The Inventivity Pod

Susann Keohane discusses how she uses remote sensing to study behavior patterns in the aging population, a project she hopes will help the elderly thrive: “Overall, I really want us to make older adults feel like technology is for them…and it’s theirs to be used to, and it should be marketed, advertised, and designed for everyone”.

Susann Keohane is the IBM Watson Health Innovation Leader for Healthy Aging and Longevity. Her induction into the Florida Inventor’s Hall of Fame in 2021 is amongst one of her achievements; another includes having 137 U.S. patents. She has become an expert in enabling human ability through emerging technologies with a focus on accessibility research, aging-in-place Internet of Things (IoT) technology, and cognitive systems to deliver personalized insights and adaptive interfaces.

In this episode, Keohane shares with host Richard Miles the importance of building more intuitive design solutions for the aging population, alongside having them feel comfortable with the technology.

Craig Bandes discusses how to avoid the same pitfalls of companies he has worked with in the past and how to create a structurally sound order of operations through his experience in business and finances: “And you get to a point where you just realize that if I don’t try it, I’ll never know, and I’ll always regret it. And then you jump into it . But jumping in with more experience, I think, really increases the odds of surviving”.

Craig Bandes is the CEO and co-founder of Pixelligent Technologies. He has over 25 years of experience serving as a CEO, entrepreneur, and angel investor. Additionally, he is a member of the NanoBusiness Alliance Advisory Board.

In this episode, Bandes shares with host James Di Virgilio the importance of having a business background before entering the business world, how he’s saved a company from bankruptcy, and the next steps for said company in terms of workplace diversity, globalization, and sustainability.

TRANSCRIPT:

Intro: 0:01

Inventors and their inventions. Welcome to Radio Cade — a podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. Starting in running your own company — it’s not for everyone. For those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. We decided to go out and talk to some of those people and find out what they’ve learned, what they’d repeat, what they’ll never do again, or hear stories from their first year, then from the period when they realized they’re going to survive and how they intend to position their companies for the future. We’ll find out what a CEO’s normal day is like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is it time to move on? Join us for CEO101 — a limited series of deep looks at people who are their own boss — for better or for worse.

James Di Virgilio: 0:54

We’re talking with Craig Bandes, the president and CEO of Pixelligent Technologies. It’s a nanotechnology company that does a whole lot of fascinating things that Craig is going to tell us all about. But first, Craig, tell us about your background as a leader. You’ve done a lot of things — both co-founding companies, as well as being brought in to be a CEO.

Craig Bandes: 1:14

Yeah. Well, great. Thanks for inviting me to join today. So, you know , I think it’s , it’s nothing that I think you can prepare for without being in the role. There’s so much of it that you figure out as you go. There’s definitely taking advantage of books on leadership or being mentored by others that have come before you, but there’s nothing like being in it to really make all the mistakes, hopefully learn from them, and start to formulate what you think is a, a good compilation of strategies, right? There’s not just one that I think makes a leader, or a CEO, successful.

James Di Virgilio: 1:45

Give us a little bit about your, just, biography, sort of the companies that you’ve led. Give us a CV here.

