Medsider: Learn from Medtech and Healthtech Founders and CEOs - Lessons Learned From Selling 3 Medtech Companies: Interview with ThermoTek Chairman Robert Kline

Episode Date: February 28, 2022

In this episode of Medsider Radio, we’re sitting down with Robert Kline, the Chairman of ThermoTek.Robert 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.In this episode of Medsider, Robert shares the lessons he learned from leading three medtech companies through successful acquisitions: never underestimate the importance and difficulty of fundraising, don’t assume everyone has the problem you want to solve, and don’t build your company around an exit. Before we jump into the conversation, I wanted to mention a few things:If you’re into learning from proven medtech and healthtech leaders, and want to know when new content and interviews go live, head over to Medsider.com and sign up for our free newsletter. You’ll get access to gated articles, and lots of other interesting healthcare content.Second, if you want even more inside info from proven experts, think about a Medsider premium membership. We talk to experienced healthcare leaders about the nuts and bolts of running a business and bringing products to market. This is your place for valuable knowledge on specific topics like seed funding, prototyping, insurance reimbursement, and positioning a medtech startup for an exit.In addition to the entire back catalog of Medsider interviews over the past decade, Premium members get exclusive Ask Me Anything interviews and masterclasses with some of the world’s most successful medtech founders and executives. Since making the premium memberships available, I’ve been pleasantly surprised at how many people have signed up. If you’re interested, go to medsider.com/subscribe to learn more.Lastly, here's the link to the full interview with Robert if you'd rather read it instead.

You've got to have persistence and be resilient. It's not easy building a business. This is not, you know, the Hollywood version of a startup in Silicon Valley, you know, pool tables and beer in the grid. It's just hard, serious work. It can be very enjoyable. It can be incredibly rewarding and satisfying, but it's really hard. And so the people who I see who are, who are,

They just have a passion, they're persistent, they're resilient, and, you know, they're willing to take new information, adapt to it. But if you're not persistent, resilient, you won't make it. Because this isn't going to happen in two or three years. This is a five to ten-year journey usually. And so you have to be ready for the tough times. Welcome to Medsider Radio, where you can learn from proven med tech and healthcare thought leaders through uncut and unedited interviews.

Now, here's your host, Scott Nelson. Here, everyone, it's Scott. In this episode of MedSider, I sat down with Robert Klein, who left Big Pharma to start Med-Avance in the late 1990s. He eventually sold that company for $260 million in 2011 to what is now Beckton Dickinson. Bob's next venture, ViroSite, a spinoff from the University of Colorado, sold in 2016 for $16 million. And then shortly thereafter, he joined its startup Boulder Surgical in 2017, pivoted the company. and exited in 2021 to a logic for $160 million. Bob is now chairman of Thermotech.

Here are a few of the key learnings that we talked about in this discussion. First, if you're setting out to solve a problem, make sure other people are experiencing the same issue and are looking for a similar solution. Talk to potential customers about what they really want so you can be sure a product market fit early on. Two, don't start a company with one eye on the exit. Buyers don't magically appear the moment your device is approved for the market,

Build a self-sustaining business and the investors will come. Third, fundraising can't be viewed as a nuisance. It's part of your business model. Raise money early and raised it constantly. Remember that loving your product is not enough to convince investors. You have to sell them on its commercial viability and projected financial returns. Okay, so before we jump into the discussion, I want to mention a few things. First, since you're listening to Medsider, you're probably aware of how expensive it is to run clinical trials.

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ProvePilot will provide IRB approval for your first study at no cost. Some exclusions apply, so visit medsiderr radio.com forward slash proofpilot to learn more. Okay, second, if you're into learning from proven medtech leaders and want to know when the new content and interviews go long, head over to Medsider.com and sign up for our free newsletter. You'll get access to gated articles and lots of other interesting healthcare content. If you want even more inside info from MedTech experts, think about a MedSider premium membership. We talked to experienced healthcare leaders about the nuts and bolts of running a business and bringing products to market.

This is your place for valuable knowledge on specific topics like seed funding, prototyping, insurance reimbursement, and positioning a MedTech startup for an exit. In addition to the entire back catalog of MedSider interviews over the past decade, premium members get exclusive Ask Me Anything interviews and masterclasses with some of the world's most successful med tech founders and executives. Since making the premium memberships available, I've been pleasantly surprised at how many people have signed up. So if you're interested, go to medsider.com to learn more. All right, without further ado, let's get to the interview.

