Good afternoon, everyone. It's so wonderful to be here at HRX. Can everyone hear me, just as a quick check? Raise your hand. Raise your hand if you can. Perfect. So out in the audience, they'll need us. So it's wonderful to be here at HRX with so many of the smartest people thinking about the future of digital health. My name's Justin Norton. I'm a physician and partner at GSR Ventures, where we focus on early stage health care technology investments. We're a firm with $3.5 billion under management. And we focus on companies that are trying to use new technologies to fundamentally change how we're delivering and developing new health care technologies. As by way of background, I started out as a computer scientist. I did my undergrad and master's in computer science computational biology, focused on machine learning genomics. Took a few detours along the clinical training path, getting my MBA from Stanford, getting to work with Mintu Tarakia, who I'm sure many of you know here today at the Stanford Center for Digital Health, and then later at Apple on the health care team, before launching a startup of my own around algorithm safety and trust, which we eventually sold to Waymo, Google's self-driving car company. I'm so lucky to be here today with many of the best and brightest thinking about startups, venture capital investing, and really what it takes to be successful. We're here to learn from them, to understand what it takes to start out a company, grow that company, eventually succeed in whatever way that means to you. And then at the end, we'll wrap up talking a little bit about the future of digital health and where we're at today. Please, please, please use the app to post questions like I can see here on the HRX platform. Again, so we can make this most useful to you all, which is why we're all taking the time. So I'll let each of our panelists introduce themselves in a second and let you all know where they're coming from in the digital health space. Paul, I'll start with you on the end, and then we'll work our way over here to start. Who do you want to start with? Start with me. Good. So hi, I'm Peter Fitzgerald. I'm at Stanford. Three things real quick. Just an engineer by training, interventional cardiologist. And they manage a much smaller fund than my bookend over there. It's only a couple hundred million, both in Palo Alto and in Tel Aviv, focusing on med tech and digital health. And it's been in the works for about the last 11, 12 years. Thanks, Justin. Dan Geber-Medin, one of the partners at Flair Capital. Flair Capital is a Boston-based venture capital firm. We only invest in health care software and services. We have about $800 million under management. We're investing out of our third fund, which is a $350 million fund. Most of our capital, roughly 50% of it, comes from about 30 strategic health care corporations, large national payer providers, regional delivery systems, as well as some pharma, med device, and lab companies. My personal background, physician, internal medicine physician, trained at the Mass General Hospital. Practiced there for about 10 years. Went to business school after residency. Worked at a health plan, the Harvard Pilgrim Health Plan, for a couple of years as a medical director running PopHealth Analytics and General Strategy. And then joined my firm back in 2015 when we launched our first fund. We're early stage investors. I think we were on the gamut from seed, probably up to series B, our average check size. On the low end is $1 to $2 million. On the high end, $7 to $8 million. We're looking to commit a total of about $15 to $25 million of total capital to a company over its lifecycle. Nice to be here. Hi, everyone. I'm Paul Grand, CEO of MedTech Innovator. By background, I'm an entrepreneur. So I started eight different companies in tech, biopharma, and medtech. Then I became a venture capitalist for 12 years. And along that journey, I started MedTech Innovator originally as a competition to help entrepreneurs get more visibility. And then we started an accelerator, which now, not too much longer, about eight years after that, we are the largest accelerator of medical technology in the world. So we see lots and lots of technology and get to work with amazing entrepreneurs. We're kind of a downstream accelerator. So we like to think of ourselves as kind of like the graduate school for medical technology. So that's it. And Ken. Thanks, Paul. So I'm Ken Nelson, head of digital health diagnostics and monitoring for Biotronic, which is one of the four big pacemaker implantable defibrillator companies. And I'm starting up a new division for them. Really happy to announce that partnership yesterday with the LiveCore. And then on top of that partnership, we also have a partnership now with Pacemate. And excited to talk about that here at the conference. From a startup standpoint, I helped build and commercialize the cardiac monitoring patch industry, first with iRhythm launching their ZioPatch product, then with BioTelemetry bringing their MCOT patch and ePatch product to market and launching both of those. And then third, as chief commercial officer, most recently, Barty Diagnostics. And as part of Barty Diagnostics and building that team, that culture, that infrastructure, we were actually a cohort company of MedTech Innovator, which is the biggest MedTech startup accelerator in the world. And they were very, very helpful. So we'll talk about that journey and what that did for us as a startup. But happy to be here at HRX and excited for this talk. Thank you. I'm George Stewart Mendenhall. I'm a practicing electrophysiologist here in La Jolla over at Scripps Memorial Hospital. Very similar to Justin, I was a chemistry and physics major at Harvard and did a lot of computer science. I actually planned to go into computer science, too. And it was the days before machine learning were really canonical courses. And then I went to the Harvard HST, the MD master's program, and continued on to EP fellowship. Started Everbeat, everbeat.net, which is a rhythmic monitoring. It's through PPG. It's a ring-based form factor that looks at your pulse irregularity. We started that at UPMC at University of Pittsburgh Medical Center and have now gone to pre-series A with development of prototypes that we can talk about the journey. Happy to be here. Perfect. Well, starting at the beginning, we'll frame the conversation again. What does it take to get started? Why would you choose to start a health tech company? And what does it take? So Peter, as someone who's seen this so many times from so many different angles, you can start us off. And then everyone else, feel free to jump in. We don't need to go down the line. Ask each other questions. Disagree. Push each other. We're up here to have fun. Peter, go ahead. Thanks, Justin. Now, if you translate what he just said, he goes, go to the guy at the end who's the oldest. So that's what he did. Found out. Yeah, you did, Justin. But in some ways, that's fair because I have been involved, like everybody here, in lots and lots of startups. Been on the founding team of 20, 25, had bio design at Stanford. We teach the concepts, the