Example of Effective Government

I just put up a post on the San Diego iHub expansion and could have included this information in it, but I thought it might minimize my thoughts. I just spent the better part of a month listening to Washington politicians argue about details that they needed included in any proposal to raise the debt ceiling. People who you hoped would act intelligently to avoid the catastrophic economic impact of our defaulting on loans. The biggest issue facing our country is the sagging economy and one of the key indicators of our recovery is job creation. During this month-long debate, it didn’t seem like any of the Washington contingent were thinking about job creation programs.

And then I attended the program that announced the expansion of the San Diego iHub to include cities along the 215 corridor and heard how government officials, educational representatives and local business people think that this program will stimulate technology development and the associated business startup and job creation initiatives in the area. I also heard speaker after speaker extol the efforts on one person who was instrumental in making this happen, Bruce Coleman, Murrieta’s director of business development. Even Joe Ayala from the Governor’s office of economic development credited the tenacity of Bruce in not spearheading efforts to expand the iHub but in convincing him that the event announcing the program was important enough for him to attend and speak at.

He was also the catalyst  for Murrieta using the EB-5 Visa program to raise the $12M needed to develop a shopping center in the city. This program requires that there be a job creation element for the investment. I have heard it being used within startups, but realizing that this could be used to raise money for real estate development was pure creativity!

If we had more government at the national level acting like Bruce consistently acts, we would be long on the road to economic recovery and not impending disaster.

Kudo’s to you Bruce! I look forward to seeing your future results

Expansion of San Diego iHub Initiative

Yesterday I attended a program in Riverside where Joel Ayala, director of the Governor’s Office of Economic Development, announced the expansion of the San Diego iHub to include cities along the 215 corridor including Temecual, Murrieta and Riverside. A number of local government officials attended the event along with area members from the business and educational communities. There was also a demonstration area, thankfully inside, of various technology undertakings along with the area companies.

The expansion area still has a lot of land for development and have established some beachheads for technology development. As example, the new Loma Linda Teaching Hospital, a 106 bed hospital that opened in April of this year. It was a joint development effort between the University Medical Center  and community investors. This is the regions most recent hospital opening. University of California (UCR) has some great programs for life sciences and engineering and CalState San Marcos has opened their re-modeled Temecula location.

I am interested in seeing how this hub progresses. There certainly was a lot of energy at the event that even the 106 degree temperature couldn’t effect.

Wireless Health – Product Development Cycle?

I had an opportunity the other day to have a great conversation with someone very involved in the wireless health industry to talk about my goal of establishing a seed acceleration program focused on wireless health products. We talked about a number of things like what I expected could be done in 90 days, is this really an incubator, how is this different from some other local initiatives? I like being tested and challenged especially from people considered experts in the field. I get feedback about how well I know what I am doing and how good I am at expressing myself on the subject. It is also a great learning experience and, quite honestly, I have a lot to learn.

Every so often, someone says something that doesn’t immediately resonate with me, but later comes back into my thoughts when I have some time to think about. During our conversation, I mentioned that the goal of the accelerator was to shorten the learning curve that all early stage entrepreneurs go through, which I feel is somewhere between 18 and 24 months. I think that much of this time is wasted by looking for the right information, contacts, processes, investors, etc. I have always believed that there are different types of capital needed by early stage entrepreneurs with two of them being Time and Money. Both are critical and precious resources and need to be monitored as much as possible.

At one point he said, and I am paraphrasing, you might be able to shorten the learning curve, but I’m not sure you will be able to shorten the 7 to 9 years it takes to get a wireless medical device developed and into the market. Although I did hear the 7 to 9 year piece, I did not immediately focus on it. Later, it hit me, why 7 to 9 years? I can understand it might take that long to get a new drug approved where the FDA needs to make sure that the drug reacts the way the manufacturer says it will and that it doesn’t cause any harm. I am also aware that some products that have stored medicine in the device, like insulin, don’t lose potency while sitting on a shelf; so you must have it some for some number of years. But a non-invasive, medical device that combines cellular/wireless capabilities with it, 7 to 9 years and 10s of millions of dollars? It makes no sense.

During my corporate career, I was always involved with products, and worked through maybe 6 different product management processes. The differences were generally how you compartmentalized the various steps and how you organized your R&D, Product Development, or Life Cycle Management tasks. One of our goals was to continually monitor and evaluate our processes and look for ways to make them more efficient. Our longest cycles were 36 months for large PBX and Central Office systems.

I have heard quite a lot about the FDA 510(k) process as being a big part of the problem, but have also heard the FDA say that entrepreneurs share the blame by not following procedures, or not taking advantage of pre-meetings or making changes they have requested. If the 510(k) process was put in place to facilitate getting devices into the market quicker and it is still taking anywhere north of 36 months on an exception basis, then the process is very broken.

