points out. 

“If you read Malcolm Gladwell's book, David and Goliath, the ‘Goliaths’ have their ways of fighting battles. But when you're small and you're new, you have to find a way to be a little disruptive,” Joe explains. It’s not just about building a website or having a reputation. For Joe, what you have to do is to come up with a model that accentuates your unique benefits. 

“Once you've proven a concept, it's very easy to want to scale quickly,” says Joe. But trying to hire tons of people and optimize everything all at once is a big challenge. For example, by having a single salesperson test a particular territory, Joe suggests you can learn, “What are the objections that doctors have? Have you priced it right? Is there a training issue? And so, whether it's dipping your toe in the water and making your product available online and then doing some basic marketing, or whether you put one or two salespeople into a good market, you can take a bit of a slower path in terms of cash deployment for your launch.” 

In addition, stakeholder education might also be essential, especially if you’re changing the game like Butterfly is changing the ultrasound space. That’s why the company offers extensive educational initiatives like training videos, its AI-guided ScanLab™ app, and courses on Butterfly Academy. Although it requires significant resources, these educational programs are an absolute necessity. As Joe points out, “You can’t sell a car if people don't know how to drive it.” 

It’s Better to Be Purchased Than Sold

Joe, having seen five companies through their exits, is an expert when it comes to medtech M&A. “A successful M&A deal is one where you're purchased, not sold," he reiterates, "If you create a posture of trying to sell your business, you won’t get the full value.” 

According to Joe, the best strategy is to keep a reasonably low profile while building value. But that's not always feasible. You occasionally need to engage with potential buyers directly. For that, Joe suggests that you identify the potential acquirers – especially competitors – and simply befriend them. For example, build relationships at industry events over time. 

Not every strategic is looking to make a purchase, but they might be open to partnerships. Starting with conversations around distribution, for example, is a great way to demonstrate your company’s strengths and prove your reliability at the same time. 

“When you're doing something, you think the whole world revolves around it, but the potential acquirer might not fully understand how you'd fit in their company,” explains Joe. You need to show them what you’re doing, and how successful you are at it. Here, openness and transparency are key, yet this doesn’t mean you should divulge the secret sauce. Use your communication channels to educate the key players – those who might be potential acquirers in the future. Joe shares, “You can even steer them towards synergies between your business and theirs.” 

All these efforts in communication are essential in creating trust, which is a significant part of acquisitions, according to Joe. “They can do a lot of due diligence, but if there's something they miss, it’ll hurt them badly after the deal is done.” Maintaining a strong posture and confidence in your mission will attract those already in acquisition mode. It could even spark interest from other likely strategics. That’s how you make sure your company is purchased, not sold.