Craig Bandes: 1:51

So, very different companies, very different industries. The first company I co-founded with a partner was in IT staffing and consulting — and that was an area where he had slightly more experience than I did in it. And we were big users of those, sort of resources and vendors when we’re both working together as executives in a telecom company, which [inaudible] many back around the uh, circa 2000, didn’t work out after raising lots and lots of money — which was my main job when I was there. And so we started it together, and it was not my lifelong dream to do it, but I had more entrepreneurial background than he did, so it was more, helping get started. I did that for a couple of years, and I’m still running more of a lifestyle type of business today, and decided that really was not what I was looking for, so [I] moved on from that and got recruited to go join a — very early stages — a company that was being formed in the Homeland Security sector, not too long after 9/11. So this would have been in, like, early 2003 when the Department of Homeland Security was just really coming together; and there was a huge need for companies that could come in and provide services to this [inaudible] organization to try and find all kinds of ways to make sure we were better prepared for all kinds of things and acts of terrorism, for sure, but just generally, even natural disasters. It’s not something that was well-integrated in state and local and federal governments. And so I was brought in [inaudible] Global Secure as the president. I wound up taking over the CEO title about a year later and grew that company to, from really three of us, to about 300 people with operations in five states that span software development and training services, and many batches of protective gear and raised about $25 million, maybe closer to $30 million, had nationwide distribution channels we set up… And then ultimately, after trying to go public, but not hitting the window at the right time, when I’m selling off the business at the end of 2007, into early 2008. And that’s about the time that I was approached by a friend, who’s a corporate attorney in D.C., to try and take a look at this company called Pixeligent, which was a very early-stage, non-material company at the time, but also happened to find themselves in a bad spot of bankruptcy and litigation against a large public company. So I was really brought in to see if it was salvageable, and brought in some experts that knew IP portfolios much better than I did, said there was good IP here, and decided to get involved and see if I could at least get it turned upright, and then see what happened. Appointed by the bankruptcy court, the chief restructuring officer wound up restructuring the company, ending the litigation, getting back control of the IP. And then we had to raise money for a pre-revenue, recently bankrupt, [inaudible] technology company in January of 2009 — which could not have been worse timing. So we got out by the skin of our teeth, for myself and a bunch of local investors that I know and started the process of rebuilding Pixelligent.

James Di Virgilio: 4:38

That’s a fascinating story that we could spend an entire podcast on, for sure. I also started my wealth management firm in February of 2009. So I know, I know exactly what kind of time that was. All right, Greg, take us back to what you would consider to be your early formative years as either a CEO or a co-founder. What was it like for you to take on that kind of role?

Craig Bandes: 5:02

So, we went in with — on the first one, at least — called Focus Technology, we went in saying, “hey, we’re going to start this company.” The telecom company had ended. And there were a bunch of really good people that we thought we could bring on quickly. First time I wrote a big check to get something started as did my partner. And it was just dark right, and very entrepreneurial, not a lot of great planning. It was just, “we think there’s a good opportunity and let’s, let’s go.” And the first big lessons for me there were, one: we hired a lot of people too quickly. And all of a sudden we had a burn that put a lot of pressure on us to go close business in a way that was really not organic. We figured it out, but it wasn’t without a lot more pressure [ inaudible] that we really needed to put ourselves under, and we should have started much more cautiously with a handful of people, including ourselves, and built it a little more brick by brick. I think the timing was, around when we started the business, was when things were contracting in the world of telecos. And we thought that meant it would be a good opportunity to go after short-term staffing, as these companies were cutting fixed overhead and we realized that that was not the right premise, that the consultants were the first to go. And so there , there is a lot of things that we jumped out of the gate on, and I put a lot more faith than my partner, who felt he knew that business better than I did. And within about six months, we were digging ourselves out, as opposed to growing the company. That first lesson, or basket of lessons, was: when you’re starting, start more carefully — really understand the markets better, the timing of what’s happening in those markets better. Figure out what is the right number of employees you need to really just get things started — and even if it means you’re going to lose some really terrific talent that you may not be able to get back, it’s a safer, better bet to do that and then go find other team members as you grow. Those were the main lessons on that. And we learned them righting the ship. We wound up, you know, growing a lot more carefully after that, but those were some early missteps that, in hindsight, seem obvious, but at the time we were just excited to take off.

James Di Virgilio: 6:58

Yeah. Why take on a project like this? You come out of school, you’re starting to do whatever it is you want to do. Why take on an entrepreneurial project in the first place?

Craig Bandes: 7:07

I wouldn’t advise it, actually. In fact , if I look at some of the issues that led to pretty serious circumstances that Pixelligent found themselves in, it was started by three PhDs that just got through their postdoctorates and started this company without ever having worked in a business, and then really understanding what all the facets are. And sometimes for folks that are sort of, deep buried in the technology, they think the technology is the hard part in business and growing is the easy part, which obviously is not the case. There’s tens of billions of pieces of paper, of patents, out there that will never see the light of day. Most of the time — and there are the Mark Zuckerbergs and the Bill Gateses of the world — for every one of those there’s millions more that maybe try too early. And so I would say the first thing is, that it’s better to go out and just get some level of experience before you start. I think once you have that, and you have an idea of that you think is a service or a product that’s missing in , in whatever market that you’re in, or you’re aware of. And you get to a point where you just realize that, “if I don’t try it, I’ll never know, and I’ll always regret it.” And then you jump into it . But jumping in with more experience, I think, really increases the odds of surviving .

