Implementing Ideas Into Practice, Lecture by Mir Imran / InCube Labs (2008)

Transcript



So maybe you could describe the pipeline, things go from, obviously, an idea to something that becomes a research project, and then maybe it turns into a venture. Maybe you could explain the process. As most of you can imagine, it starts with a problem. The process, it begins with the analysis of the problem looking at the attributes of the problem, and when I say attributes, you look at how big is the problem and how is that problem currently solved? Are there opportunities to improve that solution? Or sometimes, you stumble on problems that haven't been solved. So you spend a lot of time understanding the problem. Probably, during this first concept stage, 80 or 90% of my time goes in understanding the problem. I feel that the more time you spend with a problem, the better chance you have of coming up with a good solution. So I think just to give the audience a sense of the range of topics that you tackle, I think it's overwhelming, I cannot even imagine that one person can be a master of all these different fields, maybe you could give us a sampling of some of the projects you have going on right now. Probably about half of them are in implantable devices. There's one company developing a gastric pacemaker for the treatment of obesity. Another one is focused on treatment of chronic pain with an implantable stimulator. Another one is developing an implantable device for the treatment of atrial fibrillation. Another one, which is a very exciting company, it's a drug device combination for the treatment of epilepsy, so it's an exciting novel approach, and I collaborated on that project with some scientists at Duke. There are a couple of others - an artificial prosthetic colon and rectum company for people who have colostomies due to cancer or what have you. So we couldn't potentially restore normal function, and then, another one which is focused on inflammatory bowel disease. So a whole range of things. How do you become so well-versed in all of these different fields? I am actually not. What happens is I look at a problem, for instance, take any one of these things - epilepsy. When you look at epilepsy and you look at the drugs that are out there and the device therapies that are out there, deep brain stimulation, you find that the success is really low. The best therapies there have success rates that are amazingly low both drugs and devices. So I see that as an opportunity. So I go into that area of really not understanding it that well. I went to medical school so I have reasonable understanding, but I don't have current understanding, so I do a lot of literature search. The way most of you would start digging up a problem, I look at what is currently being done, what are the side effects of those therapies, and then I dig deeper. I go into the cellular level. What is happening at the cellular level? Do we understand the problem well enough? Sometimes, I end up coming up with a solution, not always.

Transcript



So what do you consider a good exit strategy for these ventures? Do they usually get acquired? Do they go public? When does it happen? If you look at my companies, I probably have sold nine companies, and an additional three have gone public, but even the ones that went public were ultimately acquired. Then, out of the eight that are currently there, there is one getting ready to go public shortly. So it's a mixed bag. It depends on the kind of technology. It's very difficult for any of these companies to survive long-term on their own because they're a single-product company. So the risks are very high for these companies. One hiccup and you're in deep trouble. Manufacturing problem, clinical problem, regulatory problem, any delays can basically shut you down. That's why most of these companies end up getting sold to bigger companies.

Transcript



Why do you set them up as individual companies as opposed to having one big company with all of these different product lines? One of the reasons startups are successful is because you have a single-minded focus on one problem. So if you have four problems or five problems under one roof with an R&D team, first of all, you cannot attract investors. They're attracted to a specific problem. Secondly, you can't focus. One project can steal all the resources if it's going well, or one project that's not going well can drag the whole thing down. So it's better to separate them early. I only allow myself to be distracted and unfocused. So you're the one who gets to be distracted and unfocused but all the teams are very focused on their project.

