Building a Deeptech IP-heavy Startup In India
A strong IP portfolio implies a deeper moat which further implies stronger customer retention and higher pricing power
Pick any sector, you will find a few startups trying to address the inefficiencies across the value chain. Incumbents are often caught unaware of the changing industry landscape, providing a window of opportunity to a young disruptor. Further armed with funding from venture capitals, the disruption cycles have accelerated across industries. The Indian startup ecosystem has raised hundreds of billions of dollars and in the process created 100 Unicorns as well, yet one industry seems to have no representation on that list: the medtech industry!
India has 20 per cent of the world's population, yet the diagnostic market is in low single digits. New technologies/products only aimed at enabling a faster turn around and/or driving better quality, have seldom found success. In markets which have little-to-no cost for misdiagnosis, there is little incentive to invest in quality alone. The adoption of a device in such markets, is almost entirely on immediate and quantified value addition, i.e., the investment in a new device is only justified if it can either lower your costs or drive incremental revenue.
While the Indian medtech market alone isn't big enough to support billion-dollar valuations, the same is also true with most IT services and SaaS-based companies/startups in India. Yet, companies in the IT and SaaS space have found much larger markets for their offerings: the North American and European markets. So, why can't medtech do the same? The quick answer here is regulation. Medtech is a heavily regulated industry, as it absolutely should be!
One just can't wake up one morning and start selling in the US. You need the clearance from the USFDA, and it takes years (from inception) to prepare and get the same. In our case, it has taken over six years to have filed for our first FDA 510k clearance.
So once you have the local regulatory clearances, you can start to sell the devices in that market, but for you as a device manufacturer to get the best possible value from the ecosystem, you need to set-up high barriers to entry, i.e., if you are selling a differentiated product which is difficult for others to compete with, you will have pricing power, and this is precisely where a strong IP portfolio of patents can add great perceived value.
The minimum it takes is a couple of years for you to get a patent grant and hence the IP strategy can never be an after-thought. During the research and product development phase, we invested heavily in planning our IP roadmap, filling for 30-plus patent applications between 2016 and 2019. A couple of years later, we now have 19 granted patents, including 6 in the US! This is probably among the highest for any India based startup of comparable age.
Apart from enabling you to create a technology driven moat around your business, a well thought out IP strategy can further help you build credibility with the stakeholders across the ecosystem:
Customers: How do customers trust your product? If each one of them has to do an extensive in-house evaluation, your sales cycle will run in years. Having a strong IP portfolio coupled with testimonials from initial customers is often good enough for the next customer, thereby significantly reducing your sales cycles.
Distributors/channel partners: Setting up a medical device distribution is a very capital intensive and a long-drawn process. In almost all cases, you are much better suited to identify channels where your product is a complementary fit to their existing portfolio and then onboard them as your distributor. The distributor is then going to make substantial investments and deploy resources to push your product in the market. That decision gets much easier if they know that your product has substantial competitive barriers, again driven by IP.
Investors: Building a state-of-the-art medical device is extremely challenging and can take years before it is ready to market. During that time, the traction on your IP journey then becomes the intermediate milestones that you and your investors can keep a track of and assess the progress of the organization.
A strong IP portfolio implies a deeper moat which further implies stronger customer retention and higher pricing power: vital ingredients for happy partners and stakeholders, critical to the success of your organization!