Why Building a Community is Crucial for Medical Device Startups

A common thread runs through Marcus Gerhardt’s career: If a company involves technology and disruption, it’s probably calling his name.

Marcus co-founded Blackrock Neurotech in 2008 with his long-time friend and business partner, Florian Solzbacher. Blackrock’s MoveAgain brain-computer interface (BCI) system is a breakthrough medical device that uses brain implants to allow immobile patients to control electronic devices, wheelchairs, or prosthetics with their minds.

The two founders contribute complementary skill sets. Florian provides the scientific knowledge: in addition to being co-founder and chairman of Blackrock, he’s an adjunct professor in biomedical engineering at the University of Utah.  And Marcus spent years honing his entrepreneurial skills, participating in 14 venture projects before turning his attention to Blackrock.

Marcus admits that when his old friend first reached out about his idea for Blackrock, he thought Florian was crazy. But after doing his research, Marcus was intrigued — and he arrived at somewhat of a contrarian business strategy.

Together, they took a leap of faith not just with the technology but also in their funding methodology, creating a model different from traditional venture capitalist (VC) financing options.

In this episode of Medsider, Marcus explains why Blackrock’s business model works for medtech companies, how the approach gave the company an “in” with the neuroscience research community, and why medical device companies need to work with — and not against — regulatory bodies like the Food and Drug Administration (FDA).

Key Learnings from Marcus Gerhardt's Experiences

• Venture capital funding isn’t the only path forward for medtech companies. Marcus successfully applied an innovative model for raising funds that leveraged current technologies to finance the lengthy research and development period Blackrock needed.
• Cultivating community is a worthwhile priority. Forming authentic and meaningful connections with researchers in the neuroscience space helped Blackrock become a major player in the industry.
• Regulatory bodies have important responsibilities within the chain of production for medical technology. Embrace the requirements and work with, not against, these agencies.

An Alternative to VC Funding

Although he’s raised over $250 million through venture capital funding during his career, Blackrock was Marcus’ first foray into healthcare startups. So when Florian first approached him, he did his due diligence and researched the medtech sector.

Marcus didn’t like what he found.

With more medtech companies failing than succeeding, he was wary of the risk. Additionally, he knew that medical devices require significant investment before a product goes to market, which inherently conflicts with the VC demand for quick turnarounds on investments.

Marcus knew the business model couldn’t rely on fundraising cycles. So he went back to the drawing board, and researched established European medtech companies, like German-based B. Braun. He started to see a pattern: Successful medtech companies were family-owned and often run by stubborn founders.

“I knew Florian could be very stubborn, and I can be very stubborn, so I thought, OK, maybe we’re onto something,” says Marcus.

Instead of taking the traditional VC approach, Marcus brought in private investors. He acquired existing technology that could drive revenue and fund other projects that required extensive research and development.

Florian quickly identified a worthy investment: Cyberkinetics Neurotechnology Systems, a Utah-based company. The team, along with a small group of eager investors, bought the company.

With fresh eyes and a new perspective, Marcus and Florian started selling the technology as a tool for those in the neuroscience research community.

They turned a profit in their first nine months.

“It happened much faster than we had projected,” says Marcus. “Within a couple of years, we were the market leader, providing tools and solutions to neuroscience researchers.”

The format allowed the company to stand on its own two feet. By consistently generating cash, Blackrock could pursue additional research and development without relying on fundraising cycles.

The Power of Community

While the rationale for the company’s business model was built on a financing strategy, additional benefits quickly became clear.

By providing reliable tools and services for neuroscience research centers worldwide, the Blackrock team was quickly welcomed into the small but influential community of leading neuroscientists.

Blackrock now has over 500 strong working partnerships with scientists who use its electrodes, stimulators, and data acquisition systems (to name a few examples) in their research.

“Every single one of [our customers] has challenged us and given us ideas to help us come to this point that we’re at now,” explains Marcus.

Through these close relationships, the company was able to keep its finger on the pulse of innovation in neuroscience, which then translated to clinical applications. Marcus believes Blackrock’s behind-the-scenes view is the secret to his company’s success.

Marcus credits the power of the research community for helping Blackrock become the number one BCI player in the market, despite competition from goliaths in the field that are funded by deep-pocketed billionaires.

“We are a product of the BCI research community,” he says. “There is a strong identification with what we do and how we’ve done it, whereas there’s a borderline antagonistic approach from that community towards more commercially-minded endeavors.”

Blackrock’s research roots have also helped the company to scale successfully. Marcus’ team has grown from 50 to 130 people in less than seven months. Despite the many recruitment challenges that companies face today, Blackrock has been able to tap bright minds from within the neuroscience community to support hiring efforts.

“It’s been a fantastic interplay, and we’ve benefitted hugely,” Marcus reflects.

By surrounding themselves with great minds, great connections and great promise, Marcus and Florian find themselves unlikely leaders within the BCI industry.

A Vision to Get People Moving Again

The team at Blackrock is on a mission to help people suffering from neurological disorders walk, talk, see, hear and feel again.

As a result, Marcus and his team are driven less by financial indicators, and more by patient success stories and continuing technological advancements.

For example, Nathan Copeland was one of the first patients to participate in studies with the cutting-edge technology. He has two small brain implants in his motor cortex, and two in his sensory cortex. The implants allow Nathan to not just move his neuroprosthetic hand, but also sense touch — a particularly valuable experience when shaking hands (and fist-bumping) with President Barack Obama.

Placing value on the sense of touch was an important focus for the developers, as their research overwhelmingly indicated that people living with paraplegia are more eager to regain their sense of touch than the ability to move.

Blackrock continues to follow both the patients and the technology.

Future areas of focus for the company include cochlear implants that allow deaf individuals to hear again and technology that supports the re-development of speech skills for those with amyotrophic lateral sclerosis (ALS, or Lou Gehrig's disease).

Working With (Not Against) Regulatory Bodies

Blackrock’s technology was recently identified as a breakthrough innovation by the FDA, a designation that will speed up the approval process from the United States’ regulatory body.

Marcus shares three pieces of advice for how medtech companies can work better with regulatory agencies:

Communicate early and often.

Working with the FDA can be a long and arduous process. Open communication lines early, and understand what challenges you will face based on the device or solution you plan to propose. By doing so, you’ll be better positioned to provide a thorough proposal that addresses the FDA’s concerns.

Don’t be afraid to challenge the status quo.

When developing disruptive technologies, you’ll inevitably push boundaries. This means that all organizations involved (including regulatory organizations) may need to adapt with you.

Marcus knows that Blackrock’s technology is ahead of its time. He understands that part of his job is to help the FDA embrace technological innovations like his company’s BCI solutions.

“We’re going to be pioneers,” he says. “And we’re going to have to get the FDA on board to be pioneers with us.”

Remember that you both want the same thing.

Too often, medtech companies view the FDA as an organization that prohibits or stalls growth. But Marcus believes that’s the wrong perspective.

It’s important to keep in mind that both the medtech company and the FDA want the same thing: safe and effective products that improve the lives of the people who use them.

Accepting that the FDA plays a vital role in the product development process will minimize your frustration, while also opening the doors for finding practical solutions that support patient needs.

Ultimately, for Marcus, it’s all about integrity. He believes in staying true to himself, which is just one of the reasons he’s passionate about creating a business that puts patients first, and values researchers within the industry.

“We have always been very focused on the patient story —the patient impact and the application,” Marcus says. “That's what we were led by. It wasn't as if we said, OK, that is the biggest financial market: It was, Here is proof this can work.”