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published on February 28, 2020 by
This is Jim McGough with a special episode of the Jim McGough podcast (click image above to listen) featuring an interview with Paul Grand, who is the founder and CEO of the MedTech Innovator Program. I was able to catch up with Paul in November of 2019 and discuss how he got involved in innovation, what his “why” was for starting MedTech Innovator, the importance of the right ecosystem to support each startup as well as trends in health tech investing and regional differences in health tech innovation around the world. Since EdgeOne Medical, the company I co-founded with my wife and Lilli Zakarija is a long-standing partner of the MedTech Innovator program, I felt compelled to share Paul's story and his insights as he's a great example of someone who is making a difference. Here's the interview (30 minute Podcast):
Good morning everybody. This is Jim McGough and I have the pleasure to be with Paul Grand, the CEO of MedTech Innovator here actually at the MedTech Innovator global headquarters in Westwood, California. So Paul, just wanted to say thanks again for taking a few minutes this morning to share some of your thoughts on MedTech Innovator and innovation in general.
Paul Grand:
Great. Thanks for having me here, Jim.
Jim McGough:
So for those who are not familiar with MedTech Innovator, MedTech Innovator in my opinion, it's the world's largest and most reputable global MedTech innovation ecosystem. It's a competition, there's an accelerator. Paul's been the driving force behind this for many, many years. And being a partner in the MedTech Innovator Program, I know that a lot of people are curious to learn more about MedTech Innovator and Paul Grand and all the things that you've had the opportunity to learn and see over the last many years of this program. So with that, just want to open up to see if in terms of how you got here, just tell us a bit about like what were some of the experiences or life experiences that you had that helped shape you to be in a position to do what you're doing now with MedTech Innovator.
Paul Grand:
Sure. Always happy to talk about how I got here. So I'll start off with maybe a brief background on myself that not everyone would know. And that's that from the time that I was 12, I was a computer programmer and continue to do so today. And that really shaped me a lot I think, growing up as someone who was a big part of the tech revolution in the early days as a kid. And then after college, some of my first jobs were in the tech industry and I really appreciated this incredible revolution that was sweeping the world with tech and seeing the opportunity for myself and for others who really didn't have any particular expertise -- let's say in a space -- but had a passion and excitement about changing things, could go in and really disrupt things and make a huge change.
So I think I've always been shaped by technology probably, and even through today in Med Tech for me, it's just tech. It's just Med Tech. And I think the thing that I had to learn along the way obviously was the nuances of the healthcare system, regulatory and reimbursement things like that. But ultimately I'm just still really excited about technology. So the thing that gets me excited is about the ability for technology to make a massive change in the world around us and hopefully for the good of all of us. And in the case of healthcare, hopefully making us all live longer and healthier at where I am today with MedTech Innovator. But that entrepreneurial part is one of the things that really shapes why I do what I do today.
In my experience, having started a lot of companies and seeing how difficult it is to be an entrepreneur and how for any entrepreneur your success is really driven by not only luck and other things that come into play, but also by the people you surround yourself with and the people who are part of your ecosystem whether they're mentors, or it could be investors who are mentors, and just other relationships. But that network, that ecosystem around you, is really everything. And I've found as a guy who was here in Los Angeles starting internet companies before most people knew what the Web was or anything about with the internet, the thing that we had as a big disadvantage was that we didn't have an educated investor community who really understood tech and certainly not the kind of tech that we were involved in here in Los Angeles.
The Bay Area is a world apart from LA. And we struggled in many ways with things that, had we been in Silicon Valley, would have been easy for us. Whether it was recruiting the type of team members that we wanted, whether it was having investors who are really sophisticated that could help us. Some of my early investors were people like the Ramps Football Corporation. They were people who were great investors, but they certainly weren't sophisticated Silicon Valley kinds of investors who had the networks and ecosystem to help us. And I only encountered those kinds of people after a somewhat failed attempt to do a public offering in 1996 and when we had the first internet crash, economically, where we had been preparing to do an IPO in one of my companies, a company called Net Count.