James Di Virgilio: 8:14

This is a lot of good information. Let’s probe this a little bit further. You talked about funding early on, and obviously that’s the lifeline of any company that’s trying to go anywhere. You have to fund your ideas, be able to get your product or service to market. It’s much different obtaining funding in your current role at your current stage, I’m sure than it was in the beginning, in the early stages. What was it like for you to take on a project and then have to go out and get funding in the early stages, given that you had probably never generated funding for something before?

Craig Bandes: 8:42

So my background was a little different. I came out of investment banking and venture cap. And so, so I was very comfortable with the capital markets. Back — growing up, my family had an over-the-counter trading firm when I got my [inaudible] seven right after high school. So I was deeply enmeshed in the financial markets and was very comfortable in the language, and the way things worked . So, for me, jumping into raising capital was something that was a skill set that I just already had, so I think on that front, I definitely had an advantage. I did a lot of capital raising at the telecom company where it was $275 million of equity and debt capital for that company, and then filed to go public with that company as well, and ran that process. So I had a lot of really good background . So when I jumped into, even with Focus — the first company — we raised a little bit of money, like a million and a half or $2 million, maybe. Beyond that we put into it ourselves, it wasn’t that difficult. I think as you start to go into companies that have a much bigger appetite for cash, like this one — Pixelligent — today, we raised over $50 million of equity so far, and we’re not done yet. But what I learned along the way here is that there’s many different types of capital. And I think a lot of entrepreneurs get focused on venture, and very few of them get it. And so you can spend a lot of time , especially at the early stage of launching, trying to go chase that capital with a very low likelihood of success. And so I think about it of: there’s many pockets of capital , right? There’s the initial friends and family round, then there’s the angel round, then there’s a super angel round, family offices. And then there’s different flavors of different stages of venture capitalists. There’s corporate venturing — and that helps bring in some strategic capital that may help you scale your business faster, open up markets faster than you could on your own. And so when I tell friends, or , or when I mentor for classes, that you really want to understand, what type of capital do you need, how much do you really need to get to the next one or two milestones to start to show real progress? And you can point to success that will help you go raise additional and greater sums of capital and really know the audience who you’re talking to well — in terms of the type of investor you’re talking to because each one of those that I mentioned will have a very different set of criteria they’re looking at and a different set of objectives that they’re looking for. And so sometimes I see, especially first-time money-raisers , kind of put together a deck and think it’s a one size-fits-all. And it’s not. I have probably put together, even with Pixelligent, hundreds of different decks, targeting different types of investors, depending on really understanding what their objectives were and why they would want to write a check.

James Di Virgilio: 11:13

Yeah, that’s really good information, especially on the funding side, which you mentioned a little bit already about. Especially if they’re inventors on the technology side or the ones that created the innovation, the business side tends to be foreign to them — and the funding side tends to be very, very foreign. What were some challenges that you faced or found particularly difficult during the early stages of your career? Again, as a CEO and co-founder.

Craig Bandes: 11:37

I think some of the challenges or the key lessons learned, well we covered a little bit of this already, which is: start more slowly and build into it so that you don’t put too much pressure on capital raised and just control the burn until you really start to get real revenue traction with your customers. I think the understanding of all kinds of different stakeholders that can help you be successful, right ? So we talked just now about raising capital — that’s one area you need to know — but I had great success in bringing on awesome advisory board members along the way who bring skill sets from a technical perspective, a financial perspective, maybe more of a strategic or a market entrepreneurial perspective. And having them on the team not only makes the team overall smarter, we can leverage their experience. We can leverage their networks in terms of capital raising, customers, or just an understanding of how markets work. And I think the other key piece of it is: when you’re out there building the company, you’ve really got to focus on bringing on the right employees, right? And every time I settled for anybody, you’re bringing on the wrong body. You have to, even though you might be under a great deal of pressure, you know you need more people, you really have to focus and t ake the time to bring on the right people. And the right people will be the ones that you have to sell. It’s just not a matter of you’re going to give them a job and pay them a salary a nd g etting t hem m ix equity. B ut people that I brought on that have been the best, h ave really been the ones that have put me through the pieces the most a nd t urned o ut to be the most productive and most loyal employees. And so, really understanding as t he CEO, it’s your job to basically convince and sell all your stakeholders. I t’s not just t hat in this case, a, uh, an investor stakeholder, but really everybody that you need to be on the team to help you be successful.

