Turning Your End Users Into Key Investors: Interview with Lazurite CEO and Co-founder Eugene Malinskiy

Lazurite CEO and Co-founder Eugene Malinskiy is a self-described serial entrepreneur. He had a successful run working in the IT sector, but has always had a passion for medicine. He even has experience working as a medic and has spent considerable time in hospitals throughout the country.

Eugene’s IT and medical skills came together when he received a Master of Science in biomedical engineering from Cleveland State University (CSU).

“I was actually able to combine both the things I was good at with my passion, into one path,” he says.

After graduating from CSU, Eugene launched DragonID, an innovative healthcare and engineering company specializing in medical devices for the fields of cardiology and orthopedics.

The idea for Lazurite and its bellwether ArthroFree product came to Eugene when he witnessed a physician's assistant, minutes before surgery was supposed to start, trip over a bunch of surgical camera wires in an operating room. The cords were connected to the surgeon’s handheld camera and light, both of which are needed to perform minimally invasive surgery.

“There’s literally multiple cables running out of the surgeon’s hand, [which is] holding this camera that takes the video from inside the body. There’s a light to that camera that provides light into the body. Multiple cables that are heavy, that are bulky [and] dirty, go into the surgical tower that’s across [the room] on the opposite side of the patient — and that’s been the same way for the last 50 years,” Eugene explains.

Eugene recalls wondering why there were so many wires.

“The year is 2014 [or] 2015. Why are there all of these cables and wires to the surgical tower that shouldn’t be there? Wireless surgery should be possible,” he says.

That incident led him to launch Lazurite and begin developing what would eventually become the company’s flagship product, ArthroFree, a wireless camera system for minimally invasive surgery.

Eugene leveraged his experience with previous startups to make Lazurite a success.

FDA granted market clearance to ArthroFree in March 2022 after only a three-month review — a quick turnaround for any medical device. It’s the first wireless camera for minimally invasive surgery to ever receive FDA clearance.

As of the third quarter of 2022, Lazurite has raised about $25 million across multiple fundraising rounds. After ramping up hiring, the company is working through the manufacturing and supply chain logistics to prepare for a full market launch for ArthroFree.

In this episode of Medsider, Eugene shares how planning out every step of ArthroFree’s regulatory and development process helped streamline the FDA clearance process, the importance of preparing for failure and being ready to solve problems, and why entrepreneurs should seek out investor input at every stage of development.

Guest

Eugene Malinskiy

CEO of Lazurite

Eugene is a self-proclaimed serial entrepreneur with expertise in the IT and medical fields. He also has hands-on experience as a medic and has worked in operating rooms throughout the country. He founded Lazurite, an innovative healthcare company focused on cutting-edge surgical and lighting technologies, in 2015. That same year, Eugene was selected as one of Forbes 30 Under 30 recipients in the manufacturing sector.

Key Lessons from Eugene’s Experiences

  • Put together a regulatory and development roadmap from the start, and hire a consultant to help you refine the plan. Mapping out your path beforehand will pay off when it’s time to submit your application to FDA.
  • Eugene sought input from surgeons throughout every step of the ArthroFree development process. Those surgeons then turned into investors who drew in more investors. Maintain a strong line of communication with your financial partners, and garner feedback from them through every stage of development. Let them be a part of the process.
  • Be prepared for things to go south, whether it’s a technology failure or a different issue within your company. Be aware of the problems and be ready to solve them; don’t brush them under a rug and kick the proverbial can down the road.

Create a Development and Regulatory Roadmap Early On

Eugene recommends startups flesh out their regulatory and development plan upfront.

One of the first things Eugene did when he launched Lazurite was call in help from regulatory consulting firm Musculoskeletal Clinical Regulatory Advisers (MCRA). “[Days after] after I formed the company, I called [MCRA],” Eugene says.

He then mapped out the company’s development and regulatory pathway and modified it based on feedback from MCRA.

Once the plan was finalized, Eugene made sure to follow it for the entirety of ArthroFree’s development lifecycle. When it was time to go to FDA, the company already had a full submission package put together and ready to submit to the agency.

Eugene also quickly hired a Director of Regulatory Compliance, Patrick Polito, who is with the company to this day. It was an expensive but critical hire, Eugene says.

“Without Patrick being in the mix the entire time, there’s no guarantee that we would have stayed on course, on track to go through all the paperwork and all the processes that we would need to in order to be successful,” Eugene says.