All right, Bob, welcome to Medsider. Appreciate you coming on the program. It's great to be here. I appreciate the opportunity to talk to you. Yeah, this should be a cool conversation, pun intended, right? With your experience within kind of the cooling space. So I'm looking forward to learning a little bit more about some of those stories from your career. So with that said, I provided kind of a high-level bio at the outset of this interview,

but we'd love to hear it from you first, right? kind of provide the elevator pitch for, you know, for Bob, Bob Klein's, you know, career leading up to your time at Boulder, you know, which you recently exited to Logic, as well as Haven Crest. Okay. Well, so hopefully this will be a long elevator ride. I'll try to keep it as brief as I can. But, you know, I've got 30 years now in the health care, mostly the med device space. And the first part of that career was spending kind of traditional roles in big med tech companies. I actually worked for companies that were part of the Pfizer medical products group.

So that was when big pharma was into med devices. And so I got a lot of good experience, you know, starting out, understanding the medical device business and learning it from a lot of different angles, played a lot of different roles. But the last thing I did in the big company was in the business development space. And so I'd spent a lot of time in smaller startups looking for opportunities. And I just kind of fell in love with the smaller company startup environment. And I really got the bug to see if I could take some of the things I've learned and kind of translated into that environment.

So I started looking for opportunities. And after, you know, I think it was like 15 years working for big. companies, I found an area of space that I thought might be a good opportunity to found a company. So I did that, I left my cushy, you know, big company job and pursued this idea that was in the field of what we call therapeutic temperature management. And it was really this nascent idea to start using core body temperature and actually inducing lower temperatures to reduce neurologic trauma after anoxic event. So whenever the brain went out, We went without oxygen, could pooling the body and really the brain lower the damage that was caused by the absence of oxygen.

But at that time, it was just a pre-clinical idea, had been done in rats and never done in humans, at least on a clinical sense. So I left the big company, started pursuing this idea on my own, threw in some of my own money, and was able to recruit a couple other people to join me. who I'd worked with in the past. And, you know, it just became a long journey. It took 12 years. But kind of an incredible journey, labor of love, developing first and foremost a therapy that's proven highly effective for sudden cardiac arrest patients and head trauma patients, now kind of standard of care in a lot of settings,

and really developing the approach that was most commercially viable, most clinically viable. In other words, it could be actually administered in these trauma situations at various times, day and night. So we really spent a lot of time fine-tuning the technology and the approach, and the company grew over time to be quite significant. We had our own direct commercial operations in the U.S. We even expanded into Europe with direct operations,

had distribution partners in other parts of the world, And, you know, as a lot of these companies go, we kind of became victims of our own success. We had raised venture capital, and we ended up exiting to CR Bard in 2011, a really good deal for everybody, including CR Bard, which now is part-backed to Dickinson and went on and has been very successful with the technology. The company was Medivance. The technology was the Arctic Sun. And from there, you know, I still had the bug, took a little time off, looked at opportunities. For me, I'm located in Colorado, so most of the opportunities that came my way were usually on one of the coasts. And just wasn't in a situation where I really desired to leave.

And so I ended up spinning some technology out from the University of Colorado that was in a little different field than I had worked in. but I had trained in, you know, as an academic in this field of virology. And I found some technology that was a physical way, a flow cytometer that could measure virus particles, very small particles. Usually it has to be done through a biologic process. That takes many days. And with our process, we could do it in a matter of minutes and hours. And that's really important, as people understand now, to the vaccine world,

in manufacturing vaccines. Also in the gene therapy world, which was emerging, the virus is often a vector used to do the gene therapy. So this idea of being able to remove a lengthy step from manufacturing and research processes for days to hours was really kind of timely. So we built that business fairly quickly at raise some capital. We went commercial.

We had some good success. And almost before I knew it, a big biotech firm out of Germany called Sartorius came along and made it an offer we couldn't refuse. So that was a quick turnaround, maybe three and a half years. And during the time that I was running that company, I knew some people who had started another METTech company in the Boulder area where I'm located. I had worked with them previously at the first company that was owned by Pfizer. that I had worked for. I'd seen them do some incredible things. So they started this company to focus in pediatric surgery and to develop advanced instruments for these smaller patients. And without really knowing much about it, just in my faith in them, I invested in the company,

but I wasn't active in. And so as I came off the exit in 2016 for the second company, which was a company called Biotide, I got approached by a recruiter who described an operative. opportunity to me in the Boulder area for a company that I quickly figured out was this company I invested in. At that time, it was called Just Reitzer. And long story short, they had kind of hit a wall and were having problems. I liked the technical founders. It was in the local area. The products that they were trying to develop were really worthwhile. So I joined them four years ago, kind of came on board, and we had to do a lot to kind of turn the company around, but we eventually did and changed a lot of the original ideas.

