How a Culture of Transparency Can Supercharge Your Start-Up

Interview with Ajax Health CEO Duke Rohlen

Duke Rohlen is a bit of a maverick in the medtech space. 

Starting with FoxHollow Technologies, Duke served in a number of positions before becoming President. There he drove annual sales to $200 million, guided the company through an IPO, conceived of and structured a $300 million collaboration with Merck Pharmaceuticals, and, ultimately, spearheaded the sale of the company to Ev3 (now Medtronic).

Eager for his next challenge, Duke founded and served as the CEO of CV Ingenuity (CVI), a medical device company that developed drug-coated balloon platforms for the treatment of vascular diseases. As CEO, he raised $30 million of venture capital, before ultimately selling the company to Covidien (now Medtronic) in 2013 for $300 million.

More recently, he pioneered treatment modalities for nasal obstruction as the Chairman and CEO of Spirox, and eventually negotiated Spriox’s sale to Entellus/Stryker. 

Today, Duke is the Founder, CEO, and Chairman of Ajax Health, which deploys capital and leverages operational experience to accelerate healthcare innovation across medical devices, digital health, healthcare services, and biotechnology.

It’s an impressive resume, with a number of exciting high points and victories. However, when I ask Duke how he felt in those moments of triumph — when, for example, he successfully sold CV Ingenuity to Covidien — he gives me a surprising answer: “bittersweet.”

Really?

“Yes,” Duke confirms. And he wouldn’t want it any other way. 

Feeling both elated and poignant at the point of sale, Duke reasons, is an indication that he’s done his job well. “I don’t think anyone who’s part of a great company … no matter what the price tag that you’re getting for the company, nobody feels totally great about turning it over to somebody else,” he explains. “I think mixed emotions come from just the whole engine being galvanized around doing something big and lofty and creating something that has real meaning.”

It makes sense when you consider Duke’s leadership style; he’s a communicator and team-builder who assembles dynamic groups of people committed to growing companies for the long-term. So it’s only natural that there are some mixed emotions when those companies sell, even when the exit values are high and the returns on equity are impressive.  

In this episode of Medsider, Duke discusses the three component parts all successful start-ups share, why he encourages entrepreneurs to be picky and prioritize one vector, and how he strives for transparency as he grows his businesses.

Key Lessons From Duke’s Experiences

  • Successful start-ups are made up of three equally important components: technology, business model, and team. 
  • Keep your eyes on the prize, and minimize profligate spending by ensuring that your company’s vector towards value-creation is as straight and focused as possible. CVI eliminated distractions and stayed focused by pursuing a U.S.-only strategy and foregoing any efforts in Europe altogether. 
  • Emphasize a culture of transparency in everything you do: from internal organization, to clinical trials, to your exit. Duke’s authentic approach at CVI facilitated buy-in from his team, and helped quell calls for European expansion from board members.
Guest
Duke Rohlen
Founder and CEO of Ajax Health

Duke Rohlen is the Founder and CEO of Ajax Health which focuses on accelerating healthcare innovation across a number of modalities. Previously, he was the Chairman and CEO of Spirox Inc. (sold to Entellus/Stryker). Earlier in his career, Duke led two companies — CV Ingenuity as Founder and CEO, raising $30 million of venture capital; and FoxHollow Technologies as President, where he guided the company through an IPO — before ultimately selling both, respectively, to Covidien and Ev3 (both now Medtronic).

Cover These 3 Key Bases in Your Startup

How does Duke determine which medtech projects are viable and worth pursuing? He looks at a company as being made up of three distinct parts — technology, business model, and team.

“I think if you nail those three things, you have a chance,” says Duke. 

In order to generate success, a company has to have all three, and they have to be treated as if they’re equally important. Problems arise when start-ups prioritize only technology, or focus exclusively on an exit.  

Here’s the breakdown of what to aim for in these three vital areas:

1) Technology.

