What are the ‘usual’ distribution options for Europe?
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Many U.S. start-ups will try to gain access to EMEA through signing a local distributor in targeted countries. The logic of finding the best local distributor for each country for a specific technology is compelling for launching a new device in EMEA. The local distributor who specializes in a particular market will know the hospitals, the reimbursement issues, and the doctors that are critical to successfully commercialize the new device in their market. The inability to carefully oversee and monitor the local trainings, and the general lack of control in the field of your start-up’s new device is a weakness to a distributor network managed from abroad. The reality of not being able to have an on-site constant presence with distributors is an uncomfortable reality of this approach for start-up devices. The idea of having your technology ‘out there’ without proper supervision is also a liability concern. The danger of a physician using the technology incorrectly because of incomplete or incorrect training by a distributor could lead to serious patient complications. The negative impression created from such an incident is devastating to a new device’s reputation. In addition, the lack of a constant presence also creates the inability to drive sales for your device, which is one of many products the distributor may represent. If a start-up continues to build more and more local distributor agreements and is responsible for sales support, the amount of time management resources will be overwhelming to the lean HQ employees because of the daily sales issues arising in each market. Your company also may be concerned about how, for example, 15 or 20 separate distributor contracts will add a negative to an early exit strategy. In order to secure the best distributor for a device’s technology, the distributor will rightfully negotiate for a meaningful ‘buyout’ clause. This clause gives the distributor a type of protection in case the device is sold or the start-up is acquired. You may sign distributors without a strong ‘buy-out’ clause, but the distributor’s sales focus may not be the same. Thus, multiple distributor contracts with reasonable ‘buy-out’ clauses are needed to expect selling effort, but the clause can become a liability at the time of acquisition. Many advantages exist with a local distributor network, but many disadvantages managing from abroad arise. A logical compromise some start-ups may implore in EMEA is to hire one or more Sales Directors based in larger markets. The Sales Director may handle a few key countries direct, and pursue local distributor agreements for the balance of target countries. Once again though, the financial commitment required hiring (was he/she the right hire?) and to support this role is significant to a start-up, and usually not funded properly to do it right. Would you be quicker to commit to Europe if you could:
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