And then kind of same thing with the second company. We weren't looking to exit and started to grow quite quickly, had developed some new products, and full logic came along. I hope they won't mind me saying they're kind of flush with cash because of COVID and their diagnostic division. But more importantly, our products would be cited and desired by their customers. customers, they're GYN surgeons. So we completed transaction with them last November.

Okay. And that's that that was that was Boulder surgical. Yeah, which we rebranded just right to Boulder surgical because just right was really known for pediatric focus, which which was something that we leveraged, but expanded to include a lot bigger market opportunities in the band of pediatric. So we rebranded the company to Boulder, B-O-L-D-R surgical. got it got in that in that early 2000 we're going to jump into some of the some of the kind of the classic midsiter questions and try to get a feel for the lessons that you've learned and kind of

key insights throughout your career but just just to understand you when you when you joined just right i guess at the time which was Boulder and then and then exited to logic did you jump right into the CEO rolled them in that early 2017 timeframe okay okay got it got it and you were an investor in the company already yeah i was a silent investor got a sense that I was betting on the technology founders who I really believed it, but really hadn't paid attention, which is not what I would advise for others for their investments. But yeah, I jumped right in. Got it, got it.

And then now, you know, what's your involvement like with Thermotech? Is it pretty high-level involvement? I know on your... Not really. I mean, so along the way, some of the contacts I made, some of the investors in my earlier companies ended up starting a private equity firm down in Dallas called Havencrest. Got it. And I joined them as an operating partner.

So I helped them with diligence into companies and things that they're looking at. But I actually found the company Thermotech, which is in the thermal space, medical device thermal space, and brought the deal to them. And we were able to execute the deal and acquired that company. I think at the end of, I get confused with the COVID. situation, but I think it was the end of 19 and, you know, joined his chairman. And my first job working with the P firm was to find a CEO, which we eventually did. So Randy Chapman's the CEO there and doing a great job. So I don't have a lot of involvement other than working with Randy.

But that's sort of what the operating partner responsibilities are, Haven Crest and with Thermotech. Got it, got it. Okay, very good, very good. Well, thanks for that explanation. I think most people listening are going to get a sense for kind of your, the arc of your career and the number of kind of startup companies and early stage companies that you've involved with and, you know, taking them kind of through the full life cycle, right, to eventual exit. So let's start with a topic that is arguably one of the most challenging, right, for any startup, you know, med tech company, which is raising capital. And so, you know, when you think about your time, whether it was at Medavance and the rounds that you raised then or at ViroSite or even at Boulder Surgical,

which was maybe a little bit different because that when you joined that company was, was sort of already kind of in full scale commercialization. Talk to us a little bit about just maybe the key lessons that you'd learned, you know, along the way raising capital, and maybe frame that within, not necessarily specific to whether it's a seed or series A or maybe a later stage round, but just kind of key things that you think other entrepreneurs should know when they're looking to raise capital, whether it's VC or from private equity capital or even just super angels. Right. Angels. You know, I had to learn this long away. Most people start a company, they're excited about the idea. They want to develop the technology. They want to get it, you know,

to the point where it's actually in use in the field. And so they're really excited about that. And you kind of have this vision for first timers, you know, what a great journey this is. is going to be. And the funding is kind of just, you know, a nuisance in the sense that you think of, well, we'll get the funding and we'll do all this. And when I learned at least in the CEO role is you're always fundraising. And it's a really, really important part of a successful startup. And it's really, really hard. And so it's, I don't want to say it's a full-time job, but it's certainly something you have to always be doing and thinking about and planning for. And it's, it's, it's, it's, It's the engine that allows you to do all the things you want to do.

And it takes just a lot of forethought and effort and pounding the street and talking to people. And most of it is a process of rejection. You know, it's just you've fallen in love with the idea and you believe it and you're passionate. But now you're trying to convince others. And everybody has their different point of view and what they think is important in a startup or what makes a successful startup. And ultimately, you know, you're asking people for money. that want to get more money back. So you have to really think it through commercially.