innovation. But what I learned and what mistakes I made were very helpful to some of the younger entrepreneurs. And through the venture capital effort now, that's what I get to help with. And for me, that's great. I'm not going to be thinking of the ideas that these folks are going to be thinking of. But I made enough mistakes that I can help with the orientation. And I think that's really important because it's not innovation. It's integration. And one of the luxuries that we have, too, like Dan, is all my LPs are all strategics, from Samsung to J&J. And there's 20 of them. And they really help with the orientation. We put them on boards. They co-invest because you can have the best technology. But if it's not integrated, there's only four people in this world that pay. Hospitals don't pay. They're all underwater. Patients don't pay. The government pays a little and late. So it's retail health. It's pharma. It's the employers. Those are the folks, and of course, the payers. Those are the folks you have to be thinking about even with the early concepts that you're going to be because the best innovation, if it's not paid for, it will not integrate. And the health care system is very complex. We talked a little bit this morning about how it's being disrupted by the Amazons, and the Googles, and the Walmarts, which actually is a great opportunity that is happening here. But again, if I'm to say anything in my old age, it's integration, not innovation. I think it's an excellent point. And maybe just to continue the metaphor, I think that there are a lot of problems in our health care industry. Many of them touch all of us. But there are not a lot of problems that there's a willingness to pay for. And I think you have to understand oftentimes who is your customer. I think the unique thing in health care is that oftentimes the end user of a product or a service that is implemented upon may be someone different, an entity that's completely different than who's actually paying for it. And understanding that value proposition from their perspective. Peter talked a lot about large enterprises. It's just understanding, what is their purchasing behavior? What sorts of products and services do they pay for, and how do they pay for? What is the burden of proof that they're looking for in order to engage as a customer? I think oftentimes, certainly in the med tech world, certainly in small molecules, the randomized clinical trial is the gold standard. But I think in our world, we spend a lot of time working with entrepreneurs who have a product that is fully functional. And we're taking commercial risk. Oftentimes, you don't necessarily need an RCT to get something to pay for. The opposite is also true. Even if you have an RCT, it still doesn't guarantee that a payer will reimburse you for a particular product or a service. I think ultimately, you have to understand what problems are they looking to solve? Usually with large enterprises, they know their budgeting cycles for around three years. And they have a top five list of things, strategic priorities that they have. And so I think as an entrepreneur, even when you are in the early ideation stage around a problem, I think it's super important to engage with these potential customers early on, vet and validate their interest in what you're working on. It makes a health care sphere very, very unique in that we are largely dealing with OPM, other people's money. We're being reimbursed by a third party as opposed to showing the greatest widget that a person wants to go to Amazon.com and buy. Now, we still can do that. And the consumerization of health care sphere actually encourages that. You can buy your Apple Watch with or without your cardiologist's permission or blessing, and similar with AliveCore. But when we're forming for the medical device industry, it's additional 4D chess in that you're trying to make a product perhaps for a CPT code. But that CPT code may vanish in five years. Or it may be obviated by a new technology or something else. Or providers are just not willing to pay for it. So when we were developing our technology, we had to think, as you said, no money, no mission. Unfortunately, we have to make sure that it's something that's affordable and is going to be a business proposition that is reasonable, that it's going to be reimbursed. If you're going to do a B2C, and if you're going to, good luck. Correct. It's very difficult. It's the B2B2Cs and the blended CAC that you get by working with payers and that lengthening of LTV. I mean, those sort of attributes, I think we have to think about when we're looking at that consumer market, when we're looking at that group now. Absolutely. Yeah. You're absolutely right. And the B2C, I mean, is probably, what, 2 thirds of the economy in large, right? So that is ostensibly a bigger market, but it's a more competitive and a ruthless market that the vast majority of startups fail. So, and I'll just throw in one little thing here, which is, if you're thinking about starting a company, which I think probably a lot of people here are, potentially, it's no longer just like, oh, there's a medical need and we want to go solve it. You have to spend a lot of time at the very early stages thinking about the very end game of who's paying for it and how all that works and what the alignment is. It's no longer just, I want to solve a problem for myself and other people will probably want this too. So it just means that it's a different game today and you really need to understand the payment side of things. Yeah. And so just to add to that, Paul, when you think about driving awareness of the technology and then driving adoption, that plays hand in hand with the reimbursement piece. In order to do that, you have to be so careful with limited money, limited resources, bringing the right people into the organization and putting them into the right positions. And it starts with that. And then the other piece of that is the people in the room, many of the physicians in the room today took chances on a lot of the startups we were part of to try this technology that we fought to make differentiated from the current technology on the market. But we had to start somewhere. People take risks to try these new technologies. And if you don't have the right people on the team to help drive that awareness, drive that adoption, you can have an amazing technology and it'll just never get off the ground. And then one of those places to create those opportunities is in a place like a MedTech Innovator, which is the largest MedTech startup accelerator globally now. And they give you great opportunities to pitch the technology, to get in front of corporate venture, to get in front of venture capital, and just in general to get the product out there. So I don't know if you want to talk about some of the partnerships you have. Yeah, no, that's great. Thanks, Kent. So just quickly, I mean, I think that the way to think about what we do is we're really more like a corporate accelerator, except you don't have to move in and immerse with any particular corporation. But it gives an entrepreneur the early opportunity to work with people who probably