Right around the time we were in that process, we got a call from our bankers saying, "Oh, Wired pulled their IPO." And I said, "Oh, that's too bad." And they said, "No, you don't understand, if Wire is pulling their IPO, no one's going to go public. You'll have to go raise money another way." And that was the very first time they took us on a roadshow up to the Bay Area and I started meeting all the people on Sand Hill Road and realizing how much of a disadvantage we’d been at this whole time. Here were all these people that I was talking to who had great, incredible insights into not only my business but the challenges that were going to be ahead of us, as we were going through a kind of due diligence. And I suddenly realized that this whole time I had been in this echo chamber, whatever you want to call it, where we're just talking to people around us and not the bigger picture.
So as an entrepreneur I then kind of went on to realize how important it was to have an amazing ecosystem around you to support and how it's so easy to get stuck with your head down and you're working on the challenges that are in front of you and not reach out beyond that. And I think that's one of the things that really kills most startups, in general, is that they never get out of that. So as an entrepreneur, having been an entrepreneur, having raised money, having had to downsize, I had one company where I had 150 people and next thing after the dot-com crash in 2000, the second one, I had to do an ad exchange. And right as we were launching, which was in June 2000, is right when the whole economy blew up.
Once again went from having a hundred-something people working for me to downsizing to a dozen or so people. And going through that and watching banks call on loans, Silicon Valley bank, people like that, watching that affect everybody, watching companies shut down. I've been through that and seeing both the good and the bad and what entrepreneurs go through. And so the thing that has shaped me and why I'm doing what I'm doing, in addition to helping patients and people, is wanting to help our entrepreneurs. As a venture capitalist, the thing that would make me crazy was that I could only say yes to like two companies a year. I was a venture capitalist for almost 12 years. I loved helping people and listening to them and meeting them, meeting some of the smartest people there are. I could go, as you know if you're an investor as you are, and you have money, people want to meet with you.
I could meet with anybody as an investor, it didn’t matter who -- the most brilliant academics, scientists and inventors -- as soon as they heard that we had money to invest, they wanted to meet. It was really being like a kid in a candy store, I could just go meet with people and in that experience I realized that being in that position and meeting with all these people and saying, "Oh, you should meet Jim McGough, he could help you and that's a good person you should know." I do that kind of thing with people.
But we could only actually invest in maybe two or three companies a year. That's very frustrating when you're looking at a thousand companies in a year and you know that there are lots of ones that you want to help or be involved with. And so a lot of that is, I think you know that drives us in general at MedTech Innovator is trying to help the really promising companies. And we'll talk more about that I'm sure.
Jim McGough:
Sure, sure. Just on this theme that you're talking about, there's been some sentiment that, I mean like the tech investors have been coming into health tech for the last five years and maybe there is unrealistic expectation of how quickly hospital systems could take in this new technology, new workflows and so some casualties where the early founding CEOs that maybe were led to, "Hey, you have to hit this milestone by such and such a date." Because you're going all over the country, all over the world, do you see like a normalization or is that certainly in pockets where the tech investors or they were formerly in tech are starting to understand the slowness and then also the entrepreneurs, the clinicians, scientists have understanding of what the investors are really going to expect. What do you see in that space?
Paul Grand:
What you said is so right on. You've got this new wave of investors, the investors, when I was a venture capitalist, that were the brand name, venture capital firms that were out there and whether it was a Kleiner Perkins or Denovo Ventures and so on, there were all these firms that were terrific, that were the brand names, and then over time a lot of these people have gone away. They moved on as you know to later stages or they've gotten out of healthcare entirely and certainly out of medtech.
So there's a new wave of investors who are knowledgeable in their spaces, so if it's tech, straight tech investors, they might know a lot about scaling quickly or hiring great teams and motivating teams and keeping people compensated well. They've got all sorts of interesting skill sets there. But when it comes to healthcare, they don't know anything about bringing products to market. And they're learning as they go, of course, like anything you learn over time. But they really don't know what they don't know in most cases. So, as a result, they give advice that can actually steer these companies in the wrong direction. It's with good intentions, but they'll tell people to iterate quickly and do all these things that you can do when you have an Instagram kind of app but you can't necessarily do that in health care when you need predictability, when you need long-term data, when you need data that can be used to convince people to adopt a product three years from now. You need to be collecting that data three, four, seven years in advance.