So I just think you have to spend more time on it than most. I think people in startups, at least in the early stages, want to spend or once they're even going. You know, they want to do the business of the business as opposed to thinking about next steps. And so I've always kind of said to people, you have to start early. You don't measure your success by how much you raise,

but you have to be thinking about how much money you need and when you need it. And at least for me, and I've raised a lot of venture capital over the years, no matter what people tell you, it's always a nine to 12-month process. Everybody says they can move quickly. You have a couple of really early successful meetings. But then the diligence process starts, which is always, you know, pretty time-consuming. And they want to bring in others to raise the capital. And then you have to negotiate the term.

So you can't wait. until you need the money. I always say the best time to raise money is when you have money. So my advice is really just, you know, really focus on this as critical activity to the success of your company, devote enough time to it. And it's almost you're always constantly raising money. Even when you close around, you have to be thinking in the next round. So don't just put the, you know, the money in the bank and think you're done. You have to, already be planning for your next round. Yeah, those are good thoughts.

It reminds me the conversation I had several months ago with Peter Raines, who's running a Neutromics, which is like a wearable, kind of a wearable technology, kind of really interesting tech. But, you know, he, you know, we kind of talked about this acronym of ABC, right? Always be closing, right? And, you know, I think, you know, listening to you with all of your experience, you know, kind of echoing the same sort of sentiment. And I'm always amazed at, like, when I,

I see a company raised, whether a seed round and then they raise their A round like nine months later or, you know, going from round to round, it's like this nine to 12 increments. And it's like, wow. I mean, they literally probably just closed the one round and then they're off to the race is closing the next round. You know what I mean? Because to your point, it always takes longer than you expect, you know, even if there's interested investors. It just always says, and the other thing I think that's hard, again, for people just starting out is, you know, I mentioned this. but it's like you get so many more nose than you get, I'm interested. And that's really hard when you put your heart and soul to something and you have people

telling you it, it's never going to work or I don't like it. You know, most people, most venture people are at least polite. I mean, they don't try to crush your soul. But it can feel that way when you believe something so strongly and others don't. But, you know, you can't let that stop you. It really only takes one. You know, the key to fundraising through the venture. communities to find one group that wants to be the lead, the most of diligence. Once you have that,

then you can find others because, you know, the risk and versk and they want to know that somebody else believes, but you can't get down because, you know, you called on 15 groups and none of them were interested. You just kind of pull yourself up and pitch to the next one. And eventually, you know, I've been very lucky, but eventually you'll succeed. But it's a hard process. And a lot of New entrepreneurs, they don't realize how hard it is. And so they, I think they underestimate how much time they have to spend on it. Yeah. Yeah, those are such great points. And, you know, just anecdotally, I had a conversation literally just yesterday with kind of a long, a longtime friend. I used to work with him at a previous company and just exited, you know, a few months ago. Pretty sizable exit. It was just

fun to see to just kind of follow from afar, just to see that eventually kind of kind of happen. because I think it was a good win across the board for everyone involved. And he even mentioned, like, I was asking him a little bit about some of the early days, you know, raising funds. And they actually raised, like a lot of their early investors were eventual customers of theirs. And he was kind of, yeah, he was kind of walking that through. And it's like, one of the things that I learned early on was just when pitching, like, he's like, I got to, I have to bring the internet, because he's an engineer.

So he's a little bit more, a little bit more introverted, brilliant engineer, but like not as, you know, not as maybe sales oriented. And he was like, I just realized that I need to bring a level of energy. Even though I've gotten turned down the previous five calls, he's like, I need to keep bringing that energy. And it kind of reminds me what you just mentioned of like, you know, you're going to get turned down. You're going to need a lot of rejection. But you just got to keep going, keep pitching, keep believing. And, you know, know that it's going to take, it's going to take a while.

Yeah, I tell a lot of the, you know, I do some mentoring and help advising and help me. It's a, you know, I always tell the people pitching what you're usually a CEO. But if they don't think you believe it, they're not going to believe it. Right. So you know, you don't want to tell them what they want to hear just because they want to hear it. And maybe it's not true. But you have to bring the energy. Absolutely.