So, I would really like to understand what the process is to get a product from concept to patient or consumer along with the timing. Can anyone share or point me to a description of the processes being used?

I look at the types of products under development in this industry and feel they are just too important to languish in development for extended time frames while there are patients or consumers who will benefit greatly by having access to them. There are some very innovative devices and applications under development. If great innovation collides head on with process, rules and policies that make it incredibly expensive and too time consuming to get into the market, entrepreneurs will turn their attention somewhere else. Whether it is to another country or industry, it is just wrong!

So, I would really appreciate it if someone can point me in the right direction. Maybe we can test some new ideas within the accelerator.

Happy Independence Day.

Jim

Free, or Almost Free Money for Your Startup

As many of you know who follow me, I am a big fan of Fred Wilson of Union Square Ventures (USV) with a blog, AVC. I have been following his blog and learning a lot for over 5 years. Fred put up a great post today, where he talks about Government Grants as a financing source that you might consider. Fred points out that among the positive aspects of government grants are that they are Free Money, you don’t have to pay it back, and you don’t have to give up any of your company stock for it.

Fred also points out that there might be some drawbacks that might turn some entrepreneurs off. The application process can be time-consuming and time to approval, if you can get a grant, may take a long time. Fred points out a few other “strings” you might encounter. He specifically mentions the Small Business Innovation Research (SBIR) grants.

Fred’s not high on startups getting this type of funding. It seems a lot of his bias comes from the investment sectors that USV focuses on. There are a number of other sectors like bio-tech including medical devices, and clean-tech that need enormous amounts of capital that are hard to fit into a VC time cycle. For example, getting a new drug approved by the FDA is potentially a 10 year process and most VC funds are structured with a 10 year life span. Or, how about the tens of millions of dollars it might take to get a medical device through the FDA’s 510 (k) process. I realize that there are VC firms that invest in this segment, but this is not for the faint of heart. A VC has to believe in the investment without clearly knowing when the device will come to market (the 510 (k) process), and they won’t know exactly how much reimbursement will be allowed by the Center for Medicare and Medicaid (CMS). So, getting some early dollars from a NIH grant to help the process along can be huge for companies.

When you read Fred’s article, be sure to go through some of the comments to get some idea about the network of conversations about grants.

In the meantime, if you are in Southern California and have a product or device that you think might fit a government grant program, there is a great resource at TriTech Small Business Development Center (SBDC) with offices in Irvine and Riverside. They recently brought on a SBIR/STTR and federal grant expert to help companies understand the available programs and whether there might be a fit between a grant and the company. They are currently putting on SBIR workshops that are worthwhile attending if you might be interested or want to know more.

Being someone who likes full disclosure, I feel compelled to say that I have been mentoring high-tech startups at TriTech for a couple of years. I recently sat through a session with one of my clients who was not convinced that going after a Phase 2 grant was worthwhile. After about an hour with the new expert, he better understood the process and why he had nothing to lose in applying.

Wireless Health – Seed Accelerator 2

My next big set of issues were around what it would take to put a program together. Issues to consider included: a place to run the program, finding and signing mentors, getting the word out about it, figuring out how to fund this (and how much would be needed), finding sponsors, and a myriad of other details.

I watched Brad Feld at the Startup America unveiling, and listened to his announcement of TechStars Network. So, a natural place for me to start was to find out about TechStars Network and see if there was a format to follow. I exchanged a couple of emails with Brad and his partner in this organization, David Cohen, and discovered that they were in the process of putting a program together and gave me the contact information for the new Director of the Network, Jenny Boyd.

One of the things I really like about the people involved in this startup space is how open and sharing they are. I was able to read a lot about the program before I had a call with Jenny, but she spent 30 minutes filling in what details were in place and it sounded like just the program that fit what I wan planning. When I mentioned that I was talking to a number of organizations that were looking a creating programs, she offered to talk with anyone that wanted to know more about the Network.  I now had a list of things I needed to put in place in order to apply to TechStars Network.

The first was to find a space. Late last year, my partner and I attended a meeting of the Escondido City Council, in support of  Gary Knight, the CEO of the San Diego North Economic Development Council (SDNEDC). This was Gary’s final step in the process where he was looking for approval of the SDNEDC’s plan to rehab a vacant public building in Downtown Escondido and create a Business Innovation Accelerator (a new name for a Business Incubator). Gary walked out with a 3 year lease with a 2 year extension. I had previously agreed to support his efforts and be a business mentor for his program.

This is a big space and having a seed acceleration program seemed like a natural fit; Gary agreed and I was able to check off two big program milestones. I had the space but I also had a supporting organization for the program, which TechStars wants to see as part of a proposal. Additionally, there was a natural evolution for the companies in the program. If they decided to stay in the area, they could move to another part of the building and take up residence in the Innovation Accelerator. As they grow and need more space or different support services, they can move a couple of blocks to the new Technology Business Center that the city is building. This creates a natural pool of mentors for subsequent programs and, hopefully, a technology hotspot for wireless health product development. I realize that this may take a number of years to evolve, but as Brad Feld has stated many times, you must have a long view for these types of programs and not expect or promise big short-term gains.

