Barriers to entry are obstacles that make it difficult for new companies to enter a market. Michael Porter identified 7 classic barriers: economies of scale, product differentiation, capital requirements, switching costs, access to distribution, government policy, and cost disadvantages independent of scale.
Barriers work both ways: they protect incumbents from you, but once you overcome them, they protect you from future competitors.
Key Takeaways
- Barriers protect incumbents but also protect you once you're established.
- Regulatory barriers are dominant in healthcare/medtech.
- VC funding helps overcome capital barriers; partnerships help with distribution.
- Identify which barriers you face and build a specific strategy for each.
Frequently Asked Questions
Which barrier is most significant for medical device startups?▼
Answer: Regulatory requirements
Regulatory (CE marking, FDA clearance) is typically the highest barrier in medtech — it takes 12-24+ months and significant capital.
High switching costs for buyers means:▼
Answer: Customers are unlikely to change suppliers easily
High switching costs (training, integration, data migration) create a moat for incumbents but also for you once customers adopt your product.
A startup can overcome capital requirement barriers by:▼
Answer: Venture capital funding
Venture capital is specifically designed to fund startups through capital-intensive barriers that block bootstrapped competitors.
Which strategy helps overcome incumbents' distribution access?▼
Answer: Partner with existing distributors who want new product lines
Partnering with distributors who carry complementary (not competing) products gives you immediate market access.