Lessons Learned From Selling 3 Medtech Companies: Interview with ThermoTek Chairman Robert Kline

Robert got his start in big pharma, including working for Pfizer. While in business development, he realized that he was most excited about small companies that created innovative products.

In 1998, he traded in his comfortable job to strike out alone. He founded Medivance, developing non-invasive products that change core body temperature. The company was acquired for approximately $250 million in 2011.

Robert's next venture was ViroCyt, a spin-out from the University of Colorado. The technology reduces the time it takes to quantify small biologic particles (including viruses) from days to hours. ViroCyt was sold for $16 million in 2016.

Robert then took over a startup trying to produce surgical equipment for use in minimally invasive pediatric procedures. Now known as Bolder Surgical, the company pivoted and was ultimately acquired for $160 million in 2021.

Robert now serves as Chairman of ThermoTek and actively mentors other healthcare entrepreneurs.

“I have had the great luck of being able to … found a company, grow it, and exit it: all the phases,” Robert says. “I want to help others have that experience too.”

In this episode of Medsider, Robert explains why assuming your customers want the same thing you do is risky, his best advice for fundraising, and why it's short-sighted to build a company around an exit.

Guest

Robert Kline

Chairman of ThermoTek

Robert Kline left big pharma to start Medivance in 1998, which he later sold for $260 million in 2011. His next venture, ViroCyt, a spin-off from the University of Colorado, sold in 2016 for $16 million. Robert then joined startup Bolder Surgical in 2017, pivoted it, and sold the company in 2021 for $160 million. He’s now Chairman of ThermoTek.

Listen to the Interview with Robert Kline

Key Learnings from Robert's Experiences

  • Know your worth and stand by it. Investors who don’t have a deep understanding of the medtech space can be blinded by buzzy companies with flashy, low-quality products. Don’t let them force you to lower your price or compete directly.
  • When you’re looking for customer feedback on your prototypes, find people who are open to new ideas but take a lot of convincing. If you can make something that even the skeptics buy into, you’ll know your product has a market.
  • There are pros and cons to both public and private investment. Public investors can sometimes work faster — but they also expect quarterly revenue predictions, which can be hard for a startup. Finding private investors is a slog, but if you can bring in people who understand your product and give you the space to work, the opportunity is worth it.

Don’t Assume the Problem You’ve Identified is Universal

The desire to solve a problem is part of the creation story of many companies. Medtech is no exception.

Sometimes it comes from the clinical side: You’ve identified a disease that either has no treatment, or progress on treatments has stalled. And sometimes it comes from the engineering side: You’re developing new technology that does something never seen before or is more efficient or effective than existing solutions.

Founders often get so swept up with solving their particular problem, they convince themselves everyone else will share that enthusiasm. Just because something is obvious to you, doesn’t mean everyone else will see it that way. Before you start racing ahead with your idea, take the time to ask your potential customers what they actually want.

“I see a lot of companies [that] think they understand the market requirements and the customer requirements really well, so they rush out with their solution,” Robert says. “And in the early days, you really have to avoid listening to your own story.”

For example, when he founded Medivance, there were other companies developing devices to change body temperature. While Robert was speaking to healthcare workers about what they needed from this kind of technology, his rivals were focused on making overly complicated devices.

Designed purely from an engineering standpoint, these devices were technically sophisticated. However, they were invasive and required specialist training, which limited demand. Emergency rooms (ERs) and trauma centers are two major clients for this type of equipment. If a hypothermic patient arrives in the middle of the night, they can’t wait for the only person trained to use the equipment to show up at 9 a.m.

Meanwhile, thanks to his on-the-ground research, Robert focused on creating a non-invasive device that could also be operated by nurses. “And because of that, we ultimately were wildly successful, where the other companies really weren’t: They ended up being acquired for pennies on the dollar,” he says.

The same goes for clinical trial data. Don’t assume that every potential customer or investor wants to see the same level of research before they’re ready to support you. Although large randomized clinical trials remain the gold standard, Robert says that in his experience, clinicians can often be convinced with data from smaller trials.

He calls this “building a drumbeat.”

“Clinical evidence in the hands of real clinicians over time builds enough information that others are willing to join,” he says. You may need large randomized clinical trials to get regulatory approval: but don’t assume you need it to build a market for your product. Ask your customers what they need to see.

Don’t Build Your Company Solely For the Purpose of an Exit

Medical device founders who are looking for the exit before they’ve even registered their corporation probably won’t make it, Robert says.

The problem is that entrepreneurs with this attitude tend to see securing regulatory approval as the finish line. They assume that the moment their product has been given the OK to go to market, a big company is going to acquire the business for lots of money.

That’s a risky strategy, given how many factors have to line up perfectly for an exit to work out.

As Robert points out, you could be stuck in a bad economy, when investors are less willing to take risks on new companies. Or you could find yourself on the wrong side of a trend. For example, during the dot-com bubble of the late 1990s, investors were so fixated on internet companies that medtech — along with other industries — was sidelined.

The exit you’re picturing on the horizon is likely a mirage. Instead of falling for it, put your effort into building a commercially viable product with a self-sustaining business model, and measurable market impact.

“More and more in the medtech world, acquirers are waiting to see how the market is reacting to your product,” Robert says. “You’ve got to think bigger. You can't focus on the exit, because you can't plan that. Just build a great company: Do the things that you believe build long-term value in a great company.”

Don’t race so fast towards a finish line that may not even be there that you neglect to build a company with the mileage.

Fundraising: Don’t Underestimate It

Raising money is more than an inconvenience to be checked off your to-do list. It’s an essential part of your business plan.

Having been around the fundraising block many times, here’s Robert’s best advice on the aspect of entrepreneurship many medtech founders dread the most:

Prepare to be rejected.

The idea that someone could be anything less than wildly excited about your passion project is crushing. But it’s not personal, and it will happen over and over again, so thicken up that skin.

Think commercially.

Despite what The Beatles told us, love is not all you need — not in the world of medtech investors, anyway. Investors don’t care that you’re passionate about your idea: You need to show them how it will make them money. “You're asking people for money who want to get more money back,” Robert says. “You have to think commercially.”

Raise money before you need it.

Fundraising is not something you can procrastinate on. Don’t get yourself into a position where you’re finally ready to set up your very expensive clinical trials, or build your very expensive prototype, only to realize the bank account is empty. “The best time to raise money is when you have money,” Robert says.

Fundraising never stops.

You’ve just closed Series A, and raised enough money to fund the next couple of years. It’s time to get started on Series B. As Robert says, “Even when you close a round, you have to be thinking about the next round.”

Being a founder isn’t glamorous.

As you’ve probably realized by this point, being a founder isn’t all champagne toasts and dollar signs. Raising money is a grind, on top of all the other obstacles you have to overcome. Only the most resilient founders will make it. “Have passion, but be prepared for a long haul,” Robert says.

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