Six Costly Mistakes that Start-Up CEOs Should Avoid

Greg Davis
Note: The views expressed in this article are those of the author and do not necessarily represent those of his/her employer, GxP Lifeline, its editor or MasterControl, Inc.

Representing one-third of the global medical device market, the European Union provides a significant opportunity for start-up medical device companies. But, it can also present costly challenges for the unprepared. Following are a half-dozen cautions drawn from real-world experience that could help you avoid the most common commercial pitfalls.

CE Mark approval requires limited clinical data - often fewer than 50 procedures performed by a handful of highly experienced physicians. The true test of commercial viability actually comes after receiving the CE Mark, when many more physicians test your product's capabilities and uncover limitations.

1. Chasing conflicting commercialization objectives. What are the strategic reasons for launching your product in Europe? Our experience has validated more than 10 unique objectives, ranging from driving rapid revenue growth to providing product free of charge. Expecting rapid revenue growth, premium pricing, and deep account penetration simultaneously leads to frustration and disappointment. Analyze your strategic options, understand financial implications, and stay laser-focused on what's most important.

The decision to "flip the commercial switch" is an important one for start-up companies. Prior to commercialization, many companies are tempted to develop business plans that show rapidly climbing revenues (often called hockey stick curves) and profitability within a few, short years of launch. Unfortunately, the vast majority of commercial launches in Europe do not meet these lofty expectations. As you discuss commercialization goals with your investors, begin with what is most important to achieve, and why. For example, a singular focus on achieving an aggressive revenue target can drive the wrong behavior (i.e., stuffing the sales channel, lowering price, opening new channels or outlets, entering less profitable markets). In the early days of commercialization, think most about building a solid foundation for future growth.

2. Believing that CE Mark approval proves product viability. CE Mark approval requires limited clinical data - often fewer than 50 procedures performed by a handful of highly experienced physicians. The true test of commercial viability actually comes after receiving the CE Mark, when many more physicians test your product's capabilities and uncover limitations. So, focus post-CE Mark energies building your clinical data set (through post-marketing registries) and listening closely to customers' feedback.

For one start-up company, this post-marketing registry approach determined the difference between success and failure in the U.S. market. While conducting a multi-country, 250-patient registry in Europe the company discovered that its device caused reportable adverse events in a small percentage of patients. These events were substantial enough to require a product recall. This new clinical information enabled the company to redesign the product before initiating its U.S. pivotal trial. Had the problem been first discovered in the U.S. trial, the corrective actions would have been much more time-consuming and costly to implement.

3. Going broad before understanding how to go deep. CE Mark approval, with its access to 27 countries, makes it tempting to expand rapidly across Europe. But strategic acquirers care most about what is happening at the individual account level. So, select 20-30 accounts, test and refine your sales strategies. and focus on driving deep product adoption. Do this with your nascent sales team and potential acquirers will quickly calculate the future potential.

In a drive to maximize revenues, another start-up company expanded rapidly into 21 countries across Europe and the Middle East. Early revenue was exciting to see as distributors placed initial stocking orders. All efforts were focused on initiating and training new distributors. Six months into the launch it became clear that the company was not going to achieve its aggressive revenue plan. Even more troubling, the sales volume was validating a much smaller market size than the company had projected. What went wrong? In its push for short-term revenue growth, the company lost focus on driving repeat usage. It underestimated the challenges of changing physician practice with a device that added cost to the procedure and was not supported by robust clinical data.

4. Underestimating what it takes to increase product supply tenfold. Nothing destroys product launch momentum like product shortages and quality issues. Establishing a robust supply chain takes significant time, expertise, and effort. Selling in Europe requires securing new, multi-language labeling and documentation, local logistical support, and a thorough review of your quality system. Select the best partners for long-term growth, expect delays, and act decisively to protect patient safety.