Transcript



I think ideas are so easy to come up with. They're the easiest thing. It's the implementation and it's a long road. Whenever you launch a company, it's a six- or seven-year journey if you're successful. I spent a lot of time early, and I'm willing to kill these ideas if they don't meet the criteria. So why don't you tell us a little story? I want to hear about at least the process that typically happens and maybe the timeframe for one of these ideas. Let's take one that's a success from idea to actually some exit and the hurdles along the way. These ideas come in random and multiple ways. So back in 1992, a friend of mine had a carotid endarterectomy, which is a cleaning up of carotid arteries, and ended up with a stroke, and he had then a few months later, the second carotid artery cleaned and he had another stroke. I started scratching my head and I said, "These are embolic events and there should be a way to fix that or prevent that from happening." I was busy with a couple of other companies so it was in the back of my mind. Then, another year later, another acquaintance of mine had a saphenous vein graft angioplasty and ended up dying because of a huge amount of embolic load flowing downstream into the heart. So that really was the beginning of the concept. So I said, "This is a problem that's worth fixing." So I went to some of my friends who were interventional cardiologists, folks here and at other institutions. I said, "Is this a problem in your practice?" They said, "No, we never have embolic events when we're doing stenting or angioplasty." So I started looking at literature and what I found, sure enough, in the U.S., clinical literature, back in the early -90s, couldn't find any papers talking about embolic events and complications, but Europeans were writing about it. They're not worried about getting sued. Always, when you're looking at some unique problems, look at European literature. Sometimes, they're much more open about problems. So I decided to come up with some tools that prevent embolic events during the procedure. It wasn't really an uphill battle because when I went to talk to investors, in doing the diligence, they would call these same guys who said this is not a problem. So I told them that, "This is what you're going to hear, but trust me." I think primarily because I had established a long track record so the investors said, "Fine." In the presence of clinical experts saying, "No, we don't need it," I was able to raise four or five million dollars and launched the company. As we started getting some clinical data, publishing that data, there were 20 other embolic prevention companies that came out because everybody saw how important this area was. What we found out was in saphenous vein graft therapy or interventions, there was almost a 20% incidence of embolic events. It was huge. So we were able to do a randomized trial. Here's another interesting anecdote. We got FDA approval on a 510(k). Most of you know what a 510(k) is. I think a lot of people won't know what that is. 510(k) is a faster way of getting FDA approval, and it applies to those devices that have a precedent. So if you have a device that is similar to some other device and it is not going to cause any harm to the patient, you have to come up with justifications, and FDA generally gives you a very quick approval. So we got that, but we realized that if we were to start selling the product with that approval, physicians, they were of a mindset that embolic events were not a problem. So we went back to the FDA and said, "We would like to do a randomized trial under a PMA." PMA is the longer protracted thing, and we wanted to establish scientifically in a randomized trial with statistical significance that we can reduce embolic events, and it does make a difference to the patients. It took another $10 million and two more years to do 800 patients. That helped turn this approach into a standard of care. So physicians could no longer say, 'We don't need it." Very interesting. So we ended up selling the company to Medtronic.

Transcript



You are unique and that a huge percentage of things that you do are successful, but have you had some that have just bombed along the way and you go, "Wow. Gosh. I would have done that differently." My success rate is high mainly because I'm willing to kill the projects before I launch a company, so if I count the projects I kill, the failures are many, but among the companies, I've lost two companies. One was a dot-com which I started in the fall of 1999 which was a bad timing. I should have stuck to medical devices. You caught the bug, too, right? Yes. It lasted all of eight or nine months, so that was a total waste of time. Then, another company I had started back in 95. As I was doing a lot of work with implantable devices, I realized that biomaterials were going to become very important for implantable and even non-implantable devices. Biocompatibility is essential whenever you touch a patient. So I started a company to develop biomaterials, and my idea was I would license this to other medtech companies for use in their devices. After a couple of years of more thinking about it, I had already started the company, I realized that it was not a good business model because you're selling this biomaterial which is a small part of a product, perhaps, and you're trying to collect royalties, and those royalties won't come until that company is successful or that product is successful. So I decided to shut it down and fold it into my business incubator, so I'm still using those biomaterials in a number of my companies. Even though it was a failure, it wasn't a real failure. Right. The technology is really quite good. So do you have a formal process of evaluating things along the way? Do you wait for certain milestones, or everyday, are you taking the temperature of these ventures? I realized after building several companies, in some of these, I really went through a lot of headaches and challenges. There was one company I should never have started, but I was ultimately able to make it successful but it was a bad idea. That was the one that really taught me the value of discipline and analysis up front to evaluate your ideas and kill them because it's much more painful to kill a company or to fix a failing company than to kill a nascent idea where you haven't invested a lot of time and money in. So you put a lot of up front effort into evaluating whether it's highly likely that it's going to be successful first. Right. Great. But that's no guarantee of success. The big hurdles come once you actually start the project. Right. I'm always fascinated with entrepreneurship, about the escalation of commitment along the way. Do you feel that at each one of these steps? Yes. I sometimes feel like I'm stuck in the twilight zone of the startups. It's a marathon, and you have to look at each problem, solve it, periodically step back and make sure you're going in the right direction. You have to surround yourself with really smart people, get smart money involved, hire people who are really committed and talented. It's all those elements. A lot of times, companies get into trouble because of people problems.

