I won’t insult you by going into great detail about the theory—you can figure out the stages of dying (Kuebler-Ross:1969) for whatever company you are thinking about by yourself. I will just say that with respect to medical device companies, there is absolutely no good (objective) way to judge their health (or lack thereof).
There are a lot of moribund/zombie medical device startups out there. Looking at their websites, it’s impossible to tell whether they are meeting milestones and impressing their doctors, patients, hospitals or investors, or struggling to find their next “success” to live to fight another day. Covid has made it MUCH more difficult to tell the difference between these two opposite outcomes. And I don’t know what the “official” Death of a Medtech Company obit should be. (Bankruptcy filing? No FDA clearance? I’m guessing the website is the tombstone, etched in perpetuity or at least until someone stops paying the domain fee).
For my part, I will only say that once the “entrepreneurial energy” of the startup is gone, it is the end of a good company even without covid. My own experience was that entrepreneurial energy (EE for short because I’m lazy) is a necessary ingredient for every startup (duh) but keeping that energy is the sine qua non of any successful company. Interestingly, I think that investors (especially those not in the industry space thus without knowledge) may contribute to the demise of that energy because they apply metrics (from other industries) to the startup that do not help get the real growth going.
What happens in a small med device company once one or all founder(s) leaves? If it’s on the heels of a multimillion-dollar investment to develop the company, not a big deal. Everybody wins! But especially if it is a small (fewer than 20 employees) company, it creates ripples that the management needs to address, and to assure the remaining employees that they will appropriately replace the founder with someone of equal skills (most importantly CTO-founder). No matter how great the replacement is, however, it is nearly impossible to replicate the EE of the founder who left, and all you can hope is that s/he/they do not form another company to challenge yours.
OK, but if the founders are all gone and now there are the rest of the employees working in the company—how does the company actually die?
Employees with highly marketable skills (and with options) will notice that employees with highly marketable skills are not replaced (either because no qualified people want to work for a company with such a high risk profile or because the startup cannot pay enough relative to other opportunities). But it’s hard to leave those options….
And potential new employees (especially in THIS market) will say, “why would I go to startup B when I have many other offers?)
At some point, the management will probably say to the remaining employees “we can’t pay you this cycle but as soon as X happens, we will fund you and give you a bonus for your troubles”. My advice: get out now. You will probably not get paid next cycle either. (But you are risk-takers, so I understand why you would stay. Without judgement).
I welcome any comments about how other medtech companies have died (and also, what that means, in your experience).