Medsider: Learn from Medtech and Healthtech Founders and CEOs - Why Building a Community is Crucial for Medical Device Startups: Interview with Blackrock Neurotech’s Co-Founder and CEO Marcus Gerhardt

Episode Date: January 26, 2022

In this episode of Medsider Radio, we’re sitting down with Marcus Gerhardt, who has started multiple companies, including an eCommerce platform and international consulting firm. In 2008, he co-founded Blackrock Neurotech, a pioneer in brain-computer interface (BCI) technology, and the world’s leading collaborative partner for developing approved medical devices at scale for neurological therapies. He currently serves as CEO and is on the company’s board.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). 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 Marcus if you'd rather read it instead.

This here was MedDevice. This could potentially take five years, ten years, fifteen years. And we had to find a approach to build our business that was not reliant on fundraising cycles. Because fundraising cycles are super fickle things, you can never control them. I've raised a quarter of a billion dollars in my career. And in a in a week moment, I might say it was my good looks that made it happen. But I'd be lying outright. Most of the time, it was just good luck. It was just great luck and timing.

So keeping that in mind, if you can't really plan for it all, then you've got to make sure you can stand on your own two feet. 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. Hey, everyone, it's Scott. In this episode of Medsider, I sat down with Marcus Gerhardt, the co-founder and CEO of BlackRock Neurotech, a company he started back in 2008.

Black Rock's moving in brain computer interface or 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. Here are a few of the key learnings that we discuss in this interview with Marcus. First, venture capital funding isn't the only path forward for med tech companies. Marcus successfully applied an innovative model for raising funds that leveraged current technologies to finance the lengthy research and development period, Black Rock needed. Second, 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. Third, regulatory bodies have important responsibilities within the chain of production for medical technology. Embracing the requirements and working with, not against these agencies, is crucial. 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. Anyone who spent time in the MedTech space knows that you typically need to commit hundreds of thousands of dollars, oftentimes millions, towards clinical research. But it doesn't have to be that way. And here's why. ProofPilot is a new kind of hybrid clinical trial platform that

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analysis within hours, all in one compliant platform. on. Get up and running quickly with an annual license fee and launch as many trials as you like with an unlimited number of participants. To get started, visit medsiderradio.com forward slash proofpilot. Again, that's medsiderradi.com forward slash proof pilot. For the medsider audience, with an annual contract, Prove Pilot will provide IRB approval for your first study at no cost. Some exclusions apply, so visit Medsiderradyo.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 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. 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 MedTech 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. Marcus, welcome to Medsider Radio. I'm looking forward to this conversation. Well, thank you very much and thanks for inviting me. Yeah, I appreciate it. I think it'll be a fun discussion. Let's start, before we go too far into kind of like the major lessons learned, you know,

throughout your career as well as building up BlackRock, let's talk a little bit about your personal background first. And then hopefully that will lead into kind of a little bit more of an overview for Blackwrex, Blackwrex technologies and kind of your overarching business model. Yeah, sounds good. What would you like to know? So, like, let's not spend, you know, 10 to 15 minutes, like, going through each and every, like, moves you've made throughout your career. But, like, give us, like, the, you know, the elevator pitch and, you know, the why be kind of behind when and how he started Black Rock. Yeah. Look, an unlikely background in terms of training, because, in essence, I focused on international politics and modern history.

so an arts guy. And then you kind of wonder what's an arts guy doing, trying to run a neuroscience company. And really, I don't have a great answer for you on it, except that my passions change a little bit over time, but also that today I wouldn't have wanted any other degree to help me out, do the job I have to do, which is in fact not to understand neuroscience better than the geniuses I have around me. And there's many of them. I have more double and triple PhDs in this company than I can shake a stick at.