And it's hard to do. It's a sales job, right? So it's hard to do when you get an objective. Yeah. But if you push through hard enough and you really believe you've got something, in time, you'll find somebody who will want to take a chance and work with it. Yeah, that's good stuff. Let's, let's actually transition kind of the opposite into the, in the spectrum, which is exits, right? And I think this is going to be kind of a, I'm sure your

advice is going to be pretty, pretty solid considering you spent time in the BD world. And then, you know, I've been quite successful in exiting, you know, all, you know, all, I guess we talked a little bit more about three of the companies, right, Medevance and the, and the virology company. What was the name of a big idea? Virocite. Virusite, yeah, and then Boulder Surgical. But let's talk a little bit more about like what what that looks like, you know, exiting a company. When you think about some of those wins, you know, across the board, are there certain things that stand out that were kind of instrumental in making those transactions happen?

Yeah, there are, and I hear this a lot of companies that, you know, or other stage companies, or even further along, I talk to, you know, they ask about exit and they get asked by their investors and other people about exit. And I always tell everybody, you know, don't build your company for an ex. I mean, and I've seen this over and over again. You know, we're going to do this. We're going to do that.

Five years from now, you know, we'll get acquired. Especially with technical founders, I see this. Once we, you know, build the product and prove it out clinically, you know, get the clinical data. One of the big guys will come by us. And I always tell them, well, that will be great if that will happen. And it has happened. But you can't build the company around.

that you have to have a longer term vision you're going to build a company that's going to be self-sustaining and successful and that means you have to go through the full life cycle of company not just get it to you know product development and regulatory approval but you got to prove out commercial viability and you know more and more in the med tech world that's true the acquires wait to see you know how the market is reacting to your product so you got to think bigger than that and you can't focus on the exit because you can't plan the exit. So just build a great company. Do the things that you believe build long-term value in a great company. And that's not easy sometimes because you end up making decisions that, you know, maybe in the

short term, if you think you're going to exit early on, you don't want to invest that money. You don't want to raise that and get you around. You want to give the highest return and think you can at that point. And then you collect those investments that need to be viable later. So build a great company. Don't focus your team and your company on an accident, focus them on what they're building and the difference that they're making for patients and customers. And if you do that, and I would say if you do the right things long enough, eventually the stars align and you get an opportunity for an exit. But you can't control the timing of that. I've learned that, you know, I've lived it. There's so many factors related to an exit that you don't control, starting with,

you know, just basic things. Like if the economy is bad, you know, strategics pull back. They don't want to, you know, take risks. So they, you go through a period of time where there's just not a lot of M&A activity. You know, I've been in the situation with certain market segments like the internet become the hot market segment. Nobody wants to talk about med tech. They're all focused on, you know, the internet. So, you know, you have to, you can't do anything about that. You have to, you have to survive and you've got to live through that. And then, of course, we just went through the pandemic. So, you know, what are you going to do if they stopped doing surgeries, right? So don't worry about the things you can't control. Build a good sound

company and build it for the long haul. Eventually, you know, maybe sooner than later, you know, the stars, as I will say, well, line. And there'll be a good opportunity to get liquidity that benefits everybody. And then the last thing I'd say is early on, develop relationships with potential acquires, start talking to them. But don't talk to them about being acquired, right? Because that feels like, again, you're thinking short-term and even feels desperate. All you want to do is you want them to be familiar with what you're doing and to be watching

what you're doing. So I have always kind of scheduled regular updates to go. companies that I think potentially might be interested in acquiring us. And often those conversations, you know, will go several years, three, four years, give them a regular update. And then eventually one or two of those companies has seen enough that they want to engage, you know, with an idea of potentially acquiring. But you don't want to get the point where you think you're, you know, you create a value and others will see it, but you don't know any of the players. You want to establish those relationships. They get to know you. You get to know them.

They see your credibility because you're telling them, these are my milestones that are coming up. You hit your milestones, hopefully. And so it becomes an easier transition into potential acquisition. Hey there, it's Scott. And thanks for listening in so far. The rest of this conversation is only available via our private podcast for MedSider premium members. If you're not a premium member yet, you should definitely consider signing up. You'll get full access to the entire library of interviews dating back to 2010. This includes conversations with experts like Renee Ryan, CEO of Cala Health, Nadine Miarid CEO of CVRX, and so many others. As a premium member, you'll get to join live interviews with these incredible medical device and health technology entrepreneurs.

In addition, you'll get a copy of every volume of Medsider mentors at no additional cost. To learn more, head over to Medsider Radio.com forward slash premium. that's medsiderradio.com forward slash premium.