Start-ups often develop around exciting and transformative technologies, but not all innovations are equally viable. You want to make sure that you’re developing a technology that addresses an unmet need, has reimbursement, can get clinical data, and can come to market in a timeframe and with a cost allocation that makes sense. 

2) Business model.

Next, you need to have a business model that is fundamentally sound and clear.

It all starts with asking important questions. Are you building a product to sell or are you building a company to last? Is the market big enough that your business could actually be a stand-alone company? Or are you building a start-up to have huge opportunities with just single products? The answers to those questions should guide your decision-making moving forward. 

3) Team.

Now it’s time to assemble a team that is excited about the technology and comprehensively oriented toward the business model. 

Keep in mind that the team doesn’t just comprise technology and product experts. Venture partners, private equity groups, and advisors are all vital as well. If you’re operating in a highly political industry, you may need team members who can help you navigate the political landscape. 

And there’s one more type of team member you want to remember: your ace in the hole. “Every one of my companies has at least one employee, if not two or three, that are what I call ‘aces in the hole,’” says Duke. This is the person who knows — without question — everything about the relevant technology, everything about the space, and can give you a competitive advantage over somebody else who doesn’t.

Stay Focus and Streamlined

One of Duke’s keys to success is to make the vector towards value creation as straight and focused as possible. He encourages start-ups to remain laser-focused on one vector. 

This is why CVI pursued a U.S.-only strategy and decided to develop on top of the Evercross balloon with Covidien (rather than creating their own balloon base). CVI completely circumvented any efforts that could have compromised their vector; they went straight after the peripheral market in the U.S. without any focus on anything outside of the product itself. 

“That not only enabled us to be very focused,” Duke explains, “but it also saved a lot of money because we weren’t spending resources on distractions.”

Ultimately, when it came time to sell, this strategy paid off. Keep in mind that when you raise a little bit of money, you have a lot of room for arbitrage. You could sell for $300 million, or you could take a deal for $150 million and still get an incredible return on equity. This opens up the buyer universe, which generates additional interest, and inflates the value of the company.

Prioritize Transparency in Every Stage 

If there is one keyword that sums up Duke’s priorities in business, it’s “transparency.” 

“I think the way that families work, the way that friends work, or the way that companies work is through transparency,” Duke says. “The companies that I’ve run have had incredible transparency, where everybody knows what we’re doing, everybody feels bought-in to a vision.”

Here are four ways that Duke employed this maxim to strengthen his start-ups: 

1) Define clear objectives.

Be up front with your team about the targeted approach you’re pursuing. Have clear answers at the ready to answer fundamental questions, such as: 

  • Are you building this company to sell, or are you building a standalone company?
  • What is the fastest way to get there? 
  • What’s the most cost-effective way to get there?

Communicating clearly gets everyone on the same page from day one, which is critical for remaining profitable. 

“When there’s transparency, that makes people feel good about the great things and also collectively unified around solving the problems of the challenging things. People enjoy being empowered.”

As Duke recalls about his time at CVI, “We knew where we were going. Everybody was galvanized around that mission, and everybody worked incredibly hard to make sure it was realized, without distraction.”

2) Spend purposefully. 

One common challenge that Duke identifies with small companies is lack of a focus that leads to wasteful spending. 

Duke points to start-ups in the spine arena as prime examples of having too many cooks in the kitchen, and getting spread thin by trying to do too much in too many different spaces. 

“You just look at all of the roadkill that’s on the side of the roads from the last 10 years of medical device investing … it’s because they’ve spent a lot of money and they don’t have a lot to show for it, and it’s not because of anything other than changed business plans,” Duke explains. 

Minimize this risk by communicating clearly about the targeted approach you’re pursuing; be transparent with your board and your team about precisely where you’re spending money, and why. Alignment up-front is critical to being cost-effective.

“A targeted approach allows for buy-in, and takes away a lot of questions at the board level on a going-forward basis.”