In my next post, I will continue describing my experience focusing on defining and engaging possible mentors.

In the meantime, any thoughts, comments or suggestions are, as always, welcomed.

VC’s Go to Washington to Talk About Medical Device Approval Process

I ran across this post on the Wall Street Journal’s Venture Capital Dispatch blog. A group of Venture Capitalists that invest in medical devices went to Washington to talk about the issues associated with getting medical devices cleared through the FDA. Main point was they were focusing on making the process consistent, predictable and transparent. They also talked about how the current process is driving more entrepreneurs overseas along with all their innovations.

It seems they got to speak their minds, but doesn’t sound like they got commitments to resolve the problems. Now that’s not good.

Wireless Health – Seed Accelerator

At first, the idea of me putting together a seed accelerator program based on wireless health products was daunting. After all, I am not in that field and certainly have little knowledge of the science involved in developing medical devices. As for wireless, I do have a communications background from my career at Bell Labs, AT&T and Lucent Technologies although not necessarily cellular. Then I realized that a seed accelerator is actually focused on positively affecting the “process” of startups not the technologies and products of the startups. I can deal with that!

I began looking at the current process being used. Not necessarily a pretty picture. The length of time it takes to get from idea to market is extremely long if you are developing a medical device. I understand that a lot of this time is to ensure that the product does what is says it will do while not harming the patient. That responsibility falls onto the Food and Drug Administration (FDA), which has a long and involved process for bringing new drugs to market that takes 10 years to get through.

They were reasonable about devices to conclude that maybe there should be a shorter process for devices without risking harm to patients, and developed the 510 (k) process where some devices can be approved in a matter of months versus years; a big breakthrough. They did make provisions that result in longer approvals by requesting more tests (clinical trials) whose complexity can add years and millions of dollars to the product development cycle. The good news is that the Center for Devices and Radiological Health (CDRH) who is responsible for approving medical devices has been studying ways to make the program more effective and be better prepared for new technologies like wireless being added to new devices. You can read about their plans here.

I have no intention of trying to become involved in the changes at CDRH or their 510 (k) process. Since I am looking at the process itself, I started to look at the process and see if there are things that startups, especially first time entrepreneurs, can do to get closer to the Months to Approval that I mentioned above versus the Years and Millions of Dollars alternative. So, I talked to entrepreneurs who have been in the medical device space and have successfully navigated the approval process along with others who seemed trapped in it. I also talked with lawyers who have helped clients with their applications and listened to people who have years of experience with the FDA. I learned that there are a number of things that entrepreneurs can do that will help them through the process many of which can be included in a seed acceleration 90 day program.

Personal Health devices like the Nike iPod Touch application or the Fitbit product require no FDA approval and can get to market much quicker. With an increased interest on personal health, there will be many new wireless personal health products introduced over the next few years. Obviously, there are lots of things you can accomplish during a seed accelerator program to assist companies startup process.

Once a medical device is approved by the FDA, it can be brought into the market. The next important step is for the product to be reviewed by the Center for Medicare and Medicaid (CMS) who determines if and how much they will allow patients to be reimbursed when they have the devices prescribed for them. There are currently some problems with wireless medical devices within the current CMS policies, but, as with the FDA 510 (k) process, these have been identified and CMS is working on resolving the issues. In the meantime, there are things that entrepreneurs can do to facilitate the CMS process that can be covered in the seed acceleration 90 day program.

My next big question was “Can I develop a program that addresses the main issues that I described above and includes other relevant information that will accelerate companies working in this sector in 90 days?” Again, I talked to a lot of people currently operating in this space along with the service providers who support them, and created a set of program milestones. I got great feedback especially in relation to the milestones. There is a significant learning curve with first time entrepreneurs that can be positively impacted in a seed acceleration program. As an side, if you put an entrepreneur who has developed medical devices together with an entrepreneur who has developed wireless devices the result is a set of first time entrepreneurs who will have a learning curve.

So, I’ll end here for now. In my next post in the series, I’ll begin to discuss the process of putting the program together. One last point, as I have been working through the process, I originally used Wireless Medical and Personal Health as the title.  As I move along, I get input and adjust accordingly. One recent recommendation was to shorten the title to Wireless Health. The rationale was that the title was too long and this shorter version includes both the medical device and personal health device spaces.  It also reduces the number of keystrokes, which may not seem like much, but over time will be significant. So, I have adopted that recommendation.

As I said above, I look for input and I believe this will be a program that will get better based on continuous process improvement. So, if you have any thoughts or suggestions, please send them along in the comments.


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