16 Aug Our CFO explores navigating financial hurdles in a MedTech start-up
In an article recently published on Pharmafield, our CFO, Francis Cooper, discussed some of the financial challenges medical technology (MedTech) start-ups face, particularly in the light of Covid-19. Over the last two years, clinical trials were slowed or stopped, electronic components have been difficult to secure and issues such as Brexit have added further complexity to financial planning.
With more than 15 years’ experience in MedTech, pain relief and wound care, combined with expertise from various finance roles, Francis highlighted the complexity of managing cash flow in an industry where things rarely go to plan.
Proving the product
Early stage MedTech companies face unique challenges compared to other start-ups. Supplying global healthcare systems with new and innovative products is complex. There is a significant time gap between concept and product. From winning over clinicians, efficacy trials, randomised control trials (RCTs) and regulatory and clearance issues – there is considerable uncertainty in terms of when a business might be able to fully commercialise a MedTech product.
Francis highlighted that MedTech companies have little control over the timing of these processes, but each can cause significant delays – and delays are the enemy of cashflow. This was especially the case during Covid-19 which saw the closure of many clinics, delaying the completion of clinical trials. This led to a risk of companies not hitting certain milestones which would have otherwise triggered the release of further funding. Predicting these kinds of delays in advance enables businesses to remain in control of their own destiny.
Avoiding the panic
Expecting unexpected risk in any MedTech company is sensible, but it is impossible to know what specific issue will materialise. To minimise interferences with cash flow, Francis stressed the importance of transparency, particularly with investors: “It makes sense to brief investors so they understand and are supportive of the timescales and potential risks associated with the MedTech industry and accept that returns may take longer to achieve than with other industries.”
This open and ongoing dialogue has been an important element of Sky Medical Technology maintaining a healthy financial position.
Preparing for the unexpected
Francis outlined how Sky has moved away from traditional annualised budgeting to improve creativity and responsiveness. “At Sky , we rely on a rolling 18-24 month forecasting process”. Francis continues, “This approach has enabled us to remain in control of cash even in unexpected times. We have moved from quarterly updates to monthly, enabling finance to review forecasts with functional department heads to understand any changes and to ask questions that can highlight if anything has been missed out or mistimed.” Being flexible has allowed the Sky team to collaborate more effectively to minimise risk and mitigate the resulting impact on cashflow.
Read Francis’ full article here.