James Di Virgilio: 13:21

So true when it comes to people being what moves these things forward, right? The wrong team and the best ideas — not going to get it done. You have to have both of those things. Let’s move from, let’s call it, your rookie years, your early years to your middle years. You’re a veteran now. You’re established, you’ve done some things already. You’ve learned some of these lessons, which you’ve already shared, thus far. How did that change how you were able to lead as a CEO, having some of that experience under your belt already?

Craig Bandes: 13:46

So I think part of it is you , you learn to be a little more thoughtful before you make decisions, in terms of people over investment. Once you’ve gone through some of those painful processes in the past that you were maybe moving too quickly, I think you start to realize how important the CEO is in setting the tone for the organization and understanding really the impact you have on the organization. Sometimes we’re so focused on the objective of just getting it done and charging hard to go after, especially after you raise some capital and you’ve got investors over your shoulder. It’s really important that you make sure that the team really understands where you’re headed, and why that’s hard, in an entrepreneurial venture, is that that changes, right? The classic word, pivot — there’s many pivots. I can’t count them [inaudible] here. And when you do that, it’s really important to make sure everyone understands what the new objectives and goals are and to spend the time with everybody. And I think some of the mistakes I’ve made was: I thought it was clear after one meeting and “we got to go do this.” And it wasn’t. And sometimes that would make people frustrated. Sometimes it would make them feel alienated . Sometimes they would leave, because they didn’t understand the direction . And so really making sure that as we’re moving forward, everyone that’s in the huddle really has a good understanding of where we’re going, why we’re going there, what the play is that we’ve called. And so when we go execute, we don’t have a problem . And I think that’s something that I did not really take into account or grasp as much as I needed to early on. And now I spend a lot more time communicating with the team, making sure we all understand where we’re moving forward. I think you can’t over-communicate — you can have too many meetings — but you can’t over-communicate to make sure everybody understands really where we’re at.

James Di Virgilio: 15:21

That’s a great one. Oftentimes as a leader, you can have a lot of thoughts in your head and you live with those thoughts every single day. And you spit out a few sentences, a paragraph, some moments at a meeting where you think the direction is clearly understood, but other people are not necessarily living in your head all day, knowing all the thoughts you have, and it comes out to them as some passing thoughts. So that’s a great key takeaway there. During the veteran’s stage, if you will, the middle stage of your, your CEO life, how did you handle growing and expanding rapidly, really starting with X number of people and then very quickly you find yourself with growing resources, growing staff — how are you able to navigate that successfully?

Craig Bandes: 15:56

I think it’s been different with different companies that I’ve been a part of. With Global Secure, we were a buy-and-build strategy, so we acquired three companies and another one, but it was more like a foreclosure and we got the product line and some people. So that one, we were able to scale very quickly because we had the cash and we were able to make some good acquisitions. And then that was more around an integration of the company. Now, each of these companies that we acquired were meant to be in separate areas and talked about. So it was software, it was training, it was product manufacturing. So it wasn’t meant to make them work together, but still finding a way to keep, thematically, why we did what we did, and scaling that. So it was more, each one of those was very much like scaling three individual companies, which had its own set of challenges, but I also had very competent executives running those divisions. And so we were able to, as a team, move that one along pretty quickly and scale pretty quickly based off of the infrastructure that was already there when we acquired this company, but Pixelligent’s different — Pixelligent was seven PhDs, and then me, and this is a chemical manufacturing company — it’s around novel technology and nanotech , and I had never taken chemistry. I’d taken some physics. So it really was an amazingly steep learning curve for me across everything that we did. And so for this one, it was more really getting my head around, “okay, what are we doing?” And what the initial path was didn’t work. So what capabilities do we have? And I think we can go sell to the market that differentiates us, and really kind of start here one step at a time and build it brick by brick, as we start to get some level of customer interest in them, and then start to build up a brand, initially here. And then we started going to Asia very early to build up our reputation there because that’s a big market for us — still spent a lot of time there, you know, non-COVID time. So it was a much more methodical approach of how we build and scale a team. But even here, we scaled very quickly. Around 2015 or 2017, we got our first big market –it was going to be in the area of solid-state lighting and LEDs. And ultimately, we missed the timing on that and we had to scale back and cut the company [inaudible] very quickly just to kind of give ourselves time to pivot, and now we’ve been in a rebuilding mode again, really since 2019. But in this situation, I was able to read much more quickly what was happening, make the change — as painful as it was — very fast, early on to give us time to recover and redirect ourselves. And had I not had the prior experiences, I think it would have made the decision [inaudible] .