3) Stay hands-on during clinical trials. 

When CVI’s time to run clinical trials came, the company decided to manage them internally, rather than following the more common approach of hiring an outside Contact Research Organization (CRO). It turned out to be an incredibly effective move.

“Transparency establishes trust, and trust establishes loyalty,” explains Duke “We said, ‘Let’s go get very good, high-enrolling physicians [who] trust us and are willing to go the extra mile.’ We nurtured and engendered incredible relationships before we even started the trial. And then once we started the trial, we were able to leverage those deep-seeded relationships to quickly enroll patients.”

The CVI team was able to streamline the trial process because they were personally dealing with not only the physicians, but also the clinical staff. This is why Duke recommends that start-ups remain actively involved in recruiting efforts, and with physicians and clinical staff, even during bigger clinical studies. 

4) Proactively engage acquirers. 

Companies are bought strategically, not opportunistically; you don’t develop a company in a black hole and then hope to sell it to somebody when you have approval. Rather, you have a lot of dialogue and strategic discussions with a number of companies over time. You let them know what you’re doing and when you’re doing it, and then they are able to gauge your success. 

Make it a priority to get to know potential acquirers on a personal basis. Learn to understand their priorities, and to engage them proactively.

Duke recalls that he met with Covidien or Ev3 upwards of twenty times before they made a deal. He was strategically unequivocal with them about his endpoints and future plans. 

“I was very transparent and said, ‘Hey, listen, if you don’t want to buy it, we’re going to sell it to somebody else, and there are a bunch of buyers that would want it. So, either step up and step in at a big level, or step out.’ There was a lot of confidence in my ability to communicate that.”

“You have to be honest. I think you have to be competitive, but you also have to be friendly, and you have to do it in a way that makes people want to continue to work with you,” Duke concludes. “Because it is based on relationships; at the end of the day, you’ve got your integrity and you have your relationships. Those will attract people that will allow you to be successful.”

Download a copy of the interview transcript right here.
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Duke Rohlen is a bit of a maverick in the medtech space. 

Starting with FoxHollow Technologies, Duke served in a number of positions before becoming President. There he drove annual sales to $200 million, guided the company through an IPO, conceived of and structured a $300 million collaboration with Merck Pharmaceuticals, and, ultimately, spearheaded the sale of the company to Ev3 (now Medtronic).

Eager for his next challenge, Duke founded and served as the CEO of CV Ingenuity (CVI), a medical device company that developed drug-coated balloon platforms for the treatment of vascular diseases. As CEO, he raised $30 million of venture capital, before ultimately selling the company to Covidien (now Medtronic) in 2013 for $300 million.

More recently, he pioneered treatment modalities for nasal obstruction as the Chairman and CEO of Spirox, and eventually negotiated Spriox’s sale to Entellus/Stryker. 

Today, Duke is the Founder, CEO, and Chairman of Ajax Health, which deploys capital and leverages operational experience to accelerate healthcare innovation across medical devices, digital health, healthcare services, and biotechnology.

It’s an impressive resume, with a number of exciting high points and victories. However, when I ask Duke how he felt in those moments of triumph — when, for example, he successfully sold CV Ingenuity to Covidien — he gives me a surprising answer: “bittersweet.”

Really?

“Yes,” Duke confirms. And he wouldn’t want it any other way. 

Feeling both elated and poignant at the point of sale, Duke reasons, is an indication that he’s done his job well. “I don’t think anyone who’s part of a great company … no matter what the price tag that you’re getting for the company, nobody feels totally great about turning it over to somebody else,” he explains. “I think mixed emotions come from just the whole engine being galvanized around doing something big and lofty and creating something that has real meaning.”

It makes sense when you consider Duke’s leadership style; he’s a communicator and team-builder who assembles dynamic groups of people committed to growing companies for the long-term. So it’s only natural that there are some mixed emotions when those companies sell, even when the exit values are high and the returns on equity are impressive.  

