Imagine if you could have someone on your team that could tell you exactly what an investor, or team of investors, were looking for? Instead of going in and pitching a bland generic deck, you were able to pinpoint your message to the precise interests and desires of those on the other side of the boardroom table?
On this episode of MedTech Gurus, we sat down with Ken Hubbard, the Co-Founder and Chairman of CapStack West, for a chat about angel investors, a big mistake that companies make when pitching to potential investors, and advice on entrepreneurs in the MedTech space.
Ken and his team at CapStack West looked at the MedTech world and saw that there was a massive gap between angel investors & what entrepreneurs were creating. After discovering that only 5% of the companies presented ended up with investments, he decided that it didn't’ make any sense, and he was going to help people looking to make a splash in the MedTech industry get more of their companies invested in.
What the average CEO doesn’t know about raising money?
Obviously, the CEO is an intelligent individual. They’re leading the company, navigating the waters of one of the trickier industries out there, but they may be overlooking one consistent mistake that is all too common in presenting a company to a board of investors.
In every pitch deck, there is a “team slide.” In the MedTech world, this is a slide outlining the individuals who invented the device, the people running the company (often the same ones that invented the device,) and then the board of advisors.
Where most companies make a mistake is listing every advisor on this page, even the ones who don't’ have any financial stake in the company. Most investors are going to want to know that the board of advisors have some financial skin in the game, so to speak. The advisors have known the CEO a lot longer than the investors, and if those advisors haven’t put any money into the company, the investor is going to start asking questions. What are they not being told? Why wouldn’t the folks on the advisory board believe in this enough to put their money where their mouth is, so to speak?
If the advisors aren’t putting money into the company, doesn't’ list them as advisors during your pitch. They can be mentors, they can be supporters, but not advisors. On the flip side, if your advisors are investing in the company, make sure and list them. There may be some situations where the folks on your board cannot legally own a stake in your company, and if so, this should be disclosed.
It’s a competitive world out there. There are far more companies that need capital than there are people to help inject that capital. A recent client of CapStack West, rather than putting forth the investment for training on how to prepare a presentation, decided to crowdfund first. Ken and the team acknowledged this and wanted the client to let them know how it went, and if they needed anything.
Six months went buy, and the client called, saying they had raised $2.4M against a projected ask of $500,000. Upon further explanation, it was revealed that they got promises of $2.4M, but after 6 months of chasing, they only closed just over $100,000.
That is an awful lot of time and effort to talk to all those investors, for very little return. If this particular CEO had been a little more flexible, adapting and allowing guidance from experts, they likely would have been able to close well above their ask.
On the flip side, another client came in and was adaptable and flexible and willing to learn. As they worked together, this CEO, who came from a product & sales background, began thinking and talking like a CEO instead of a salesman. A salesman will tell you how great the product is, whereas a CEO will tell you how you’re going to make money from your investment.
Less than 2 years later, and that company is on path to do over $10M in sales this year.
Build a Plan around Valuation
The MedTech market is heavily regulated, and built upon a very long cycle. By the time a device gets to market, it may have already been sold once or twice. Instead of one large round of investments, build a plan around valuation. Launch a round of investments knowing that another round will come later.
A lot of companies know before they even present that they're not going to be the ones to get a product to market. They know the product will be sold prior to its market debut. If you can go into a meeting speaking the language of valuation, you’re far more likely to get a positive response from an investor. If you go in saying “we have $10M valuation which includes our IP, presales, where the product is to date, and after successful clinicals, it will be valued at X,” how much more attractive is that to an investor?
There is an incredibly large network of a new type of investor out there, one that wants to change the world. These investors are very well positioned to do big things for the MedTech industry, so get out there and look for these World Changers.
If you’re interested in learning more about CapStack West, or joining the CapStack network, head to capstackwest.com, and sign up for a free trial. You can also find Ken on LinkedIn, or email him at email@example.com.
This post is based on an interview with Ken Hubbard from CapStack West. To hear this episode, and many more like it, you can subscribe to MedTech Gurus.
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Recently I was watching one of those Sunday Morning political shows. You know the type… there is the host and two distinguished guest both polar opposites in their point of view on the issue being focused on.