Those are the things ] they just don't see and they don't have that kind of pattern recognition and ability of venture capitalists who've done it so many times. So as a result, the real challenge I believe is that, startups are getting capital from people who are not equipped to give them the proper guidance to bring their products to market. And so they push them in the wrong direction or they give them, you mentioned getting a pilot at a hospital and people say, "Oh yeah, you're going to go get this pilot and it's going to get that marquee customer and then it’ll be a huge boost for you." And the problem is these small companies wind up putting all their resources sometimes, as you know, into servicing that pilot. There was someone who joked a while ago about one of the hospital systems and they said they had more pilots than a United Airlines.
That's the reality. Most of those pilots aren't converting into contracts and they certainly aren't enough to sustain that company. And so if that startup puts all their eggs into that basket, they often fail for the reason that they, whether the pilot didn't deliver the expected outcomes, whether the contract that came up as a result wasn't one that was sufficiently revenue generating or they didn't meet the endpoint and they didn't get any kind of agreement, whatever it was, you can literally have death by pilot. It's a really scary thing. And so I think the thing that a lot of tech investors and other people early on in this space did was drive people to do these pilots. Pilot, pilot, pilot. It sounded great but they haven't always worked out.
To me, that's one of the things that I think continues to be a huge challenge and it's not the blame of any particular investor or anything, it's just the environment we're in. And I think the startups, in general, are limited by the sophistication of people who are investing in them and who are on a broader basis in their ecosystem but especially as an investor, those are people you have to listen to. You got to keep them happy and hopefully, maybe they'll give you more money when you need it, especially when you run out of it, which everyone does one way or another. Unfortunately, if you're trying to please somebody who really doesn't know what the next milestone is going to be for your company and what it's going to take to get there, you're just chasing the wrong mission in most cases or the wrong agenda. As a result, there's a massive problem worldwide for the medtech and health tech ecosystem in general.
Jim McGough:
It's interesting. I've heard people say that some ecosystems and regionally and you can say Bay Area or Boston, that some of the entrepreneurs, there's more of an entrepreneurial ecosystem where the founding CEO can get the funding from some investors who are experienced have maybe worked with that founding CEO before and they're more willing for a couple of pivots to happen over the course of 12, 24, 36 months. Whereas in other parts of the world it's relatively novice investors in health tech and sometimes the first time founding CEO and there's less work with me, trust me and because of that, they don't get that extra bridge financing that may be in the other scenario where they have the trust that they built. Have you seen that? Is that a thing that you've seen on your travels?
Paul Grand:
Yeah, I think you're right in that the trusted relationship where someone goes back two, three times as a serial entrepreneur to the same investors and they back them blindly in many cases because they know the investors know that this is a person that has performed for them before and that they can trust and they're open with communication and whatever it might be, they've made money with them. Sometimes they've lost money, but they still know that person and they're a known commodity and they want to work with them again. Those days have pretty much gone, I think. I think that the environment was very consistent years ago and there's, I'm not saying it doesn't happen now, but it's definitely more than one-offs, today.
I find as you've seen in MedTech Innovator, we have people who come in and pitch us. When we first started doing this like seven years ago, I was shocked that they were coming to us and applying to MedTech Innovator because I thought, "Oh, this is a serial entrepreneur. They've done this four times. Why do they need an accelerator? Why they need this kind of visibility? They could just go back to the same investors." But those investors are gone in most cases and they're out there navigating like anybody else and going from round to round. I mean maybe in all cases as a CEO, you're always raising money they say. Even if you're not really raising money at the moment, you're really preparing for your next round all the time.
I think it's become extreme in the case of healthcare today, that CEOs are constantly looking forward to that next round and where the money's going to come from. Because as I said, those investors who you mentioned before, the ones who were the trusted ones that you work with over and over again just generally aren't there and it's building up. I mean we're starting to see some of that building now again, it's all cyclical and we'll have a whole bunch of sophisticated investors eventually. But for right now we don't really have that.
So as a result, I think a lot of the investors that are out there who are investing in healthcare and health tech, in general, are not equipped even in Silicon Valley to give the advice that we need. I'm seeing what you said, I'm seeing that it doesn't matter what ecosystem you're talking about. It's always the same thing now, I mean, MedTech Innovator is, as you said, global and we are all over the world. We do a ton of work all throughout the US, Europe and increasingly Asia as well. And in every ecosystem, I try not to smile when I hear them say it, but inside I'm smiling when I'll meet with somebody and they'll say, "We've got great early-stage grant support here from the local government and we have some great early-stage angel kind of investors and philanthropic investors but we're not like Silicon Valley, it's the A round that we struggle with that B around that we struggle with."