will be your partner down the road and have the opportunity to learn from them about what they would want if it was their product. Versus the other way around, which is the way that I used to do it when I was an entrepreneur and when I was an investor, which is we build something and then we hope someone's going to want to buy it down the road, and then you find out later that it's not a fit. And they say, boy, I wish I met you three years ago. We could have made a big change or two years ago. So what I do and what we do is try and do that early so that the thing you're developing has as much value as possible down the road. So if you're lucky enough to go through something like Stanford Biodesign, obviously that's a great way to bring a product to market. But I'd love to ask Peter, if somebody's not that lucky, what advice do you have for a startup that's early on in trying to build out that technology and drive awareness of it? Yeah, it's a great question, Ken. And I have to admit that Biodesign had a lot of creep early on. Paul and I were doing what was called Medical Device 101 at Stanford, and we'd hold these courses every, I can't even remember, it was back in the late 90s, maybe twice a year, three times a year. The physicians, the innovators would come in and we'd associate them with the intellectual property experts, business experts. But the focus was always a concept that was in need. And we stopped there. And it used to be we all thought we knew everything inside Stanford. We quickly learned that we need to bring outside folks like yourself in to that, because you have to connect those dots. The greatest, and I've seen a lot of these and been part of a lot of them, great ideas. At a cocktail party, it's perfect. But it doesn't work on a Wednesday. And that's what you really have to integrate into. So we now have learned to bring payers in, regulatory people, experts like Paul in, to really help us look beyond the fascination that you get in your own cocoon of what your technology could do. Because it needs to do it. So in the spirit of a boot camp, if you have a young, bright, potential entrepreneur here that's just graduating residency, has a great idea, what practically would they do to launch that? I have my own story, and I can tell it in a bit. But how would they go about it? Should they do pitch competitions all day? Should they talk to engineers? Should they walk into a VC's office? Is that something you could do? How do you do it? So in 2016, we initially were looking to see if we could do a wrist-worn EKG. And I thought, well, that sounds like a very, very good idea. So it was a very nice, bright, young fellow that came to me. My first year I was attending. And I said, well, I think it's been done before. And we looked, and it really had it. And this was obviously before the Apple Watch was around. And we looked to see, and we entered one of those kind of competitions, a pitch competition. And it gives you a small amount of money, about $15,000 to $50,000 to develop that. So what we did is we took that money and went to the engineering department and had them put up a Frankenstein prototype of a wrist-worn EKG. We wanted to test things like dry electrodes. Can you just touch it with your finger? What is the impedance mismatching? What is the fiduciary tracing that we can do? It doesn't match a lead one clinical EKG. And sure enough, it can be done, and it obviously has been done. So we went and made some patents, talked to the technology transfer. We did look into Accelerator and Incubator, and it was not really for us, to be honest. We did things on ourselves. We had, we kind of bootstrapped through a, we found a CEO that was a retired executive from BlackRock and was able to send self-seed. And the Incubator phase may have been useful, but during, you can kind of bootstrap yourself without it with enough connections. However, we had to kind of do everything ourselves. I'm always, right, I did that apocryphal Mozart joke, you know, the kid goes up to Mozart, and he's seven years old and says, oh, can you teach me how to play a symphony, how to compose a symphony? And Mozart says, you're never gonna compose a symphony, you're seven. And he said, well, you did it. And he said, well, I didn't ask people how to do it, right? So a little bit of it, you need to be working 24-7, and that's really what we did, and bootstrapped to this. I'll save some of the other analogies. I did want to show a little slide here, which is kind of the patent for something that recently came out, right? Disclosed herein is a wristwatch-sized cardiac monitoring apparatus, which is worn on the wrist of one arm. A finger of the other limb is placed on the receiving electrode and provides a lead-one electrocardiac signal to electronics within the housing. That's a very nice product that just came very widespread. When do you think this patent was from? Any guess, just shout it out. Anybody? Well, I'll show you the next one. It's a little bit Timex-y with that stretched band, and the third shows the digital electronics that are very simple. You can actually parse through that and look at the preamp and the BCD, the binary-coordinated decibel, and it's basically just an ADD converter. 1978. This was patented before most of us were born, or some of us were born. So, it was by Medtronic, and it expired 20 years ago, 1998. So, a lot of people I see and my colleagues that have these great ideas, but ideas are cheap. Implementation is actually very, very, very difficult, and that's where the work of being a startup and all these people have successfully started companies, not necessarily because we are the first people to have the idea. You go to Sci-Fi, and you'll find every single idea, almost science fiction, you'll see almost every idea you can think of, but nobody did it because it wasn't the time yet for this. So, the EKG on the Apple Watch was partly due to miniaturization, due to big data collection, and uploading to the cloud, and having continuous monitoring, and having appropriate battery life. This thing had to be hooked up into a cassette tape player, I think. They actually had it so it could offload into a cassette tape, and you have to be at the right time, and the right time. At Medtronic in Minneapolis. Pardon? This prototype is at Minneapolis. Oh, is it? Okay, okay, yeah, that would be lovely to see. So, it's interesting you didn't have a great experience with accelerators, because there's such a gamut of when you'd want to use an accelerator, when you don't, and what they're helpful for. I'm invested in a couple accelerators, I've gone through a couple accelerators, Medtech Innovator being one, and there's also ones that will guarantee you clinical studies, so depending on what you're trying to do, they can be really helpful, but I have heard often, people have stopped using accelerators, that term is not a great term anymore, but there are ones that are still useful, so I'd love to get a little more info on what was helpful and what wasn't. Yeah, so I think part of it was that we were at a stage where we were a little late to see the accelerator, and they typically wanted about five to 10% of the