Of course the outcome is always predictable with each guest trying to shoehorn their talking points in the very limited air time they have. It deteriorates into the two of them trying to talk (or shout) over each other. Then add the host yelling over the top of them to try to gain control of the interview.
The lead me to consider the value of listening.
Most experienced medical device sales reps would tell you, “I am a very good listener and am always engaged with my customer”. This is likely true, at least on the surface. In my own experience I find that I will sometime drift to “Listening to respond”.
What I mean by this is often I find myself listening to the point that I start to formulate my response or my next question to direct the sales interview. In many instances missing a subtle point or gesture that might have helped me steer the interview.
As a Medical Device Sales Manager and coach I see this almost daily from the most seasoned of Med Device sales pros. After we leave the prospects office I might ask them about an issue the prospect raised, or why they lead the conversation a particular way. Their response tells me they totally missed the point (or opportunity…. Trust me if it was a big opportunity I would chime in and ask the question myself.
My point with all of this is it is real easy to fall into the habit of listening to respond versus being an “ACTIVE LISTENER”. So the question is, how do I correct this?
Well over the years I have handed out probably 50 copies of
“Stop Telling and Start Selling”
By Linda Richardson
This book is loaded with thoughts, examples and ideas for how to become a more productive sales person, simply by becoming an active listener. I often pick it up and review a chapter or two. Interestingly enough when I do, sometime during the next week or ten days I get a big order that I had been working on for months.
So ask yourself, “AM I AN ACTVE LISTENER?” You might be interested in your answer. If you are really daring ask the question to a spouse, partner or friend!
When asking the typical medical device sales person about the positive (fun part) and negative (“ugh” part) of their role. Almost always prospecting or cold calling is in the negative part.
If you have ever performed this activity it can be “dreadful” to be sure. Especially if your company or manager has not provided the proper tools, or coaching, for you to achieve a high level of positive result from this activity. So, the questions are; “How does a good medical device sales consultant prepare for this activity?” or even before that “Why do I need to do this? I have a great territory a terrific medical technology and I am at or above my number!”
The Why Question
Let’s start with the why question first. Now this may seem pain fully obvious. Everyone in a sales meeting will discuss how they approach prospecting, coupled with a great deal of cheerleading and pumping the team up. However, day to day when one is all by themselves in their territory it can be dreadful to get out of the nice warm car, or pick up that telephone and call that new account. One has to get out of their comfort zone… and approach and talk to someone (who is very busy) and interrupt their day.
What if they don’t like me? What if they hate my company or technology? They might yell at me! They might hang up the phone! Yep, all possibilities, and this is why a significant percentage of new medical device sales people fail. They are simply not prepared for what it might take to perform this critical activity! So they simply do not prospect, or at best provide a token effort.
As you read through the great deal of material available and/or use CRMs or other systems out there, they each have a common theme for prospecting or new account development. This is a crucial activity for all of us. Yes ALL of us, I can hear many of the Med Tech Sales Managers out there saying , “I am beyond that”… um no not really as it is important as a sales manager that you are grooming your own prospects too… sorry chief.. you can’t dodge that one! I personally find that I often have to lecture myself on not prospecting enough it is easy to do, yet there is no activity more important to you personally and your company! So let’s think about how to prepare yourself and your customer for what is about to happen.
The How Question
There is no doubt that prospecting isn’t easy. There are many layers of defense that our future clients have. Gate keepers, voice-mail, email, in some industries vendor credentialing, yes it is tough. However there are several simple yet critical techniques that can raise your success rate and make it rewarding and perhaps even fun (ok less dreadful).
The point here is the more a medical device sales person (or manager) dedicates themselves to the concept of prospecting the more likely they will be to not just succeed, but will more than likely blow there number away. This takes mental toughness and dedication, with a healthy dose of preparation.
Yes, it is hard work there is no doubt. One can read about various systems and techniques. They are like diet books your book store, library and on line retailers are loaded with them. At the end of the day it is work! Work you need to plan for and prepare for. It is however worth it. Believe it or not… it’s your customers that will thank you as you just made their life better!
Tom is a 35 year veteran in the Med Tech space. Having personally worked with dozens of new technologies. It is Tom's passion to enhance patient outcome by bringing new concepts and technologies that will help clinical performance.