Dr. Gonzales encouraged innovators to self-fund the patent phase to secure ownership over their innovation. Once a patent is secured, initial funding through the preclinical proof-of-concept stage typically comes from friends and family and angel investors. “It’s tough work to show that the idea will work,” he said.
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April 2022But if it does, he said, the next phase of funding is where the big money comes into play to move an idea through the FDA approval process, which may include clinical trials. For this type of funding, which typically runs into the tens of millions of dollars, he turns to venture capital.
“You need to raise enough money to get to the next critical inflexion point, but raising too much too soon creates unnecessary dilution,” cautioned Dr. Gonzales. Dilution, in investment terms, refers to a reduction in a shareholder’s ownership percentage in a company as more money is invested. He emphasized the need to have realistic goals as you raise money to get to the next stage, while not taking on too much money early in the process.
Dr. Santa Maria also noted the different funding needs required by each stage of the process and encouraged innovators to talk to companies and investors interested in the idea to get a good understanding of what they’re looking for in investing, which will allow the innovator to design a pitch to meet investor goals . “You may end up needing a lot more or a lot less money,” he said. “But you need to engage with industry to find out.”
Parallel to this engagement is the need to tap into a pipeline of people to help you through the different stages of innovation. “Surround yourself by people who are doing what you’re doing, and find different mentors through the different stages,” said Dr. Santa Maria. Although it may be difficult to find such people, he pointed to the many groups within universities and U.S. device and drug companies. AAO-HNS members can use the association’s Medical Devices and Drugs Committee as a resource.
Fail Fast, Stay Open, Follow the Data
As an innovator with years of experience launching companies, Dr. Makower underscored the reality that failure is a part of the process. “The goal,” he said, “is to fail fast.” Even though failure is endemic to the process and happens at almost every stage, failures that happen before you raise too much money are better for all. “We try to keep existential failure at the beginning if we can help it, ideally before we launch the company out of the incubator,” he said. “If you can fail fast with the smallest amount of investment capital, you’re doing a very good job.”