Two Sides of the Same Intersect ENT: CEO and Investor Talk About Making a Partnership Work
You don’t have to look far to find stories of the tension that can form between a CEO and their investors. What doesn’t always get as much attention as these dramatic tales, however, are the stories where each role finds their complement in the other, providing the stability that allows a startup to fight through a sea of obstacles and ultimately achieve success. At a recent SBAA tableside chat, Biodesign alumni had the opportunity to sit down and hear firsthand of one such supportive partnership between Intersect ENT’s CEO Lisa Earnhardt and lead investor Dana Mead of KPCB. They shared with us both the highs and lows that brought Intersect ENT from an early-stage startup all the way to achieving an increasingly rare medtech IPO.
Taking the CEO plunge
While Lisa and Dana knew each other from a shared background at Guidant, their relationship as respective CEO and investor didn’t begin until 2008 when Lisa was recruited to join Intersect ENT. She remembers initially being interested in the opportunity because after spending much of her career within the cardiovascular space, Intersect would afford her some professional growth with the chance to explore a new sector of medical devices. For Dana, this type of branching out for a first time CEO was appreciated, but not without risk. He had often seen first time CEOs handed a “company in a box” where things were relatively de-risked and a close match for the incoming CEO’s background. However, this was not the case for Intersect ENT; at the time it was still an early stage company facing several unknowns. As Dana put it, “You need to ask yourself as an investor, ‘How many new experiences are you willing to throw at a first time CEO?’” In his opinion, introducing one or two change-ups is okay and probably good for a CEO’s growth, but three or four may be asking for too much adaptation, which can lead to trouble. Given Lisa’s proven track record of consistency and performance at both Guidant and Boston Scientific, both Lisa and Dana felt she was ready for this new challenge and capable of executing on more than just a “company in a box.”
Focus on People
One common theme heard from both Lisa and Dana was the importance of partnering with the right people at the critical time of bringing in a new CEO and subsequently trying to grow a company. For Lisa the composition of the board was a very important part of her decision to take the position. She knew that to be successful she would need a board that truly trusted her and allowed her autonomy to execute work as she saw fit. Likewise, before Lisa’s arrival, the company only had 12 employees, and Dana, along with the other investors, knew they needed a CEO who would act as a catalyst in bringing even more great talent to the company. Luckily, Lisa knew the importance of having employees who were not only talented, but also possessed the right mindset for the culture she was trying to create. As was mentioned several times throughout the night, Lisa happens to be a prolific optimist, always able to uncover the bright side of things. For her it was important to find people who share this perspective because, as she said with a laugh, “You certainly need to stay optimistic in this business!” As such, up until the 80th employee Lisa made sure to personally interview every candidate and still interviews every incoming manager to ensure the culture stays cohesive.
Working with the FDA
One of the big challenges that Dana and Lisa had to fight through together came in 2009 when the FDA notified them that Intersect ENT’s Propel device would require premarket approval instead of the 510(k) clearance they had been hoping for. Instead of allowing this setback to get the best of them, they immediately initiated a collaborative approach with the FDA to educate the agency on their product, and work together with them to design a trial. One main takeaway from this interaction is just how critical it is to walk the FDA step by step through the mechanics of a new technology. Additionally, they came to see the change of regulatory pathway not as a setback but as a potential competitive advantage. As Dana explained it, the PMA route fundamentally changed the “cadence” of design iterations, which ended up being very useful once they had successful approval as they now had a significant lead over any competitors. In the end this reduced development cadence gave Intersect ENT time to take a more strategic approach to development of their sales channel than they would have otherwise.
While many more stories and perspectives were shared over the course of the night, hopefully this brief recap highlights one example of what a great investor/CEO partnership can look like. A big thank you goes out to both Lisa and Dana for sharing their time with the Biodesign community and for making this most recent SBAA tableside chat one to remember.