CE Mark approval can create immediate manufacturing challenges. One client received European approval months earlier than expected. While excited about the news, the company was not prepared to manufacture a premium-positioned product in substantial quantities. Labeling, packaging, and documentation were crude and nondescript. Key component manufacturers were small prototype shops with limited capacity, long lead times, and high costs. Working on a number of fronts simultaneously, the company developed fresh product branding, transitioned to an innovative packaging design and transitioned manufacturing from domestic suppliers to contract manufacturers in Ireland. All of these changes took eight months of concentrated effort and teamwork. The ultimate payoff was a stable and flexible supply chain that was highly valuable to the company and future acquirers.

5. Relying on distributors to develop new markets/technologies. Distributors bring local market knowledge and relationships with the added benefit of being capital-efficient. But they also carry a sales bag full of other products and are motivated to sell products with the greatest return and the least amount of effort. If your product requires changing clinical practice or developing a new market, hire direct sales professionals. Most distributors do not have the incentive or patience to build for the long term.

In our work with distributors we have experienced both success and disappointment. Key factors driving a positive relationship include selecting the right partner and maintaining frequent, open communication. Selection of the best distribution partner involves multiple variables—technical expertise, market knowledge, financial stability, complementary products, and a proven track record, to name just a few. Trust starts with open communication. Trust is not achieved by parachuting into the country once a year to review the sales numbers. Be proactive and open about your company's progress towards major milestones. Look for ways to collaborate on programs that drive adoption and increase customer interest.

6. Assuming that European talent is equally motivated by "The Big Payout." Top talent from industry-leading companies are well paid, value stability, and enjoy rich benefit packages. Cultural and tax law differences make the equity upside pitch a tougher sell. All aspects of the employer/employee relationship are governed by lengthy employment contracts. The most critical hire is your top sales leader—choose wisely. Engage an experienced recruiter and expect new hires onboard three to six months after offers are accepted.

Start-up companies often transition through multiple stages of development while conducting business in Europe. It is not uncommon to move from device prototype to CE Mark approval in less than two years. These early development milestones require a clinically oriented team focused on training early adopters, generating clinical data, and building new markets. But the game quickly changes to driving monthly sales numbers across a broader set of physician customers. This shift to revenue generation requires CEOs to take a hard look at the capabilities of the current team members. Often, they are ill-equipped to make the jump to professional sales. While always involving difficult decisions, making the right organizational adjustments early in the product launch cycle will greatly increase your odds for commercial success.

The 27 countries representing the European Union constitute an important yet challenging geography for start-up medical device companies. By leveraging the experience and expertise of consulting resources like MedCelerate, medical device manufacturers unfamiliar with the unique dynamics of the European market can avoid the pitfalls that often impede successful market penetration and help ensure their long-term success.

Greg Davis is a medical device executive with broad global and functional experience in finance, manufacturing, sales and general management. He is the Founder & CEO of The MedCelerate Consulting Group (

MedCelerate enables medical device companies to grow and succeed in international markets at a faster velocity. The practice focuses on early assessment of international opportunities through full manufacturing and commercial ramp-up activities. Prior to founding MedCelerate, Mr. Davis was CEO of Tryton Medical, a venture-backed, coronary stent start-up company. In addition, he raised $20 million to initiate the first and only randomized U.S. clinical trial to evaluate a dedicated bifurcated stent. Mr. Davis also launched the company's Side Branch Stent across Europe where it quickly became the established market leader.

Before joining Tryton, Mr. Davis was president of Guidant Japan, with P&L responsibility for the company's $225 million cardiovascular business. Prior to his work in Japan, Mr. Davis managed Guidant's product portfolio in 13 Asian countries. He was also instrumental in the start-up and management of an FDA-regulated, Class III manufacturing facility in Dorado, Puerto Rico. Mr. Davis began his career in various financial management roles with Cardiac Pacemakers Incorporated and Eli Lilly in the U.S. and Puerto Rico.

Mr. Davis holds a B.S. degree in mechanical engineering from the University of Minnesota and an M.B.A. from the University of Michigan. He is a sought-after speaker on entrepreneurship and international medical device commercialization at leading industry conferences and universities. In addition to his leadership role at MedCelerate Consulting Group, Mr. Davis is also Chairman of the Board for ibiliti (, a non-profit organization created to accelerate the growth and commercialization of advanced medical technologies in North Carolina.