Archive for the 'Business Issues' Category

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.


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: Development Pitfalls

As any entrepreneur knows, getting started with a new company is fraught problems that can turn a great idea into a big mistake. There are just so many decisions that, if the wrong one is made, can kill or cripple the company. Worse though are the startups that haven’t encountered the big “Oh Crap” as yet and there’s a glimmer of hope that entrepreneur latches onto.  These startups are under the impression that they are really close to big sales/financing/strategic partnership.  Encountering your first big speed bump can be a slow and painful experience.

Many companies entering the wireless medical device space get stuck in this last category. However, their being stuck and not able to move forward may be less about something they did or did not do and more about the pitfalls along the path of taking a medical device to market.

For example, wireless devices startups may get snared in government processes that were put in place to insure that medical products are safe before allowing them into the market (by our friends the Food & Drug Administration, FDA). Once they are found to be safe, then another government organization gets involved to decide how much Medicare and Medicaid will pay for the product (Center for Medicare and Medicaid, a.k.a., CMS).

Now if you include working with the Patent and Trademark organization on intellectual property applications and issues, that’s a total of three government organizations involved in the product realization process. And, as we know, government organizations are not the fastest groups to deal with. Not only is this two-pronged FDA-CMS process time consuming, it is very costly, and every entrepreneur in this space has to make sure that he/she has planned on having sufficient financing and investors who understand what’s required to get through the FDA and CMS.

I am sure that this is one important reason why many investors avoid life sciences deals including medical device space altogether. After all, an entrepreneur can start an consumer Internet company for a few thousand dollars, a couple of great programmers, a good understanding of the demographics of the prospective customers and someone who understands the elements of SEO and Conversion. Consumer Internet startups can begin generating money in a matter of months. Contrast this to medical devices requiring large initial cash outlays over an extended period of time; in many cases years.

I find it interesting that, when there is talk about fixing the issues in the FDA, e.g., around the long timeframe for a wireless medical device company to get its products through the FDA’s 510 (k) process, there are always many comments about making sure that the primary goal of safety isn’t overlooked. I’m clearly not a proponent of having the pendulum swing all the over and weaken the process so that unsafe products get to market faster, but who can argue that the US economy and consumers both can benefit from an overhaul to the 35-year old 510 (k) process?

On a positive note, in January of this year, the FDA announced a plan consisting of 25 proposals targeted at overhauling the approval program and is targeting to implement some changes in 2011. Their list includes streamlining the review process for lower-risk devices, clarifying when companies should submit clinical data for a 510 (k) application and creating a new council of senior FDA experts (“Center Science Council”).

As for the insurance reimbursement process shepherded by CMS, a number of major stumbling blocks are under review. For example, the current process allows reimbursement for a medical device or associated devices only if the patient is at a medical facility when using the device. Now, given the nature of wireless medical devices, this just doesn’t make sense. Why should we mandate that an elderly or ill patient, having a wireless device that collects information and sends it along to a health care professional, leave their home and travel to some medical facility to use a product that works perfectly well in their home?  Especially for a device that’s merely sending data—readings of blood pressure, etc. along to the physician. This is one that we all hope is resolved soon.

I assume that it will take some time for both the FDA and CMS to make changes and integrate the improvements into their overall processes. In the meantime, what can we do to facilitate getting wireless medical devices to market faster and have them reimbursable?

Here are my suggestions:

•    What can entrepreneurs learn about the language they should use on an application for a specific device that would both position it correctly with the FDA reviewer and ensure that it is not incorrectly categorized into a class that all but ensures a lengthy approval?
•    A medical device will have both a “patent” which needs to be innovative and not intuitively obvious while the goal of a 510 (k) application is to describe the device as very much like something that has already been approved. What is the best strategy for an entrepreneur to follow given the diametrically opposed requirements of these two required organizations? There are knowledgeable people who know these organizations and have dealt with them and can provoke great suggestions to entrepreneurs.
•    So how do we get the knowledge where it is needed? This is, in fact, one of the goals of a startup acceleration program and one that we will be attempting to resolve as we move forward with an accelerator in our region.

As we put our program together, I am constantly looking for ideas and contacts that can help with this. Any suggestions or recommendations are always welcomed.

WOW! Tech Jobs Available

On Wednesday evening, I attended Startups Uncensored #20, a monthly networking event sponsored by Docstoc, in Santa Monica. The panel consisted of Jason Nazar (CEO,, Josh Meyers CEO of People Media a subsidiary of, Jeff Tinsley CEO and Founder of MyLife, Robert Angarita Co-Founder of Cramster and Mark Kapczynski VP of Corp Dev at Experian.

During their introductions where they described their companies, at least four of the five stated that they had job openings, with one having 17 openings. I am not sure if Mark from Experian mentioned openings. These are tech jobs: programmers, product managers. So it sounds like the tech job landscape is alive and well at least in LA/Santa Monica especially if you are in any of the mentioned needed categories.

Tech Stars and Do More Faster

For any of you who are not familiar with TechStars or the book that two of the founders published, I recommend that you investigate them. TechStars is a seed accelerator program that started in Boulder Colorado back in 2006 and founded by Brad Feld and David Cohen.

Brad is a Venture Capitalist and Managing Director of the Foundry, a Boulder based venture firm. He is also the author of Feld Thoughts, a popular blog where Brad covers many issues around investing are entrepreneurship. David was a Boulder based entrepreneur and Angel Investor who approached Brad with the concept that evolved into TechStars.

I did an earlier post about Do More Faster, so I won’t re-state what I covered there. I did however take one of my recommendations seriously and bought copies of the book for entrepreneurs and founders that I mentor as a holiday gift. I thought the book had a lot of great information and would benefit my clients. However, I wanted to see if they thought the same way I did.

The book is a compendium of articles written by Brad, David, TechStars participants and mentors around seven themes. Everyone read the book even those who are more consumer product focused. They all thought there was valuable content and enjoyed hearing how others dealt with problems they are currently experiencing.

Interestingly, two of them signed to participate in future programs and one of them is currently talking with the Director of the Boston TechStars about being part of the next program, which begins in a few weeks. They only select 10 companies from the 800+ applicant, so getting this far in the process is huge.

So, if you are an early stage entrepreneur, you should definitely start looking at the Startup America Program, the things coming out of the Small Business Administration in relation to Startup America,, and get a copy of the Do More Faster book.

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