1. UCSF Lean Launchpad For Life Science
and Healthcare Startups
Medical Device Track
Class 1
Value Propositions
October 2, 2013
Allan May
Chairman, Life Science Angels
amay@lifescienceangels.com
UCSF Lean Launchad - Allan May

2. THE CORE VALUE PROPOSITION
 A Compelling Clinical Need
 Not just a genuine, verifiable, clinical need
 There are 1000’s of clinical needs that will not support a
viable business model
 A Compelling Clinical Need is one which makes a
dramatic difference in patient outcomes, not an
incremental difference
 A Compelling Clinical Need provides the
headroom necessary to discover viable business
models
UCSF Lean Launchad - Allan May

3. THE CORE VALUE PROPOSITION
(cont’d))
 Clinical needs are driven from the
bottoms up, not the top down
 Who is the patient type for whom it
would be malpractice not to use your
device?
 Clinical needs are technology
agnostic
 No one cares what technology you are
using to solve their compelling clinical
need
UCSF Lean Launchad - Allan May

4. VALUE PROPOSITIONS CONVENTIONAL
 We used to think:

Improve clinical outcomes and charge a premium price
 Now we know:


Improve clinical outcomes and reduce price, or
Match existing outcomes and reduce price
UCSF Lean Launchad - Allan May

5. VALUE PROPOSITIONS –
NON-CONVENTIONAL
 There are Value Propositions Not Much Talked About:




Increase physician revenue
Shift procedures to less expensive settings or less expensive care
deliverers
Shorten hospital stays
Decrease unreimbursed hospital expenses
 Are there tensions and inconsistencies between these
concepts?

Yes!
 Do different stakeholders view Value Propositions as
having different value?

Yes!
UCSF Lean Launchad - Allan May

6. MEDICAL DEVICE COMPANIES
HISTORICAL PERSPECTIVE
 >90% of successful medical device exits involve
acquisitions
 Achieving cash positive operations or IPOs are
possible, BUT:


Tend to involve relatively simple products and business
models that can achieve cash breakeven but cannot
scale, or
Can scale to large, sustainable companies but require 10s of
millions of $$ to do so

Meaning there is a high risk of diluting out founders and early
investors
 So, you get to decide whether to design your
company to “flip”, go cash positive, or “swing for the
fences’
UCSF Lean Launchad - Allan May

7. SO VALUE PROPOSITIONS DEPEND ON THE
DECISION YOU MAKE REGARDING THE
KIND OF COMPANY YOU WANT TO BUILD
 Companies built to flip mean much
different thinking about
 Value Proposition
 Customers, etc
 BTW, acquirors hate technology that lowers prices
and are really looking to improve margins
 Regardless, you need to refine and validate
your Value Proposition for corporate
acquirors
UCSF Lean Launchad - Allan May

8. COST/REVENUE TO THE
PROVIDER/HOSPITAL IS THE DRIVER
 Physicians and Departments are losing
influence over hospital buying decisions
 Finance departments and technological
evaluation committees are calling the shots
 The Big Conflict is between Payors who
demand cost comes down, and existing
major strategic players who are doing
everything possible to maintain price and
margins
UCSF Lean Launchad - Allan May

9. Proving Cost Reduction Claims
 Every medical device startup is claiming
to reduce costs
 Cost reductions need to be definitively
proven; they will Not be assumed
 Proving claims regarding cost/outcomes is
much harder than stating them


Randomized, Double blind, Placebocontrolled, prospective studies
Very long time horizons, extremely expensive
(75% of all capital raised), and many
confounding factors
UCSF Lean Launchad - Allan May

10. Types of Cost Reduction Claims
 We reduce cost Day One
 We reduce cost over the patient’s hospital stay
 We reduce cost by reducing complications or rehospitalizations
 We reduce cost over the course of therapy for the
patient
 We reduce cost over the treatment of the patients
condition
 Guess Which Wins?
UCSF Lean Launchad - Allan May

11. GAINS, PAINS, FEATURES:
EXAMPLES OF EACH
GAINS:
 Enable physician to treat a patient group or provide a therapy not
possible today (versus another method of doing something that is
possible today –better outcomes)
 Enables physician to offer existing patients more services or to
acquire new patients with new services
 Also means some other physician loses a patient; see turf battles and
saboteur
PAINS:
 Substantially decrease adverse effects, morbidity, or hospital
readmissions
FEATURES:
 Ease of use (putz factor)
 Extent to which fits into or changes current workflow or protocols
 Impact on payment to the physician user
 Fewer steps (allows more patient throughput, ie, more income)
UCSF Lean Launchad - Allan May

12. UCSF Lean Launchpad For Life Science
and Healthcare Startups
Medical Device Track
Class 1
Value Propositions
October 2, 2013
Allan May
Chairman, Life Science Angels
amay@lifescienceangels.com
UCSF Lean Launchad - Allan May