James Di Virgilio: 18:20

So the prior experience obviously helps you as a leader to make better decisions. You have an algorithm in your mind that says, “I’ve tried that, that’s not going to work in this situation. That’s going to more efficiently get you to the right answer.” How does your own personal brand help you? Obviously, if you’re in the middle stage, you’re a veteran, right? You basically have a resume that people can look at where it says, “hey, Craig has been successful doing this and that.” And at the table, that gives you a little bit more credibility, right? When you’re having these discussions during those years, what you say has a little more weight than if you’re in the beginning where you’re , you’re sort of fighting tooth-and-nail, just to get some respect.

Craig Bandes: 18:54

I think that’s right. But beyond the credibility that may be on a piece of paper, your experience just comes out, right? In conversations with potential employees, with investors, with board members, you’re trying to recruit budget board members, customers, you just have more confidence because you’ve just been through so many battles; you’ve made, and hopefully learned from, a number of big and small mistakes along the way. And like anything else, you just feel better prepared. Whether you’re looking to recruit a junior marketing person who has 10 offers and you really want her and her business, or you’re in front of the CEO of a multi-billion dollar company, trying to convince them to write a check to invest in you. You just have the confidence to be able to have those conversations. You prepare for them obviously, but then there’s just a certain level of understanding and background, and reading a room or a person that you just get with experience, right? So I think for me, that’s the biggest part of it is just having lived through so much of it. I’m sure, you know, having a good background and people see you and check you out on LinkedIn — that all helps, like, establish your credibility maybe before you get in the room. But I think we’ve all met people who are a lot better on paper than they are in person. And so being able to, when you’re in that situation, in person, with whoever it is you’re trying to talk to, having that experience and confidence and being able to understand what their objectives are, what yours are, and trying to find the right way to get to the result you want is really just experience.

James Di Virgilio: 20:13

And you’ve touched on this now, at least you’ve touched on the now throughout this conversation, which has been great. Let’s bring you into the now in this moment right now — here we are in 2021 — you are the Pixelligent CEO; you have this wealth of experience behind you. The first question I want to ask is: in your opinion, is being a CEO today — is it different than it was 15 or 20 years ago? Is it harder? Is it easier?

Craig Bandes: 20:36

I don’t think it’s ever easy — it’s different, right? I think it’s a much more global environment. I mean, even for the size we are today — which is not big — in terms of employees, I have a team, small team in Korea and Taiwan. Prior to COVID, I would be in Asia once a quarter, visiting three or four countries, talking to customers and partners; we have distributors in Japan and China and Korea, Taiwan. You got to keep on top of those guys. So I just think everything is more spread out. Everything is global. And you have to think about your business and today probably on a much more global way than you ever have, and it’s not going to go backwards. I think having the mindset that what you make is important, but also how you make it, and the people you have onboard your team that are responsible for delivering it is really important. So I think diversity should have always been important. I think now it has obviously a lot more of a spotlight on it. We worked and had a very diverse workforce across everything and everyone that’s here. And I say everything. I mean, everything that we do, we have manufacturing, we have our research and development, we have formulation technology, I mean finance, and we have diversity really throughout the organization. And I think that adds to it. And I think there’s thankfully been a lot more focus on that, but you know , I’m reading more and more articles of how that is really in this ESG movement, more and more how CEOs are being judged. And I think that’s right. I think having a more sustainability and environmentally conscious mindset is critical. What we do as a materials company — it’s super important. What we make makes everything we go into a lot more efficient. So we’re directly in line with that. But we also think a lot about how are we making it? And what kind of footprint are we leaving? So I think from that perspective, it’s a lot more today about, broadly, what are you delivering and how are you delivering it ? Can it be more efficient, maybe less impactful? I think that’s different than what you probably had 15, 20 years ago, which creates opportunities, but for sure, a lot more moving pieces.