company, and what they could do for us were things that we were already doing ourselves. The thing, I kind of use the analogy of building a house. If you want, you can tell somebody to build you a house, you can go to an architect, interior designer and an engineer, or you can go to Home Depot and get bricks and two by fours, right? And we were already with a bunch of two by fours and bricks and we had the foundation of the house, so we didn't do it. I'm not a blanketly condemning or commenting on accelerators. I think it was just not something that we needed. We didn't need programming skill because I was doing a lot of the coding myself. I'm a programmer. I would sketch everything in Python and MATLAB and then give it to a very talented embedded system programmer that would then code it into C and to put it on the rings, but I made everything, the peak detector, the filtration, simple ML classifier algorithms that we can do in PyTorch or TensorFlow. It's two major machine learning algorithms. If you're facile with that, you can do it yourself, but that's just a relative strength. I'm not good at marketing, right? So we have a marketing firm do everything to us, but then we just did that ourselves. We didn't need somebody to really poke us toward a marketing firm for that. Again, I think it's a little bit startup by startup and where they feel their relative strengths are. I don't think, I think that if you want to drop in solution and to meet eight certain VC investors at one point at appropriate time, it's actually good for you. So I think we just heard a bunch of great ideas and got to see a very specific example. I just want to highlight one thing that I know Ken mentioned and a bunch of others is we just mentioned a whole wide range of skill sets. And most of these things, and I'll just make it explicit, are not and don't exist in one person. Most teams don't have one person who can code, be the physician, be the marketer, be the business thing. And so one of the things that's really important to us is looking at the team. Do you have the right people around the table? And when you're choosing to start a company, are there the right skill sets? So I guess we'd love to hear, Paul, more from you. How do you think about accepting companies in MedTech Accelerator? What are really the key facets you're looking for so that when people know, when should they approach you? What are the key ingredients they have to have? Yeah, so just to give you a sense of what we do at MedTech Innovator, so last year we had 1,700 companies apply to be part of MedTech Innovator, and we only accept about 80 across all of our cohorts. So the acceptance rate is really low, and there's a lot of boxes to check. And as you imagine, I'm sure there's a lot of great companies that we pass on in that process. Like any investor, anybody else in this process, we all have stories of all these people we've passed on, or companies, I should say, we've passed on. And ultimately, you're going to be checking all sorts of boxes about the need, the medical need, and obviously whether or not the economics work, and all those other things. But as you said, it comes down, ultimately, I would say almost 100% of the time, to the team. Because that's who you're going to be working with, that's who you have to trust, that's who's going to spend your money, that's who's going to take this product to the market, and so on. And the number one reason I think that we, anybody probably passes, is usually the team. You look across the table and you go, I don't want to work with that person, I don't trust that person, I think they're trying to mislead me about something, they're hiding something. Whatever it is, there's always something about the team. And I can tell you probably 50 stories, I'm sure Peter has as many stories, about people who, when you look over and you say, oh, how'd you guys meet each other? They got one person's like, oh, I'm the physician founder, and I met this guy on a plane next to me, and he had some business experience. And so, he's my co-founder. People choose the wrong business person all the time. They pick, you have this incredible technology and this incredible inventor, and they've been working on something for their career, and then they trust someone they literally bumped into at a party who had some business experience, and you're like, oh yeah, I'll give you the keys to my Ferrari here, and go take, it's crazy, but they do this all the time. And so I think, we see it all the time, it's obvious when that happens, and you go like, this person is not the right person to be running the company, and I think ultimately, a lot of us would expect that the person who walks in the door as the initial CEO is probably not going to continue to be the CEO long-term, and as long as they're self-aware enough to know that, and to come in and say, hey look, I'm the CEO for as long as it's the right timing for me, and then if we all agree it's time to replace me, I'm happy to move aside. I'm not saying that should be 100% of the case. There's some people who are the opposite, and they're going to hard charge and stay, but the point is, the team, we all know that the perfect team is not going to be in the very beginning, but having the wrong team that's clearly the wrong team is a deal killer, I think, every time. And what I found interesting, being on both sides of the pitch, so I started out doing lots of pitches, and got into one of the cohorts with MedTech Innovator, and now I judge their global pitch events, so I'm seeing the other side, and man, I wish I'd known what the other side was beforehand, because one of the biggest kiss of death things that you'd hear on the judging side of things is if the founder was uncoachable, and almost every time if somebody threw out their uncoachable, and people agreed, they wouldn't get into the cohort. And so I'm guessing that's similar with investors too, when VCs or corporate venture are looking at investing in a company, if that founder is clearly uncoachable, it's a big detractor from that. Yeah, I know Justin and Dan, I'm sure, it's the team. It's the three Ts, the timing, it has to be not solving a problem that was yesterday, team, and then the technology. Sometimes people have it the other way, that the technology is a person. Now, some of these folks aren't going to like the next comment, but I never invest in an MD who's the CEO, at least early on. I call MDs in operational sort of situations, management disasters. Now, don't get mad. I don't think any really honest MD would get mad at that, to be honest, I mean, it's a very different skill set. The MDs go into the CCU, everybody shuts up, we bark out some orders, we walk out. That's not how you run a staff meeting. And if they can be MDs to start out with, they just have to be able to surround themselves, not by C27B, but somebody who really understands and is going to work as a co-founder. But teams are the biggest issue. We see 750, I'm sure everybody sees this number a year, and the number one reason we kick it out is because of the team. And just to be explicit on that for anyone, if the question from the audience, if the