I always look back at them and I say, "Silicon Valley is struggling with the exact same thing." This is the myth - that Silicon Valley is the solution and they have all these things. I'm not saying that Silicon Valley isn't an amazing place, it is. It really is incredible. And it is definitely an asset to be there. But the startups in Silicon Valley are going through the same thing as the startups in Singapore and the same thing as the startups in Kansas and the same thing as the startups in Chicago or anywhere else in getting in that venture gap. The Valley of death is still a very real thing.
And I know the work that you do, Jim, and in your ecosystem. It’s the same that we're trying to do, which is to help startups navigate and find the right people who can help them wherever they may be. And of course, as you said, Silicon Valley, we might have some better general resources around that you can walk down the street and maybe find someone who's done it before when it comes to investors and people who are the ones who in many cases, the CEOs are answering to and need to listen to, they're not necessarily better in Silicon Valley than they are anywhere else.
Jim McGough:
Got you. Would you say then that based on that new kind of normal, what MedTech Innovator does is it allows promising medtech, health tech ventures from all over the world that access an ecosystem that's not just their local ecosystem but is a global one? And I mean I have my own opinion that there are some narrow networks, even in some very highly reputable, a lot of capital, Metro areas of the US or in Europe. I mean a certain kind that you can further credentialize or do you risk your venture by accessing your best people in the ecosystem for your particular venture? Is that something that's just more of a myth or is that actually happening right now? That's in a certain sense, what MedTech Innovators is all about is people have access to the best folks if they're 5,000 miles away or five miles away?
Paul Grand:
You took the words right out of my mouth. That's literally the way I always put it is that we're trying to bring the world's best ecosystem to any startup no matter where they are. That’s not an easy thing to do, but that's what we're doing. And it's something that we... It's taken us seven years to build to where we are and that we're able to deliver on that but that's what it takes.
I know there are other models where people relocate companies and they say, "Oh, we'll just move to our facility in Texas or move to our facility in Massachusetts or move to our facility in California, wherever it may be and we'll plug you into an ecosystem there." And I would argue that none of those ecosystems still has the ecosystem that we can offer.
If you're in California, you're getting the California ecosystem, if you're in Texas, you're getting the Texas ecosystem, and Massachusetts and so on. And it's great they have their own ecosystems, but they're still not the perfect ecosystem and that's what we aspire to build is, the perfect ecosystem for each startup and it's not the same cookie-cutter ecosystem for every startup. There are some that need a ton of work and need a lot of help and regulatory or quality systems, or you name it, and they may not be able to find that locally. You have to take them to the top tier providers and make sure they have access to those people no matter where they are. And the same thing goes for the investors and the potential strategic partners, the acquirers for these companies, you have to have access to them as well.
In the local ecosystem model, the problem is that there's only so much of that in that ecosystem. And so they’re going to get exposed to who is there, not necessarily the right people for them. They'll try, I'm not saying they don't try, but ultimately they're limited by that, whereas we've built something that allows us, through a very curated model, to bring these startups in. Wherever they may be, let them stay where they are, let them keep working, it's very disruptive to relocate somebody. My core belief here is that it's one thing to move somebody and say, "You're going to go for two weeks somewhere." And by the way, even that's disruptive, but at least it's time-limited, but to make a team relocate to be somewhere for a long period of time is extremely disruptive to the work they're doing.
I think it only works when you're talking about like ideation phase. If you're talking about people who are a couple of optimistic people who want to revolutionize diabetes, let's go set them up at one of the premier hospitals where that work is done, where the right investigators are, so they can really deal with the problem and see what the issues are. Let them immerse there, let them have access to the strategics in that space, whatever. Hopefully, they can learn about the problem and then come up with some solutions and that's great. But if you know about a company that's funded, MedTech Innovator targets, companies that are funded. The whole point here isn't to just help people who with an idea, we want to find the people who've gotten the funds, who have the team, even it's not the perfect team, but have a team, have hopefully some prototypes and some evidence and they're on the right path.
