Frank Fischer: Lessons Learned from NeuroPace
Local medical device company NeuroPace made news last November when it received FDA pre-market approval (PMA) for its responsive nerve stimulation (RNS) System to treat drug-refractory epilepsy. One of the key people behind this success was Frank Fischer, CEO and Board Member of the company. Several Biodesign alumni and current fellows recently attended a dinner discussion with Frank where he shared his wisdom on bringing medical technologies to patients.
Frank brought to the (dinner) table over 30 years of medtech senior management experience. Before NeuroPace, he worked as CEO at several notable medical device companies including Ventritex and Heartport. He also currently serves as a Board Member for a number of companies in medtech and adjacent spaces, including Proteus Digital Health, ReVision Optics, and Autonomic Technologies.
We asked Frank to give his thoughts on many of the key issues facing medtech entrepreneurs today.
Choosing a project
One of the first determinations an innovator makes when evaluating a new medical technology is whether the innovation is just a product or has the potential to be built into a real company. Frank stressed the importance of answering this question early in the development process. Accurate market analysis is the most critical factor in this assessment. If your product could only reach $100 million revenue even if used to treat every eligible patient in the world for every possible indication, it probably doesn’t have the legs to become more than just a product. That is not to say it isn’t worth pursuing, however, as it can still benefit patients meaningfully and provide attractive returns for investors and founders. If the market opportunity reaches into the billions of dollars or comes with significant platform opportunities, on the other hand, you may have the foundation of a real company.
A difficult US regulatory process – for example, a PMA or 510(k) requiring hefty clinical data – can certainly make a project less appealing in the current market. However, Frank recommends against shying away from pursuing a breakthrough solution simply out of fear of a lengthy and expensive FDA ordeal. For a large unmet need, innovators can often use grant financing to fund the early de-risking phase. The key considerations for evaluating a project, he says, should be how significant the need is, how well your solution addresses the need, and how proprietary your technology is. A need and concept with the right fundamentals can find a way through the labyrinth as long it has a talented, committed team behind it – and maybe a little bit of luck.
The Sand Hill crawl
It is no secret that early 2014 is not the heyday for early-stage medtech fundraising. In prior decades, a proven leadership team with a great idea could afford to be selective and work only with investors who could help the business in ways other than their wallets. In today’s climate, however, the fact that an investor’s “money is green” is often reason enough by itself to sign the term sheet. When investors lack key industry experience, Frank says, it’s important to find board members who can fill this gap and supplement the management team.
Frank advocates that entrepreneurs should give themselves every opportunity to secure both the capital and the partners that can help their business succeed. Never stop raising money, he advised, adding that a CEO should always allocate roughly a quarter of his or her time to fundraising, even when it’s not needed. It’s also important to always keep networking. Silicon Valley has the best ecosystem in the world for making connections, he says, and people will be willing to help you if you’re willing to ask.
Building a team
We’ve all heard stories of 21-year-old college dropouts building impressive companies in the consumer Internet space. Does this mean that poaching young phenoms from Stanford introductory engineering courses is a sound recruiting strategy for an early-stage medtech company? Probably not, says Frank. While a few young and hungry employees can provide a boost of energy and creativity to a company, experience is king in this space and you need people who have been to the rodeo before and know how to execute. Besides experience, ability to adapt to changing conditions is also a big plus. In any startup, things will never go exactly according to plan, and all team members need to take these changes in stride and keep pushing the vision forward. Frank echoed one of Hank Plain’s points from a previous Tableside Chat: Surrounding yourself with the right people is a recipe for success. Be careful not to hire someone before you really know that person and are confident that he or she is the right fit for your company and the many directions it might go.
There was a time not too long ago that a strategy focused heavily on the European market was almost a necessity for getting a medtech company funded. Frank advised to avoid choosing the EU path as a knee-jerk reaction and to give careful consideration to whether a Europe or otherwise OUS-centric strategy is appropriate. He pointed out that very few US-based companies have succeeded in building a business in Europe alone. On top of that, the pendulum is swinging back somewhat as European regulatory bodies have begun raising the approval hurdles whereas the FDA has announced several initiatives designed to encourage medical device innovation. Regardless of your go-to-market strategy, however, obtaining clinical data outside the US and fine-tuning your technology before facing FDA scrutiny can be a smart play.
Companies are bought, not sold
As medtech IPOs have become almost unheard of in recent years, it is common belief in the industry that acquisition should be the end goal for virtually every startup. Frank warned against keeping your eyes too focused on this prize. One of the biggest mistakes he sees entrepreneurs make is raising funding and building their companies with acquisition in mind. “It’s an old saying that companies are bought, not sold,” he said. “If you really have something, aim to build the strongest standalone company you can.” With this approach, it may not be long before potential acquirers are knocking at your door unsolicited. But in the event that Big Medtech doesn’t come courting you with a boatload of cash in tow, you’ll still have a viable business and the privilege of bringing it to patients on your own.
Many thanks to Frank for joining us and sharing these insights. We congratulate him on his recent success with NeuroPace and wish him the best of luck in all his future endeavors.
Nick Damiano is the 2013-14 Lucile Packard Biodesign Innovation Fellow. He previously co-founded Nurep – a health IT company transforming medical device surgical support – and worked as a Research Engineer for EBR Systems, Inc.