Eugene believes taking those two key actions at the outset — mapping out a development path and hiring a regulatory compliance lead — helped the company’s product get through FDA review in three months.

“We had a plan. We followed the plan. We had a person who was in charge of leading the plan, and then when we did put a package together for the FDA, it was very comprehensive,” Eugene says.

Seek Out Input From Investors and End Users Every Step of the Way

Much of Lazurite’s initial seed money came from physician-investors who wanted to use ArthroFree.

Eugene made sure to connect with surgeons early on in the ideation process when ArthroFree was just a prototype. He began gathering input and connecting with surgeons across the country to talk about what they needed and how they wanted the device to work.

He received positive feedback from surgeons who said they’ve needed a wireless camera option for a long time. After a month or so, and after developing a couple more prototypes, Eugene went back to that same group of surgeons, laid out his plans, and asked if they would invest in his startup. The answer was a resounding “yes.”

Eugene made sure to stay in touch with those same surgeons throughout the development process and get advice on the design of ArthroFree, which allowed those surgeon-investors to be a part of the development and planning process.

“As I developed the product over the years, I kept going back to that well, talking to those surgeons: What’s your market? How much would you pay for it? Who’s on your team? How are the decisions being made? For you as a surgeon, if I got rid of these cables, do these matter? And they provided me with a lot of input, which I then incorporated. I was able to use those surgeon-investors to help build … and create a very nice product,” Eugene says.

Those surgeons also came back to invest in Lazurite when the company entered its Series B financing stage. And because Lazurite had backing from physician users, the company was able to attract “more sophisticated” investors, Eugene says.

Eugene’s advice to medtech entrepreneurs: Keep in touch with investors. Enlist someone on your team — preferably the CEO or founder — who can be the conduit of information and let the investors know how valuable their input is.

“When it’s time to have them come back for an additional round, they will happily do so,” Eugene says.

Eugene offers up some additional quick-hit fundraising advice for medtech entrepreneurs:

1) Double down on your fundraising goals.

Expect everything to take twice as much time and twice as much money, and then double that again. That’s how much money you’ll likely need.

2) Build out your IP portfolio.

The sooner you can get your intellectual property filings in, the sooner you can get them granted and the stronger your portfolio will be, Eugene says.

“Good money management [is] always important,” he adds.

Prepare for Failure

Eugene combined several different kinds of technology to create ArthroFree, but getting those components to “play nicely together” and not in isolation proved to be difficult, he recalls.

It’s a common mistake among medtech startups to think that separate platforms or modules — once put together — will work flawlessly in a single device, but that’s not usually how it goes, Eugene says. For example, Eugene knew he needed to ensure a strong wireless connection for ArthroFree so he decided to use ultra-wideband technology: a fast, encrypted transmission technology that’s often used for military applications. A few years later, he entered into the alpha and beta testing stages for ArthroFree and started putting all the components together with the ultra-wideband technology.

Things didn’t go as planned. Eugene found that even though ultra-wideband worked great on its own and in other capacities, it actually caused an “incredible amount of lag” between the camera and the screen. That obviously wasn’t going to work for surgeons.

“If you're a surgeon doing surgery, you really cannot have any lag between what you perceive as your hand movement and what you see on the screen,” Eugene says.

The Lazurite team knew it had a module that worked well (the ultra-wideband technology), but had limitations when it was combined with other system modules. They had to clear out those limitations, Eugene says.

Those kinds of situations happened repeatedly during the ArthroFree development process, Eugene says.

The team had to work quickly and efficiently to identify and solve those problems. The trick is to be aware of the problems and don’t brush them off, Eugene says.

“Don’t put your blinders on and ignore that this is a problem because if you try to pretend it’s not [there], it’s just going to come back and bite you,” he says.

And if something isn’t working — whether it’s a technology, communication, or a different company issue — don’t be afraid to move on and try something new. That’s one key piece of advice Eugene would give to his younger self.

“Knowing what I know now, I definitely beat a dead horse longer than I should have more than once, whether it was a people issue, a company issue, a communication issue,” Eugene says. “We’re all prone to just trying to keep something going, even though it’s obvious to everybody that you need to move on, you need to change. I fall into that trap, just like everybody else.”

Don’t forget to rely on the people around you for help. A good, reliable team will help you solve any problems that arise, Eugene says. It’s all about having the right people in place to bring the technology to bear.

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