In this episode of Medsider, Duke discusses the three component parts all successful start-ups share, why he encourages entrepreneurs to be picky and prioritize one vector, and how he strives for transparency as he grows his businesses.

Key Lessons From Duke’s Experiences

  • Successful start-ups are made up of three equally important components: technology, business model, and team. 
  • Keep your eyes on the prize, and minimize profligate spending by ensuring that your company’s vector towards value-creation is as straight and focused as possible. CVI eliminated distractions and stayed focused by pursuing a U.S.-only strategy and foregoing any efforts in Europe altogether. 
  • Emphasize a culture of transparency in everything you do: from internal organization, to clinical trials, to your exit. Duke’s authentic approach at CVI facilitated buy-in from his team, and helped quell calls for European expansion from board members.
Guest
Duke Rohlen
Founder and CEO of Ajax Health

Duke Rohlen is the Founder and CEO of Ajax Health which focuses on accelerating healthcare innovation across a number of modalities. Previously, he was the Chairman and CEO of Spirox Inc. (sold to Entellus/Stryker). Earlier in his career, Duke led two companies — CV Ingenuity as Founder and CEO, raising $30 million of venture capital; and FoxHollow Technologies as President, where he guided the company through an IPO — before ultimately selling both, respectively, to Covidien and Ev3 (both now Medtronic).

Cover These 3 Key Bases in Your Startup

How does Duke determine which medtech projects are viable and worth pursuing? He looks at a company as being made up of three distinct parts — technology, business model, and team.

“I think if you nail those three things, you have a chance,” says Duke. 

In order to generate success, a company has to have all three, and they have to be treated as if they’re equally important. Problems arise when start-ups prioritize only technology, or focus exclusively on an exit.  

Here’s the breakdown of what to aim for in these three vital areas:

1) Technology.

Start-ups often develop around exciting and transformative technologies, but not all innovations are equally viable. You want to make sure that you’re developing a technology that addresses an unmet need, has reimbursement, can get clinical data, and can come to market in a timeframe and with a cost allocation that makes sense. 

2) Business model.

Next, you need to have a business model that is fundamentally sound and clear.

It all starts with asking important questions. Are you building a product to sell or are you building a company to last? Is the market big enough that your business could actually be a stand-alone company? Or are you building a start-up to have huge opportunities with just single products? The answers to those questions should guide your decision-making moving forward. 

3) Team.

Now it’s time to assemble a team that is excited about the technology and comprehensively oriented toward the business model. 

Keep in mind that the team doesn’t just comprise technology and product experts. Venture partners, private equity groups, and advisors are all vital as well. If you’re operating in a highly political industry, you may need team members who can help you navigate the political landscape. 

And there’s one more type of team member you want to remember: your ace in the hole. “Every one of my companies has at least one employee, if not two or three, that are what I call ‘aces in the hole,’” says Duke. This is the person who knows — without question — everything about the relevant technology, everything about the space, and can give you a competitive advantage over somebody else who doesn’t.

Stay Focus and Streamlined

One of Duke’s keys to success is to make the vector towards value creation as straight and focused as possible. He encourages start-ups to remain laser-focused on one vector. 

This is why CVI pursued a U.S.-only strategy and decided to develop on top of the Evercross balloon with Covidien (rather than creating their own balloon base). CVI completely circumvented any efforts that could have compromised their vector; they went straight after the peripheral market in the U.S. without any focus on anything outside of the product itself. 

“That not only enabled us to be very focused,” Duke explains, “but it also saved a lot of money because we weren’t spending resources on distractions.”

Ultimately, when it came time to sell, this strategy paid off. Keep in mind that when you raise a little bit of money, you have a lot of room for arbitrage. You could sell for $300 million, or you could take a deal for $150 million and still get an incredible return on equity. This opens up the buyer universe, which generates additional interest, and inflates the value of the company.