But my primary role is to motivate, is to communicate, is to identify new ways of doing things, of facilitating and empowering the disruption that we are pushing for. And so once I had gone through two or three degrees, I found my calling having joined a startup company straight out of Oxford University. I had considered a PhD but moved into a company in the dot-com era and set up a business with, I don't know, 150, 200 people within nine months. My first three days incorporated four hours of sleep, the writing of a business plan, and at the end of the day, $20 million raised. So the most effective I've ever been. Since then, it's gone continuously downhill in terms of productivity and effectiveness. But I found my calling, which was to create ventures. And the red thread that has spun through all

of them is usually technology or disruptiveness. So I've been part now of a 14 or 15 ventures. And the first one was an e-commerce platform, the very first one of its kind in the world. And since then, various technology solutions, but even non-technology approaches. So very frontier asset management plays, things like that, always disrupting, always looking for a change of the status quo. That was kind of the right threat. And what I've appreciated about, creating ventures is driving a vision and a mission, bringing in talented people that share parts of that vision, making it theirs, and then seeing them own that and drive that towards success, I find it enormously rewarding. And whenever that's worked out really well,

there's nothing better you can be doing, at least from my perspective. But as it relates to Black Rock, the story goes even further back meeting my co-founder at boarding school. So this venture has been an endurance race of the longest kind in many ways. We were just 16. I asked him what he wanted to do in life. And he responded like this and said, I want to create the link between bionic and artificial limit. I mean, I was blown away. I didn't know what I wanted to do in life.

And this guy, aged 16, knew it. And then he builds his entire career to achieve that. And so we stayed in touch, became good friends. And he also started a company out of university. in sort of sensor pressure technology servicing Formula One cars. And then he calls me in 2007 and says, hey, I want to start a business and met device and NeuroTech. And I couldn't really say no.

So that kickstarted BlackRock in 2008. Got it. Okay. So BlackRock, I mean, the early days of BlackRock dig back to that timeframe. I didn't realize it was that long ago. Of course, we're recording this for those listening here in late, late 2021. But that's an awesome, awesome story. When he told you he wanted to do something in MedTech, was that your first foray in healthcare or you'd done previous ventures?

No, first foray in healthcare. And I listened to him. I kind of knew I was going to be involved because, again, going back so many years and being impressed by his visionary approach, but obviously, I did my due diligence. So I stepped away. I was living in London at the time, and started researching the medtech sector. And we had another follow-up call a week later, and I told him he was out of his mind. I had researched this, and it was the worst performing VC sector of all time.

I could count more companies that had failed than had succeeded, and I told him he was crazy. But both of us loved challenges, and he knew that of me too. So he said, well, how do we do it? Don't tell me you can't do it. How do we do it? So I stepped away another bit of time and thought about that.

that's where we came up with a slightly different approach. And I took some guidance from med tech companies that have been successful in Germany and France in the post-war period. When you look at that environment, very few of them had received any kind of VC funding. They were all entrepreneur-run, family-run businesses, super successful. Brown-Melsung is just want to think about Escalap, these kind of firms, Roche, all run by families, all run by extremely stubborn individuals. and I knew Florian can be very stubborn, and I can be very stubborn. I thought, okay, maybe we're on to something. And I just looked at that and thought, okay, this is the difference to most of the technology

I've worked on before. Those had quick turnarounds. This here was a med device. This could potentially take five years, 10 years, 15 years. And we had to find a approach to build our business that was not reliant on fundraising cycles. Because fundraising cycles are super fickle things, you can never control them. I've raised a quarter of a billion dollars in my career. And, you know, in a in a weak moment, I might say it was my good looks that made it happen.

But I'd be lying outright. Most of the time, it was just good luck. It was just great luck and timing. So keeping that in mind, if you can't really plan for it all, then you've got to make sure you can stand on your own two feet. That was my conclusion. So you can't just, you know, like a software, build it for six months. If it doesn't work out, well, then you move on to the next software, right? Here in MedDevice, an engineer who's worked on it for eight years is what is fundamentally

valuable. And if you don't fund it properly, what, you close it down, it's gone. There is no way to resuscitate that afterwards. So the idea I came to Florin with was to say, listen, instead of doing the traditional VC kind of approach, let's draw on our private investors and network and start a company that will immediately acquire assets and take on something that already exists and drive revenue. We're going to suggest profitability within three years to our investors. And that's the point where he said, you're crazy. Where's the track record for that? And I said, look, we know how to execute. Let's find something that we can acquire and turn it around and we build on top of that. We put your IP on top of that. And then we'll see where that takes us and we'll raise funds for it.