founder, the inventor doesn't have business experience, what should they do? How should they find someone to work with? So, I mean, this is a really good discussion. I may say something counterintuitive. If you are a, I mean, most of us here are clinicians or technologists right around the table, and like you said, don't necessarily have business experience. But that doesn't obviate the need to learn about business models and understand kind of basic unit economics. And I would say, to Peter's point, I think the number one way as a CEO to kind of get removed if you're a clinician or a technologist is when people ask you business questions for you to turn to the CFO or to turn to the business. It doesn't obviate the need to understand those things. But you absolutely need to compliment yourself. Because when it comes to very defined strategic plans, you actually want somebody who's spent 10, 15 years in a particular function, kind of developing great strategies. And so, we see this all the time, a number of technical founders, a number of clinical founders, and some can kind of cross that chasm and be quite remarkable as founders. And again, I think a lot of technologists and a lot of clinicians are just people who have very, very high aptitudes, but have kind of been swimming in one swim lane. And so it does take that unique founder to kind of get out of that swim lane and immerse themselves in the ability to develop these skills. But you absolutely want to build a composite team because a founder can't do everything, right? And I think you run into some danger sometimes because naturally founders are very detail-oriented. They want to control a lot. They want to be king or queen. And that can be dangerous, right? So there is a subtle balance. You kind of want a strong founder who wants to be involved, but you don't want them to micromanage everyone else. I told my story, but how does the founder practically, in your experience, go about getting that team? I mean, you're in your office, in your university, you know your fellow doctors. Do you just walk into a VC or how would somebody go? My story's a little bit random and as you said, unique, but tell me how people go about that. Well, I'll say one thing, which is that there's no match.com for like co-founders. Like that would be a great thing if somebody here in the audience wants to go build that, where you could like swipe through and be like, no, no, oh, interesting, you know, and no, no. Not that I've ever used one of those apps, I haven't, but you understand what I'm getting at. Like that would actually be tremendous. I know there's an entity called like On Deck that is like a thing where you can go on and if you're somebody who's looking for your next thing, you kind of like join their membership thing and then that's a way of socializing. And there's a bunch of co-founder kind of meetup things where you can go meet, but you're marrying somebody. I mean, this is literally, you're gonna spend more time with your co-founders, with your team than you are with your spouse as a practical matter. So you should really take your time. This is, you know, not 27B, not, you know, don't just give it away to someone who's like, oh my God, you're a business person, great, let's work together. Take your time, meet a lot of people, reach out through your networks. So as a practical matter, it's just like anything else. You reach out through your networks. Hey, does anybody know, you know, I'm looking for, you know, a business person who understands the medical technology industry, who has some experience. You don't want a first time person in the business. You don't want a first time lawyer in the business. You don't want, you want people who've done this before. And so it's just a matter of literally reaching out. If you're at a university, ask your tech transfer office. Do you know who some of the local people are who might be looking or have, you know, who can help me get going? There are all sorts of entities that these people, you know, that have like regular social events and the people who are kind of looking for the next thing are going to show up. So it's like whatever your local community is, you know, there's a million accelerators and incubators all over the country. And, you know, we're globally focused. So we don't, we're not tied to any geography, but there's literally hundreds and hundreds of them to go to that in your local neighborhood we'll have a regular meeting and you could go and just meet up with maybe a dozen people, but don't make your decision right away. Yeah, one corollary or maybe addition to that, it's pretty simple and maybe I'm from an incestual Bay area where, you know, a lot of people cross this chasm, the more chasm, if you will. But, you know, if you ask a venture guy or gal for advice, sometimes you get money. You ask him for money, you get advice. So you can take advantage of that. And I've done this a couple of times is you go and say, look, Dan, I'm not raising money, but can I just get some time with you? He's got a Rolodex of people that he's worked with that he'll come up with three names by the end of the half an hour that could be perfect. So go meet him. So I think the Rolodex of some of us that have been seeing a lot of companies and the incestualness, I've taken CEOs out of companies and put them in others, helps a little bit. So that might be another addition. Yeah, I would, just one pearl, you know, where do we look for team members when we're building companies and recruiting? Customers and competitors, right? And ultimately we're looking for people in the industry, right, who have a working knowledge of, you know, a lot of the, you know, kind of steps required in order to kind of become successful. And you kind of want people with that working knowledge, you know, can someone come from a different industry and learn it on the fly? Potentially, right? But it's going to take a lot longer and they're not necessarily going to bring, you know, you know, circulating kind of networks, right? And there's not going to be those economies of scale that you have when someone has worked in an industry for 10 to 20 years. Maybe moving us on to kind of the next phase of a startup. Okay, let's say I have a team, I'm starting to build a product. We have a couple of questions from the audience, you know, what is the proper time, you know, to understand if I have product market fit, if I need to pivot? And you know, what are the important questions I need to ask myself if we have a product that's ready to continue on? Whoever wants to take that first. Yeah, I'll start. You know, again, I think product market fit is what every single company, every single venture capitalist is looking for. And you know, again, it can be, you know, hard to identify when you have it. I would say generally that the phrase that we use, we're looking for a replicable, scalable business model, you know, that shows that more than just one or two customers have decided that this is something that we absolutely need and we're willing to pay, you know, this type of price or, you know, we agree with your pricing model and how it kind of corresponds to your