Prioritize Transparency in Every Stage 

If there is one keyword that sums up Duke’s priorities in business, it’s “transparency.” 

“I think the way that families work, the way that friends work, or the way that companies work is through transparency,” Duke says. “The companies that I’ve run have had incredible transparency, where everybody knows what we’re doing, everybody feels bought-in to a vision.”

Here are four ways that Duke employed this maxim to strengthen his start-ups: 

1) Define clear objectives.

Be up front with your team about the targeted approach you’re pursuing. Have clear answers at the ready to answer fundamental questions, such as: 

  • Are you building this company to sell, or are you building a standalone company?
  • What is the fastest way to get there? 
  • What’s the most cost-effective way to get there?

Communicating clearly gets everyone on the same page from day one, which is critical for remaining profitable. 

“When there’s transparency, that makes people feel good about the great things and also collectively unified around solving the problems of the challenging things. People enjoy being empowered.”

As Duke recalls about his time at CVI, “We knew where we were going. Everybody was galvanized around that mission, and everybody worked incredibly hard to make sure it was realized, without distraction.”

2) Spend purposefully. 

One common challenge that Duke identifies with small companies is lack of a focus that leads to wasteful spending. 

Duke points to start-ups in the spine arena as prime examples of having too many cooks in the kitchen, and getting spread thin by trying to do too much in too many different spaces. 

“You just look at all of the roadkill that’s on the side of the roads from the last 10 years of medical device investing … it’s because they’ve spent a lot of money and they don’t have a lot to show for it, and it’s not because of anything other than changed business plans,” Duke explains. 

Minimize this risk by communicating clearly about the targeted approach you’re pursuing; be transparent with your board and your team about precisely where you’re spending money, and why. Alignment up-front is critical to being cost-effective.

“A targeted approach allows for buy-in, and takes away a lot of questions at the board level on a going-forward basis.”

3) Stay hands-on during clinical trials. 

When CVI’s time to run clinical trials came, the company decided to manage them internally, rather than following the more common approach of hiring an outside Contact Research Organization (CRO). It turned out to be an incredibly effective move.

“Transparency establishes trust, and trust establishes loyalty,” explains Duke “We said, ‘Let’s go get very good, high-enrolling physicians [who] trust us and are willing to go the extra mile.’ We nurtured and engendered incredible relationships before we even started the trial. And then once we started the trial, we were able to leverage those deep-seeded relationships to quickly enroll patients.”

The CVI team was able to streamline the trial process because they were personally dealing with not only the physicians, but also the clinical staff. This is why Duke recommends that start-ups remain actively involved in recruiting efforts, and with physicians and clinical staff, even during bigger clinical studies. 

4) Proactively engage acquirers. 

Companies are bought strategically, not opportunistically; you don’t develop a company in a black hole and then hope to sell it to somebody when you have approval. Rather, you have a lot of dialogue and strategic discussions with a number of companies over time. You let them know what you’re doing and when you’re doing it, and then they are able to gauge your success. 

Make it a priority to get to know potential acquirers on a personal basis. Learn to understand their priorities, and to engage them proactively.

Duke recalls that he met with Covidien or Ev3 upwards of twenty times before they made a deal. He was strategically unequivocal with them about his endpoints and future plans. 

“I was very transparent and said, ‘Hey, listen, if you don’t want to buy it, we’re going to sell it to somebody else, and there are a bunch of buyers that would want it. So, either step up and step in at a big level, or step out.’ There was a lot of confidence in my ability to communicate that.”

“You have to be honest. I think you have to be competitive, but you also have to be friendly, and you have to do it in a way that makes people want to continue to work with you,” Duke concludes. “Because it is based on relationships; at the end of the day, you’ve got your integrity and you have your relationships. Those will attract people that will allow you to be successful.”

Download a copy of the interview transcript right here.
Share:
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