Transcript



Clearly, you've got all of these ventures going. You need to have really amazing people for each one of them. Do you have a pool of people that you just keep pulling in off the bench for each one of these new projects or do you re-staff each one very specifically? I think it is the latter. I have had several times people who have gone into one company, and seven or eight years later, that company is sold and whatnot. They've come back and gone to another company. But most of the time, I put a team together for that project, and I tell you, that's the hardest thing to do. Is that the hardest part? What are you looking for when you're looking for people? Is it looking for pure technical skills? Are you looking for complementary skills? What are you looking for? I first parse the problem, the project. Generally, it's a development project, and you parse it into its mechanical engineering, material, science, if it has all those elements, or in some cases, biology and chemistry. You look at all these things and figure out what skill sets you need and try and find those. You cannot find the exact skill sets you're looking for. So what I usually do is I find somebody who is really good. I'll hire them and then modify my plan of hiring the other people. So it's a very dynamic process. Sometimes, I find some really brilliant people, and I say, "I really want to start a company around this person." Have you done that? I've done that once, actually. Tell us the story. You found somebody and you said, "This is an amazing person. I'm going to bring them in and build a company around them." Right. So this guy, his name is Glen McLaughlin. He actually got his Ph.D. at Stanford. He started to work for me in 1991. He had just graduated from Carnegie Melon as an undergrad, and he worked with me for five years and then left to get his Ph.D. at Stanford. He was the smartest guy I've ever worked with. You should get him here some time, an amazing guy. When he started his Ph.D. here, I told him, "I'll give you a cubicle and $1,000 a month stipend. Just hang out here because I'm always working on some problems and we can brainstorm occasionally." He would do that, and back in 1999 or 2000, I came up with an idea for a new way of doing ultrasound imaging, and I decided to form a company. He was still finishing his Ph.D. here and finished it. I went ahead and started the company. It's called Zonare Medical Systems now. Within a few months, he joined as senior engineer. I knew his potential so I made him chief technical officer. The product has done amazingly well, and the company did 30 million in revenue last year. It's getting ready to go public next year. He is one of those guys where I can get him, I know I can put him in something and he's going to be successful. When I find some of those people, I hang on to them.

Transcript



Are there things that you wish you had learned in school that would have made things easier for you? Absolutely. From a scientific and technical standpoint, I had a very strong background and foundation, so I could go into new areas and develop that expertise, but I never took a single business course or accounting course or finance or marketing. I had to focus on all these things in building companies. That was a challenge. So marketing and all that came naturally, but accounting, I had to hire an accountant to teach me. How do you read a balance sheet and income statement? I didn't know that when I first started a company. So I wish I had some of that earlier. So what you're saying is pick up some of those basic skills, accounting, business, marketing. You have to. As an entrepreneur, if you're starting a company, you really have to know every aspect of your business. You may not be an expert in every aspect, but you really need to know what needs to done, how do you make this thing work, what kind of people do you bring in? When you have people working, you should be able to figure out if they're a good job or not. Unless you really understand their work, you won't be able to do that. So I really think that a broad understanding is important but depth is important too. You can't just have a broad understanding of everything with no depth. One of the things we always say is that we want T-shaped people, people with a depth of understanding in one area but a breadth of understanding of different disciplines. I think at least in medicine, in my field, you need depth in multiple areas. It's not enough to be a good electrical engineer. If you look at my patents, I have as many things in electrical engineering as in mechanical engineering and cell biology, protein chemistry, software. So these are multidisciplinary problems in most of the problems that we deal with. So you really have to generate or develop depth in multiple areas. For instance, when I started, two of my companies where in the security business, and they were both quite successful. Again, that particular problem got hold of me and I had to solve it.

Transcript



How do you build a large company, scale the company yourself rather than selling it? How do you know when you have just a product or a company on your hand? A simple test for that is market size. Are you solving a problem for a large market? If you're, for example, a gastric pacemaker for obesity, that could be a multibillion dollar product if you're successful. An incremental improvement in an existing product, you wouldn't build a company around it or if the market was $50 million a year, it would be very hard to build a company around that. So market size is really what dictates whether you build a company or treat it as a product that you, perhaps, license. Let's take the case of Medtronic. They're a big company but these companies have become big somewhat accidentally. They were a single-product company for a long time but they were lucky enough to get to a critical mass where they could use that currency or their money and their stock value to acquire other companies and diversify. There are a handful. Boston Scientific grew the same way. J&J started with a single small business. There are some recent examples that are growing into diversified companies, but the risk there is very high. You have a very high probability. Even if you have successfully developed a product, one hiccup there and you essentially go into shutdown mode because, by then, your monthly expenses are very high. Unless you're bringing in revenue, you can't sustain that very long. So the risks are very high for a single-product company, and that's why you see so few of them turn into the Medtronics of the world or Googles.