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Updated July 27, 2021

100.000€ Spent and Never Done

Dr. Oliver Eidel

I meet many startups working on Healthcare software. They all have their own consultant stories to share. Unfortunately, those are often failures. The craziness of those stories never fails to surprise me.

Healthcare startups shouldn’t be making those same mistakes over and over again, just because people were too shy to talk about their failures.

That’s why I started writing about them. I’ve removed all identifying information while leaving the big picture untouched. You can find more in the articles & questions section.


Hey Adam (name changed), tell us about your company.

Sure. It was a small startup, less than ten people. We’d been developing machine-learning based software. It was somewhat of a research project at first, and then we wanted to sell it to Healthcare customers. That made it a medical device.

What happened?

We spent around 100.000€ on consultants and failed to certify our product in time. Because of that, we couldn’t sell it to customers. That made it impossible to raise our next investment round. Then we went bust.

Damn, that’s harsh. Um, let’s start from the beginning, okay? I assume none of you had prior regulatory experience?

No, of course not! (laughs) Nobody in the startup / tech space has any regulatory experience. Those are young people with backgrounds in business or computer science.

Okay, so how did you go about solving that problem of “we need to certify our software as a medical device”?

We brought in a consultant.

How did that go?

It was a catastrophe. That consultant was very expensive and got nothing done.

How so? I mean, the consultant was billing hours, right? What was he working on?

Well, that’s exactly the point. The consultant was always working on something, but we didn’t know how it fit into the big picture. Maybe the consultant also didn’t know that. A lot of time was spent discussing and writing documents, then going back and re-writing the same documents later. It felt like we were running in circles.

Our consultant always came up with random new things. Like “hey, we need to update this document” or “I think this document is not quite right, let me work on it again” even though we had already considered that document as done earlier.

Sounds like a lack of project management.

Exactly!

So, how could this situation have been improved or avoided?

We would have needed a clear roadmap of what work needs to be done - both by our consultant and by us. Like a todo list. And then regular updates on where we stand and when our work is estimated to be done, or in other words: When our product is certified and we can start selling it to customers.

I guess that’s one of our learnings, although now it’s too late. We should have insisted on more transparency regarding the whole project.

How did you choose that consultant?

We approached some of the largest and most renown consulting companies in the industry. We chose one of them. It seemed like a good choice. We’ve heard good things about them - other startups got their products certified with them and gave us positive references. But I guess, like in any large company, some employees are better than others. I suppose we were just unlucky.

And what was your arrangement with that company, if you’re allowed to share it?

I can’t go into specifics, but the general deal was that they’d given as rough quote but the actual work would be billed hourly.

Okay. So that doesn’t give you much control regarding costs - and your consultant was incentivized to spend a lot of time on your project. I assume the hourly rate was rather high?

Yes. In addition to not knowing how much work was remaining, we were bleeding cash per hour. Yes, the rate was very high.

Okay. So, what did you do once you noticed that you’re burning cash and getting nowhere?

We fired the consultant and got a new one.

How did you find that one?

I can’t quite remember. Maybe we got an introduction.

Was he better?

Yes, he was better. We started making progress. But it was already too late.

How much time had passed?

Almost a year or so.

Crazy, almost a year with no progress. And why was it too late?

We were running low on cash and had started talking to investors. It was really hard to raise money because they wanted to see traction - customers who buy our product. As our product wasn’t certified, we obviously didn’t have any customers who were buying it. Even worse, we weren’t even allowed to approach customers and market our product. Sure, you can demo them a “research prototype”. But if they want to integrate it into their Healthcare workflow and use it on real patients, it needs to be certified before.

So we failed to have any traction and subsequently failed to raise our next round of investment. Our company went bankrupt and that was it.

Crazy - and sad. Do you think having a better consultant would have changed things?

It’s hard to say. It’s always easy to blame your consultants for your company’s failure. I think it’s not that simple. Sure, getting certified earlier would have helped a lot. But we’re not talking about weeks here, rather months. If we’d gotten certified, say, 6 months earlier, that would have changed things. But would that have been possible at all? With another consultant? Maybe. I don’t know.

But it would have given us 6 months time to approach customers, sign deals and have more leverage when meeting investors. But would we have gotten those customers? Maybe our product was bad and we wouldn’t have sold it to anyone in those 6 months? Who knows.

What I can say for sure is that we lost a lot of money. All things taken into account, we spent over 100.000€ on those two consultants. In a small company, that reduces your runway by a few months. And again: Maybe having a few months more would have changed things. Who knows.


Read more consultant failures in the [articles][articles] section.

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I work as a regulatory consultant for Healthcare software startups. I try to publish all my knowledge here so that startups can certify their medical devices themselves in the future.

If you're still lost and have further questions, just send me an email and I'll be happy to answer them for free. More about me

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