largest business model. So I think ultimately, you know, all different venture capitalists at different stages have various thresholds. And so I don't think that we have a revenue threshold upon which we believe something has kind of reached product market fit, but we're looking for customers of a certain size and scale and, you know, more than two probably to kind of pressure tested, you know, an approach to the development of a product and the pricing of a product to say that, hey, we have product market fit in a particular market segment. And what is a typical timeframe for that? Like years to months to years? I would say generally speaking, you know, if you think the institutional rounds of capital that go into a business, you know, seed in series A, I think seed, you want like one or two customers identified that you want to be able to take something to. I think series A, you not only want to show proof of concept that a large enterprise is willing to pay for something, but then you want to see a pipeline, right? You want to see a pipeline of customers that we can go and sell across. So I think, you know, series A, you're looking for, you know, probably two or three or four large enterprise customers that ultimately I think will set you up for that series B when you want to kind of scale nationally. People might not know this, but I have my own experience, but the technology transfer office, is that attractive for you, people coming from that? Or does it make it less attractive as somebody coming from an independent or an industry? And could you also then condiment on Stanford's terms on that technology? As long as you don't screw up the deal. I mean, I've seen these tech transfer folks be variable. Variable what? Variable across the country. Yes, yes, exactly. And that's why I wanted to comment on Stanford. Ironically, some of the top tier institutions have more experience with it and often give you much more favorable terms than a middle tier that views you as their one shot at billions. I always remember the comment from the former president of Stanford, John Hennessey, who's a great guy. He basically said, don't squeeze them now because I want them back to build a fucking building. Well, that's. And we have the Paul Allen, and we have the Bill Gates, and we have all these buildings. So it's more of a long term view? It's absolutely correct, and then also secondary effects in that if Harvard went after Facebook to say it was founded in a dorm room and we now want part of it because you used our computers and network and everything, no future Facebooks are going to go to Harvard. Exactly. So it's a longitudinal iterative game that they are smart to do. So when you're at a top tier institution, which I'm sure almost all of you guys are, just go to the technology transfer office and just start talking with them. They have generally built in resources. I have had a little bit of tension when we were doing it in that sometimes they wanted to just take short term cash injection. Yay, we can get a million bucks. Oh, this is awesome. And we don't want to, well, we'd like a million dollars, but not at the expense of our company, right? We're doing an iterative game and we want to continue to develop this. So how do you deal with that tension? And have you seen that at all? I'll let other people spoke, but just one thing, because Justin asked this, I wouldn't look at the tech transfer folks as any market validation. They basically have folks just calling people. Exactly. So they let you, they connect you often, almost similar to an academic incubator or connector. That's not where you go, but you know, you can get good deals now. That's not going to be punitive down the road. And I think that that's the advantage for a university that is really strapped these days for alternative income. And what is a typical deal in that? I mean, for people that don't know, a typical license. Typically, my understanding is that the university owns the patents and owns the technology, then exclusively license it back to the inventor, right? So they own it, they give it back to you. You can develop it as what, but essentially, you have to essentially pay them off. And usually you get 30%, 35%. Yeah, it depends. It can be even less than that because they'll bank some royalties in there and a little bit of capital upfront. And they want to see that it's being invested upon. At least at Stanford, that's a big thing. Correct, you have to actively develop it. You have to actively develop somebody that's going to be at the table. You know, we want Dan at the table before we license it because I want to make it an increased probability of there being enough funding. So I'm curious, what advice would you have for the physicians in the audience who haven't started a company, or maybe are just starting? What do they do to navigate things with the institution that they're working with? And then, what are the biggest learning points you had in that process? Talk to other people. This is something that's done through networks, and that's why you guys are in business and you're so important, right? Because this is an esoteric field. Physicians are not trained in this. We're trained in physiology. We're not trained in price elasticity of demand. Well, you might know what it is, but it's something that it's a different language that we have to learn. I would say, talk to me, and you can figure out what my pain points were, and I'm happy to share them, or talk to somebody that you know that just founded a company and just ask them what happened, or get a hold of one of you guys that has experience with academic founders. And then, just a follow-up question to that, and this is probably for everybody, but how do you approach your colleagues to try to get them to try your technology without creating any conflicts of interest, or any advice there for the physicians who are trying to start a company and drive adoption? So, you're generally not gonna be running the research study if you want to commercialize the technology. You have to take a step back and you can kind of direct things. We basically get money for the research study. You can use a research contracting organization, right? Somebody that actually does the research for you, or you can just go directly to other research offices through colleagues that you know that don't have a big stake in your company, and have them get a PI for the clinical validation studies. I don't know if we're gonna go into 510K and de novo FDA and all that kind of stuff. But the conflict of interest is an important one, and I remember the head of the conflict of interest committee who was doing it for 30 years. He put me in charge of it because he said it had the most conflict of interest. Uh-huh. But, you know, it's all about disclosure and management. Right. Disclosure and management. That will get you survivability, if you will, at a university. As far as the, and I've done this a couple times with some of our companies, is I was on the founding team and I thought about the idea, and then I do back out, and I let one of the younger folks be the PI because they're trying to get their publications, and they