They're one of the lucky ones that got funding. We need to make sure that if we find that startup, no matter where it is, and we say they've got the right ingredients and they're solving a real problem with a market that can actually pay for it and all the things that go into being successful, we don't want to let them fail. And so that's again coming back to your question, it's just this idea of bringing the best ecosystem, the right ecosystem to that startup. And if we can't do that, then I think we're failing. And I don't mean just MedTech Innovator, I mean as an industry. I think we're failing because you let any of those startups fail. We're taking a solution that really could have made a difference for all of us. You're making a den and you're bending the cost curve and all the things that we all want to do. You're taking that opportunity and you're just throwing it away and we all have to be part of that solution.
Jim McGough:
Absolutely. Now it's great that you can see that really happening, having been on the road with you guys and seeing all the startups and how they're really benefiting. I'll use the case, it’s more comparative, like Europe and North America or obviously, you just had a really successful program with the MedTech Innovator Asia inaugural program. And maybe you can spend a moment or two just to tell us about Europe and North America and obviously Asia, if you see any trends or areas that need to be, I don't want to say improved, but just wanting to get your thoughts because you were probably one of the few people that's seen comparatively those regions in the last few years.
Paul Grand:
Sure. The global lens is really unique and in some ways, I think the thing that US startups have is they've got it easy in some ways in that our healthcare system is, while complicated, generally speaking pretty consistent. I mean obviously there's still a fee for service and value-based care, those two models coexisting is a little bit to deal with for startups and penetrating the right hospital systems. And there's plenty of challenges but at least you can generally understand how the healthcare system here works. And for some of the global startups, they're looking at their local ecosystems, which are, their hospital, their payment model, all those things are radically different than ours in many cases or at least unique.
Having to navigate that or looking at the US as a place to go first, which most of them want to do. Not all of them, but a lot of them want to do. That's definitely, it's hard because they're looking at maybe proving something locally in Berlin and then deploying in the US and will that work and were not a capital before they can do that and either market and all the other challenges. And so really kind of navigating not just their local system, but the US system. And then, of course, there's also the changing payment models, not just here, but around the world that people have to navigate. So for us in Europe, I think they generally have it at least pretty predictable. Not so much easy, but it's reasonably predictable.
Obviously these changes now and MDR and other things, but ultimately the US and Europe, people at least have a general sense of how that works. And then you go to Asia Pacific and it's very eye-opening for all of us in that, it's one thing to look at just China or just Japan or just India and so on, Malaysia, Indonesia, Singapore, and look at those things in an isolated basis and say, "Okay, penetrating the market here locally. What's involved in each of those countries." But the startups in Asia Pacific, at least half of them, if not more, are looking at Asia Pacific is their first market. And broadly they want to reach that market. It's the largest population in the entire world and that's plenty. And as I said, a lot of them do want to enter the US market, but not all of them do.
In fact, I'd say depending on where we go, a lot of times people say like they're just interested in China. They're just interested in Japan and so on. So those navigating that as you said before, like looking at a global lens and looking at startups and what their challenges are versus what kind of the DNA of a startup and the things that will cause them to fail along the way. If there are 15 or 16 common themes for why people fail in healthcare there's five of those that are unique to each country and the other 10 maybe are common. The common ones, the ones that I see and that as I said, I look at and I know every time I see that it's the same problem whether it's in Kansas or whether it's in Singapore, but the other ones, the ones that are unique to their ecosystem are our major things for them to be focusing on.
It takes an infrastructure that really knows all the nuances of that healthcare system of the regulatory system to get the product approved, the access model for getting into the payment and into the care providers and into the pathway that they need to be in and maybe the consumers in some cases so it's different in every single one of those. And what we’ve recognized at MedTech Innovator is that for us to succeed there in helping in our mission and helping these startups and bringing their technologies to patients, we really need to understand all those markets.
Jim McGough:
Paul, well, I had to find that perfect spot to stop our part one of our interview and this was the appropriate spot. So all of you listeners, thanks so much for listening and hearing from Paul on all the insights and experience that the MedTech Innovator program has provided this global health tech ecosystem. If you like this podcast, please make a nice little comment on Apple or at EdgeOne Medical and we will do a quick follow up with part two and we'll keep you notified when that will be live. Anyways, thanks again for listening. This is Jim McGough from the Jim McGough Make a Difference podcast series.
Part 2 of the Interview will be posted later in 2020 as the MedTech Innovator 2020 Program progresses. Also, please excuse typos and grammar errors as this transcription was primarily machine-based.