In the end, it worked out better than we could have hoped because we started the company in 2008. We were profitable in nine months. Now, I had suggested this plan. also because I'd hope that Florin would be off my back for another three months. I was closing out another venture. And I gave him this task. And Florin being Florin, he was back in like three days. Three days later, he calls me, he said, I found the asset. I'm like, no, you have not. And he had found here in Utah a company, Cyberkinetics, that had invested $60 million into this really cool microelectro technology, had run for an FDA submission. And, done all sorts of things, but the VC had run out of funds now, wasn't going to support it

anymore, and they were going to divest it. And he said, look, this is, this is good technology. I think there's a market where we could sell this as tools. And so we looked at it. We found it extremely valuable as a basis. And we decided to take that and first become the premier seller of tools and services and solutions to the neuroscience research community, not a particularly big market, but a bit of a niche market, but one that the product was already appealing to, and I knew we could execute on this and build an operations that would be profitable. And that's exactly what we did. It happened much faster than we had projected.

And within a couple of years, we were the market leader in providing tools and solutions to neuroscience researchers. And it's been the basis of everything we do now, to be honest, because it allowed us to stand on our own two feet. We were generating cash. We were generating revenue. It has allowed us to endure years where there was no fundraising to be had. And beyond that, what we hadn't thought of when we devised the plan, because I don't want to give the impression that we were clairvoyant and predicted all of this, we were exposed to a fascinating environment, that neuroscience research environment. I mean, we have 500 customers worldwide now in that, in that environment,

and every single one of them has challenged us, has given us ideas, has helped us come to this point that we're at now. So I don't think we could have predicted that, that it was a vague idea that we could keep our finger on the pulse of what kind of innovation might be happening in neuroscience that would then translate to neuroclinical applications. But it was really, in the the secret to our success today, that creating that basis and understanding and knowledge from that market. Yeah, I love that that's such a fascinating story. So what I'm hearing is like you early on, you thought we needed to drive revenue sooner

rather than later. So in essence became a service business, right, and use those, you know, revenue to fund other initiatives. It reminds me of like, I'm not sure if you're familiar with like Basecamp, which is a popular project management software, like early on. And this is, you know, not too dissimilar to, like, other agencies that have done that. They started off as a marketing agency, right, doing a number of different things, built up their software and helped manage their internal processes.

And they're like, we actually, we built the product that should be sellable here. You know what I mean? And so Basecamp, or I can't remember what 37 signals, I think, was the name of the company at the time, pivoted into what is now base camp and, you know, extremely profitable business. Reminds me of that kind of story. But a quick question, kind of going back to, you know, that 2007-8 times. frame, Florin comes back to you within three days, which is incredible, we've got this asset. Did you know, I mean, I'm always, I'm always amazed at like the amount of capital that's

poured into companies like that, right? And they can't, for whatever reason, they're not, they've run out of funds and they don't see a path forward. But yeah, a different set of eyes, right? Your eyes, Lauren's eyes come in and say, wait a second, we can just, we can, we can, we can pivot this and turn it around and, you know, in your case, reach, reach profitability within a year. You know what I mean? So is that, is that, is that, is that, just simply a matter, a function of, you know, your experience, your like entrepreneurial flare kind of a different set of eyes, seeing like what could be an awesome business and just flipping the switch, right? What wasn't it about that the company at the time that these,

why didn't they do that? I guess is probably the, that the short question. No, no, not added flare or anything. A lot of the guys who were involved with cyberkinetic super experienced and, and really competent individuals, right? No, it was a different perspective. on the company vision. So that company was driven by investors and VC investors who were accountable to other things than we who joined and said we're trying to achieve a different thing. They were heading out to create a BCI, an invasive BCI.

