When you’ve weathered adversity and come through on the other side, you bring a new perspective that can be helpful to those encountering a similar challenge for the first time. That’s why we turned to Allan Will for some advice based on his strong track record of founding, running, building and selling medical device companies, even during past economic downturns.
Allan has spent the past three-plus decades of his career serving as CEO of various Bay-Area venture-backed startups and has founded or co-founded 11 companies, including The Foundry, Ardian, Evalve and Concentric Medical.
An inventor on over 30 patents, he currently serves as executive chairman of the board of EBR Systems; chairman of the boards of Fractyl Labs and Setpoint Medical; and sits on the board of directors of the Fogarty Institute. In fact, his passion for board work was spurred by Dr. Fogarty himself, who served on the board of medical device startup Devices for Vascular Intervention (DVI) when Allan was the CEO.
Subsequently, Allan joined AneuRx, a company founded by Dr. Fogarty to develop stent grafts for aortic aneurysms. After selling AneuRx to Medtronic, Allan conceived and launched The Foundry, one of medtech’s most successful incubators. While CEO and chairman of The Foundry, he moved into venture capital to facilitate funding of Foundry companies. Allan joined St Paul Venture Capital and subsequently Split Rock Partners, a venture capital firm focused on medical devices.
In this Q&A he shares his view on the current crisis and steps companies can take to best navigate these challenging times.
Q. You have had an extensive and illustrious career in medical devices. What are some lessons learned from past economic downturns that might apply here?
A. Let’s start with the fact that fundamentally this economic downturn is different from the past. That’s because – taking ’08 as an example – venture firms were leaving medtech in droves, but it was due to issues around the economy. While past crises might have affected funding, they didn’t as dramatically affect how you could conduct your business. But now, there is an added impact on the actual work your company is trying to do, whether it’s because a clinical trial is on hold or you’re unable to conduct normal work activities because of shelter-in-place orders.
The commonality of this downturn with others is that we’ve again needed to assess cash in the bank and how much runway we have relative to the crisis. Many of us have been forced to restructure our businesses and conduct our work to allow the longest runway possible to survive and emerge from this crisis intact. Every company I’m currently affiliated with is doing exactly that, even though one just closed a $55 million financing round in March.
Q. What is the general sentiment you are seeing in the medtech industry and how are VCs responding to this time of crisis?
A. I think it is a bit sector-specific in that across all life sciences there are certain fields that are doing well right now. Some of the obvious ones are businesses that are developing diagnostic tests and antibody testing that would be appropriate for COVID-19, some of which are being asked by governmental agencies to double, triple or quadruple production. Others in similar situations are companies that develop personal protective equipment or ventilators, and pharmaceutical companies that are developing related treatments.
And then there are others on the periphery, such as telemedicine companies, health IT and digital health businesses, that are actually thriving, meaning they’re getting adequately funded, as we discover how much medicine can actually be practiced remotely.
However, in the traditional medical device arena, I think it’s largely a different story in that virtually everybody is in some form of “hunker-down” mode where they’re attempting to stretch their cash as far as possible.
Regarding VCs, I think those who are already invested in companies are behaving similarly to how they have responded in other economic crises, meaning they are taking a hard look at their portfolio companies and will continue to support the most promising ones, while “culling the herd,” if you will, with others.
For VCs who are prospective investors, there is a parallel “hunker-down” mode where it’s hard to get the attention of institutional investors unless you are addressing something that is specific to the COVID-19 crisis. In addition, there are those who are out there hunting for bargains in a predatory way. So, I’d say it’s a very challenging time if you need new investors in your business.
Q. Based on your broad experience in medtech and working as a VC, what are some best practices you would offer for early-stage entrepreneurs who are seeking funding or government loans?
A. I advise companies to focus only on what is necessary, structuring your business so those are the only places you’re spending money. In addition to applying for the Paycheck Protection Program if you are eligible, I would advise possibly considering the Economic Disaster Injury Loans run through the SBA, as well as seeking grants through the appropriate government agencies to which your device relates.
Like many aspects of being an entrepreneur, you’ve got to think as creatively as possible. That means pursuing every possible source of funding, while simultaneously looking internally to determine what you absolutely need to do and how you can accomplish it as efficiently as possible.
I think once you emerge on the other side, you’ll find that this exercise has served you well. I find that the best companies are run with a creative approach to staying focused on the absolutely critical activities, rather than spending money on areas that are “nice to haves.” We often don’t realize that we can do without certain activities until we are forced to do so. It’s a good lesson to live through.
And I would add that early-stage companies shouldn’t be discouraged. In some ways the earlier the stage, the better, as these businesses usually already have a very low burn rate and are able to survive on less.
Q. How can CEOs best prepare for when the shelter-in-place orders are lifted?
A. Think carefully about how you expand your business and do so very deliberately with an eye on the most critical areas first – and that includes identifying everything on the financing front that you can locate. That creativity should extend to figuring out how to run your business as inexpensively as possible, from head count to rethinking how you can conduct testing more efficiently or run your clinical trials in a less costly manner.
Talk with your team about what absolutely needs to get done and brainstorm suggestions for accomplishing it in a less costly manner. Most of us tend to get into the mode of conducting our business in the way it’s always been done, as a force of habit. Sometimes if you turn a problem on its head and focus on the key issue, you find a better, more affordable solution. For example, maybe you initially thought you needed an animal study but can obtain the same results less expensively though a creatively designed bench study.
Q. Creating a strong company culture has been a big part of how you’ve built successful companies. How do you maintain company culture during these times?
A. This is a very important topic because building or maintaining a company culture is particularly challenging when you’re doing it remotely and even harder if you have to go through a reduction in force. But I think that now it’s more important than ever to focus on culture because people are feeling very isolated. They aren’t mingling with co-workers or seeing their friends on weekends, and they may be losing touch with why they joined the business in the first place. This is exactly the time to re-emphasize your company’s mission, reminding everyone of the patients you treat and how critical your technology is to their survival.
By now, almost everyone is using virtual meetings to conduct business, but I’d also be thinking specifically about how you can use these types of platforms to build culture, such as holding Friday afternoon happy hours or doing weekly games or activities remotely.
You also could coordinate a joint volunteer activity, where you dedicate time every week to support a charity, like a food bank. While you still need to social distance, it allows colleagues to see each other while simultaneously helping others. That helps people feel good about themselves and their affiliation with the company.