become great. I sit back. It's a built-in publication, positive or negative. It either works or it doesn't. Absolutely. Then you get experience running the trial, you get built-in basically PI and paper out of it. Yep, yep. It's benefit, benefit. So maybe actually one of the things that came up, and some of the questions around regulation, what do we need, do we go after it, how do we pay for it? So I don't know if anyone in particular wants to take that to start, but this is something that's so top of mind for people, especially when they're getting started out, especially if it has a medical device component. So you mean, do you go after regulatory approval versus unregulated? Do I need regulatory approval? Do I try to avoid it? How do you think about it? Well, I would just say almost everything requires regulatory approval at some level, and navigating around the FDA is just generally a very bad idea, and almost every one of the startups that we've been involved with that has started with the consumer model has pivoted to a regulated model because that's who pays. Consumers don't like to pay for their medical care. And there's more of a moat, there's a built-in moat. You have to get regulated. Well, definitely, yeah, that as well. But yeah, navigating around the FDA is almost always a bad idea, almost all of them. I mean, we only invest in software and services, and I would say the reason why, my partners have been venture capitalists for 30 years, and if you have to go through the FDA, you usually can count on delays, and you can count on a lot of burn, right, when the FDA delays the approval or the submission of a filing, your burn rate does not stop, it continues, right? And so I think with this new advent of digital health and digital therapeutics, which is an area that we invest in, you are starting to see the FDA start to regulate software. And I think they have pretty good guidelines as to if there's some diagnostic component, when you do need to take something through the FDA and when you don't. No, I would say that we have one company that has a digital therapeutic that has begun a clinical trial, and they had to go through four cycles with the FDA just to kind of define what the trial would be. And so I think the interesting thing that perhaps is a surprise to some people, the FDA will communicate with you as an early-stage company. Absolutely. And so, and then there are consultants that can kind of guide you in that process, but just communicate with the agency, and it is going to be an iterative process. And again, I've learned this, multiply your time to that next kind of milestone, filing by a factor of two or three, because it's always going to take longer and it's always going to require more capital than you anticipate. I would be even more blunt and say, you need a consultant. You need an FDA consultant. You can try and do it on your own. We did. We failed miserably. And it cost us three months of time, and time is money. And the major reason is there's, again, things that you're just never going to know, no matter how smart you are, that the FDA will know. They've gotten much, much better. Even the second time we were dealing with them, they've made a massive hire. They have software as a service, more canonical divisions. I'm talking with a machine learning engineer at the FDA now. I mean, this guy, brilliant, right? So, and those are all new hires. Before, their eyes would glaze over and nobody knew how to regulate an AI device or something that's dynamically changing its heuristics based on what it sees, right? So that's all much, much better. But get a consultant, get it early, make sure that you're comfortable with them, their reasonable cost in the large scheme of things, and then get it through. You're not going to do it yourself. I agree with that 90% of the time. But the respect that you have to give the FDA, come early and come often. Just like Paul says. I've been a consultant for the FDA for 25 years. I'm on the software as a medical device committee. And they're getting much better. Much, much better. Because the devices that you see today are going to be harvesters of data. They're not just going to be just software. They're going to be the harvesters of data because we need to figure out what patient, what time, and what device to put in. And I think that's going to be a data issue. So they're getting better at this. And having a medical grade product actually can help you down the road. It's not, it can be complicated. I agree with your two to three multiple. But sometimes that medical grade product can be affiliated with a higher reimbursement. And for those that are doing software, you almost have to get what we call a CCO these days, a Chief Coding Officer. Now just look around. There's a couple companies that didn't have them. And we saw that they lost their codes. And we saw what their market cap did, right? So you got to be staying on top because these codes change constantly. And they're going to continue to change. So I think that's an important issue, at least internally. How do you view their health and wellness? There's also, below medical grade, there is health and wellness things like stepped counters, commercially available temperature chips. So if you use something that's measuring body temperature, you don't have to go to the chip level and say, oh, this measures the temperature accurately. So that's very helpful for getting a product that uses multi-sensors, that some are OTC sensors. You don't have to verify each little one. It can help you a lot. That's not something I'm going to invest in. I'm going to invest in if that's part of a whole program. Well, absolutely. But then as a part of the whole program has to use those sensors. So you can then do the validation of the algorithm without having to be able to use the sensors. So even as part of this. Okay, I get you. But there has to be a whole service there and an annuity and an ARR. And we've got to go out to the care providers and make sure that they don't want mom to fall or make sure that the rehab is done via SORT or HINGE or some of those that have all those components. And they're buying components like this to put in. So I just think we need to think beyond the devices and surround that with a service that is scalable. And I know that's a little bit of fluffiness, but I think about that part. And it justifies then spending time on getting that sensor approved. Maybe just because we have a few minutes left here. Want to just kind of take it to where we're at today. You know, we've heard a lot, right? We're here. This is the first time we're doing HRX to focus on health technology, digital health. Some people have mentioned this already. Last year, there was $29 billion invested in digital health. The first half of this year, it was a little bit less. It was a little over $10 billion. But where are we today? Is this a good time to start a company? If you're in digital health, if you're here in the audience. And you know, where are we going from the start of digital health? Maybe Ken, I'll start it off with you first. Yeah, so I think just to start off on that. One of the things that I