They got an FDA approved for under 30 days. They got a patient in, Matt Nagel, since unfortunately he passed away. And it was the first patient who, with his thoughts alone, created an email and sent the email. I mean, phenomenal kind of Apollo mission, a perspective, a window on what was possible, right? So very valuable. But they were a VC play in sort of the more traditional way of this is going to go and become

billions of dollars. Well, many other things weren't aligned that are, in fact, aligned today. But they weren't aligned back then. But that was their perspective. I don't think they had even the choice to think about this differently. Florin and I approached it from, well, we don't need to build that right now. Right now, we're looking for an asset. We're looking for something that we can make into products and sell to a community,

the neuroscience research community, right? We didn't have to account to a VC who wants to see a tam of billions of dollars. That was not the ask. Our private investors, who were family businesses that have existed for up to 400 years, one of them was a German business that was created 448 years ago or something crazy. These guys didn't need to hear Tam of a billion dollars. They needed to hear an execution plan. an operational plan. And that's where we provided them, right? We said, look, this is a niche market.

It's somewhere between 50 and 150 million. We weren't even very precise about it because there's no economic data about it. You kind of have to do with a guesswork. But we know we can sell this product. It's happened once, twice before. And now here's what we're going to do. And this is where we did deploy our experience, which was to say, look, we are going to start this in the U.S. and we're going to sell, we know the market is X. We're going to get 10%, 15% market chip. Then we move it to Europe. we understand Europe. Then we move it to Asia because research is starting to happen in Asia. We took an investor on one of our private investors in Singapore, both Floyd and I had built businesses in Asia. So we knew those markets. We were not gun shy of them. And so we could map out

an operational plan. It worked out way faster than we even thought. And we put in place the right operators to make it happen. And, you know, whatever, three, four years later, we were one of the top and today were the largest tool and service solution provider through that neuroscience research community. So it wasn't that we were more qualified or anything, but I think the key thing was we had a different perspective and a different requirement. Yeah. That's such a great. That's such a good story. And I love the fact that, you know, like a completely different model, right, than how most med tech, how most early stage medical technology or medical device companies operate. And I'm sure by The next question I was going to follow up with was the community aspect, right? By embedding

yourself in the neuroscience community, I would imagine the ideal, what's called idea flow, right, was probably just constant, right? Because you're having all these conversations with, you know, some of the most brilliant minds in the world on niche neuroscience topics, you could be like, you could quickly figure out which ideas may maybe have some legs, which ideas aren't there. Talk a little bit about that and how that may be impacted, you know, that's, yeah, the moving. That's exactly it. And we had some sense of how that could work, but it was a very naive sense in retrospect. I was blown away by the sheer genius of this community.

And whether they were doing basic science where you think, okay, that's miles away from translation, all the way to more applied science, in all of those areas, there is great food for the next venture and for a successful business. And being in that space for over a decade taught us a fair few things, right? I've analyzed these things, how to recognize whether they have a higher or low TRL, what some of the risks are that you need to consider. How to say no. We were awful at saying no at first. We have become much better at saying no.

But weighing those up and then working with them and recognizing strengths and weaknesses, that has been an enormous learning court. But we could not have forecast how much we were exposed to better understand what to do next. And even today, with our vision and mission of making people walk, talk here again, but also of addressing neurological disorders that over 600 million patients worldwide suffer from, as we navigate that path now and we say, look, we're going to do this product, embodiment, and application, understanding the application, seeing the potential of a technology and how it can be deployed there, we are faster than anybody else because we have this network in this community that we can draw on in this experience, and it's been phenomenal.

And there are other examples of where this has happened. So maybe if we had been wiser and smarter at the outset, we would have, we would already recognize the full capacity of it. I mean, Texas Instruments, you know, has played that game a little bit, where they, they went out and they provided their tools to a broad, broad range of students because they wanted those customers to be part of what they learn about the market and what they can then deliver as those students, become scientists, it's become and move up the chain.

So there have been examples of other companies benefiting, you mentioned base camp or whatever. There have been other examples. For us, it's been, yeah, a major, if not the pillar of strength that we base our business on today. Oh, yeah, yeah. I can imagine. And I'm part of an incubator called Big Sky Biomedical.

And we, one of our, some of our partners are founders and principles at Switchback Medical, which is a contract manufacturer that specializes in interventional catheter development and manufacturing. But because they're in that niche, right, talking with, you know, interventionalists, whether they're in the cardiology space or the radiology space or neuroradiology, et cetera, they see so many different ideas, right? It's just, it's continuous. And I can't stress that enough. And it sounds like Black Rock has experienced, you know, similar type, you've proven this out, right, by abetting yourself in that community through a service-based business. I mean, it just helped, you know, help lead you to where the company is at today.

So that's great to hear. And there's other benefits. I mean, today, you know, we are the number one BCI player in the market. And one of our competitors is a company funded by maybe the most well-known billionaire of disruptive technologies in the world, right? Somebody who's managed to shoot stuff into space and make cars drive without gas. And you'd think, whoa, no, they must be number one. Well, they're not.

And why? And it's because of the community. You know, we are in many ways a product of. So our BCI in many ways is the BCI of the research community. There is strong identification with what we do and how we've done it. Whereas there is even our sort of borderline antagonistic approach from that community towards other more commercial, you know, commercially minded endeavors and ventures. So I think being part of that community, and having that strong identification, it goes beyond and it helps us on the branding side.

As we're now growing, I mean, we've gone from 50 people to 130 people in less than seven months. Where do we recruit? And we have been able to get fantastic talent from that research community as well. And I'm just one of the things I'm super proud of even our development today that we can offer that neuroscience community, alternative career paths as well, that all these smart minds, and brains can, of course, pursue the academic realm, but now also a variety of medical device and private market endeavors. So for now, it's been a fantastic interplay, and we have benefited hugely. Yeah, well, I want to move on and learn a little bit more about the moving

in technology specifically, but I didn't think this conversation kind of unfold to talk this much about community, but there's a guy that I follow on Twitter. I don't know him personally. Greg Eisenberg, I think is his name, if I remember right. But I remember reading like a piece that he wrote on the future of the future of work. And he mentioned that, you know, one of the, one of the crucial roles for most companies is going to be this concept of a chief community officer, right? So someone that oversees and has like their North Star metric is how is our company establishing and fostering relationships within our core community. So interesting, interesting that, man, it seems like you are, you guys have been on the leading edge of this since, you know,

from the better part of 15 years. So on that note, let's talk a little bit about moving in. So FDA, you recently were granted, you know, breakthrough device designation for the moving in concept. Talk to us a little bit about what it is specifically. And then tell us a little bit more about how the idea kind of was generated and how it came to be. Yeah.

So our vision has been for a while to make people move, talk, walk, here and see again. And I know those are very, very broad and very big objectives, but at the end of the day, the restoration of function is central and critical to what we want to be able to change and affect. And, you know, why those, we'll move again because a lot of our research customers started working with paralyzed patients, tried to show how a BCI, a brain computer interface with an electrode that would pick up signals from the brain, bring that data out, and could affect them in a positive way, either by restoring their functions. So letting them, with their thoughts, move a prosthetic arm, as is the case. For example,

with Nathan Copeland, a BCI pioneer out of Pittsburgh, left tetraplegic after a car accident, tragically at age of 18. And he joins that research study. And the guys are around him, Jen Collinger and clinical side, Rob Gaunt, on the research side, just fantastic work. And they're able to have Nathan Copeland move a prosthetic arm. He shakes. There's a video of him shaking. Barack Obama's hands and fist bumping him. And they went that next step where after showing that and also drawing on many others who had shown something similar, they put a sensor in that prosthetic hand. When he shakes Barack Obama's hands, he kind of says, oh, your hand is warm. And Barack Obama replies quick with it and he says, look, I'm a lot more nervous about meeting you than

you are about meeting me. But what's happening here is the sensor is picking up the signal. The prosthetic hand has a sensor. The sensor picks up the signal. And says, sends the signal back into Nathan's brain, telling Nathan it's warm. I mean, just, just fantastic stuff. And very quickly then, with all of these research institutes across the U.S. starting to prove that you could restore a movement, also some research into how to restore communication, so people being able to communicate again where they couldn't before. 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.

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