learned early on was to always be fundraising. You never stop fundraising. You have to have a great story. And I think right now, because of this digital health explosion right now that we're experiencing post COVID, it is absolutely the best time that there's ever been as a startup to go out, raise money, drive awareness, drive adoption of the technology. So if you have an idea right now, do not wait on it. I think the time to act on it is now. Start to network with people like Paul and other people who run accelerators to try to find out when's the right time to get into one of these accelerators and then start to learn who the better early stage fundraisers are and then network to the later stage fundraisers. But I think right now is a great time. Yeah, you know, I have some like longitudinal perspective. So in 2013, I worked at a health plan. And one of my jobs at the health plan was to kind of spearhead innovation. And it was almost a rule at the health plan that we wouldn't work with startups. Anytime we looked at startups, it was a sign of risk. And so we tended, I mean, this is the healthcare, you know, of that time, you tend to just kind of work with the same companies over and over and over again. It was the, you know, the Magellan's and the McKesson's, you know, who would just come up with a whole host of services and products that we would buy over and over and over again, the optims of the world. And the other thing that we were doing at the health plan at the time was implementing the ACA. So the Affordable Care Act. And I think, you know, what, you know, two years later, fast forward two years in 2015, I joined the venture capital industry. And it was the ACA that really drove a lot of innovation, a lot of growth of startups and, you know, venture capital funding going into startups. Because I think in 2010, 2011, there was maybe a billion dollars invested annually kind of post 2015, we're up to $5 billion. And then, you know, I guess the rest is history and ultimately it was the pandemic that really exploded. And so to your point, you know, we'll probably be at around $20 billion invested annually, but my sense is the number is going to remain in that ecosystem. But I think perhaps more importantly is that large enterprises, right? I think for the first time ever in the last decade are now all in on startups, right? They're developing startups, they're starting companies, right, they're investing in venture capital firms because, you know, I think the other side of the aspect is that everybody believes that, you know, everyone wants to be an entrepreneur, right? There's a sexiness associated with that, you know, whether or not these large enterprises can be entrepreneurial is a separate question, but I think that you will continue to not only see dollars invested, but you will actually see people's time, you know, where you have, you know, someone at a health plan or someone at a large health system, you know, as a chief innovation officer or as somebody who is an attache to an accelerator, right? So I think, I agree, generally speaking, it is still a really good time. And even if there's a little bit of a slowdown, when people talk about a slowdown, you look at versus 2019 and the years before, we're still way ahead of that in 2022. You look at some of the recent rounds, the LifeCore just raised $150 million round, Clearly just raised $195 million round. These are huge. Fairly raised a billion today, yeah. I mean, huge, huge rounds that are happening right now. And then you look at the dedicated funds, CVS Health now has a dedicated digital health fund. There's tons of them. I think you're absolutely right, Ken. And I think for those that are scared by looking at the stock market, I mean, there are some opportunities. There's three things that are going to happen. The three R's, recaps, roll-ups and reverse mergers. So there are vehicles out there that are going to be adding to our compliment, but there's so much capital out there. You see the PE's folks shivering on the sideline. So don't look at the stock market and think, oh my God, I'm going to wait. This is the time, because every time we're in a nadir, and I've got some longitudinal experience too, you come out and you come out higher than the last peak. Yeah, I agree completely. I think it's a phenomenal time to be starting companies, to be an innovator. Like I see Bank there in the audience from NanoWare, one of my companies who is out there right now, just crossing what, like a million dollars in revenue. And just like three short years ago, you were just kind of getting started. So it takes time. This is like a great time. The market is hungry for these technologies. They make a monitoring technology for cardiovascular, obviously, here at HRX. But the point is, this is an amazing time to be an innovator for a number of reasons, in my opinion. Number one, you've got, as you heard a little bit already, you've got health plans, you've got health systems, you've got providers, all these people who want to work with startups. They're coming to us and they're saying, we know J&J, we know Medtronic, we know Boston Scientific. We would like to work with startups. And they want to be connected with startups. They want to work with NanoWare. They want to work with these companies because they're like, we already know about all the other stuff. They want to be on the podium. They want to be standing up and looking smart and saying, look at this thing we found. And we proved that we can improve outcomes in our health system, at economics that are favorable. So, and that's not going to come from the big companies in most cases. It's going to come from a startup. It's a great time to be starting a company. And also, because there's a downturn out there, there's a ton of people who are leaving their jobs. I get them, I can't believe the number of people who are emailing me to say like, I just left my job, I'm leaving my job, I'm leaving. And they're not old. These are like, I'm saying they're not done. These are people who are like, they're experienced and they're available. So there's great talent. We talked about trying to find talent earlier. There's all this great talent out there that are looking for the next thing. It's an amazing time to be starting a company. So I think it's great. And it can be scary. And I think taking that risk to do it is part of the whole startup experience. And just one quick story I'll tell you is when I left Boston Scientific and went from Boston Scientific to iRhythm, I can't tell you how many people told me, why are you giving up your medical device career? And it was the best decision I ever made. So don't be afraid to make that change. If you're going to work for a startup or start a company, right now is a great time to do it. Well, thank you so much, everyone. Unfortunately, that's our time. But we're all here because we want to be able to help you. So come find us. Thanks again, everyone. And thanks again to HRX for having us.

Justin Norton

healthcare technology industry

starting a company

digital health sector

strong team

regulatory approval

FDA process

investment opportunities

fundraising