James Di Virgilio: 22:25

So how do you handle the pressure of the media, public opinion, these goals, these directives, the globalization of being a CEO, how is all of that handled?

Craig Bandes: 22:34

I think it’s different for every leader in how they internalize that process and use it. For me, it’s really about — doesn’t matter the size of the organization — we all have an impact on making sure that we create environments that are creating good opportunities for our employees to grow and to learn and to contribute. I think when you read some of these stories out there of CEOs who’ve gone astray that have made some pretty poor choices. You read some of these crazy pay packages that CEOs of large companies are getting paid, even when they don’t do a great job, and they have these massive payouts. I think it’s harder when you’re talking to other media folks sometimes and saying, “not all CEOs go about their business the same way.” And so I do think there is a little bit of extra thought you have to put into, to make sure that you are understood by your stakeholders and the media in a way that you want to be portrayed, which is being a thoughtful leader, that you understand the responsibilities we have as leaders; it’s not only about making a lot of money for your shareholders or for your top people at the company, but it really is trying to make sure you share that as much as you can along the way. And you have equal balance on your overall responsibility along the way. So I think some of what’s happened has been an important wake-up call. I think it’s good. I think holding the senior executive leadership of companies, large and small, more accountable is really important. And again, I think it’s a difference from what you saw 15 or 20 years ago, but I think it’s a good difference.

James Di Virgilio: 24:04

Craig, I can tell through all of your answers that you’re someone who’s constantly trying to improve, and you’re taking lessons from the past and you’re applying them to today. So with that lens, what are you thinking about and focusing on now, as it pertains to you improving as a leader?

Craig Bandes: 24:20

A lot of my focus now is on how do we, as still a relatively small company, have ultimately the impact that we believe we can have, and then how do we attract more like-minded people like us to our mission here to continue to grow the company? I’m spending a lot more time — we touched on this a little while ago — I’m really just thinking about: where are the critical roles we need to bring on? What do those people look like; if they have a similar mindset; and to make sure we maintain that, as things continue to progress for us… Because as you grow and, we are about to hit another, I believe, pretty serious rapid growth spurt in the next 12 to 24 months, how do you not lose hold of that? In terms of really focusing on these critical issues of impact, footprint, bringing on the right people along the way, making sure we continue to maintain the diverse workforce that we have, and just making sure that we continue to really live up to the credo that we have and the ideals that we have as we grow the company through this next level here. I think that’s probably the thing I focus the most on right now. We have the ability now with what we’ve accomplished to go, you know, access different sources of capital. We know our products that we have are impactful and the customers are telling us that. And we’re, we’re actually in a great position where we, in some ways, almost have more business than we can keep up with right now. So now it’s a matter of: how do we continue to keep the right focus here as we grow the company along the lines that we just mentioned?

James Di Virgilio: 25:46

Craig, let’s talk about strategy. Obviously, you had mentioned right in the opening that when you came onboard with Pixelligent, there was a very interesting landscape, all sorts of things going on — legally, a bankruptcy, et cetera. How did you decide first that you were going to take on this project, that it was worthy of taking it on; and secondarily, how did you go about deciding what strategy to take to be able to take the IP that was obviously good, as you said, and bring it actually to market in a way that was going to work?

Craig Bandes: 26:14

With Pixelligent, I had just finished with Global Secure and was joining some boards and doing some angel investing. As I said, a friend of mine in the D.C. area, his lawyer said, “hey, there’s this company that’s doing some work for the University of Maryland. They’re saying they have some of the most important technology they’ve seen come out of their incubator program, but they need to be helped. Can you go talk to them?” And so I sat down and I got with the team and then some of the advisors, and they had some pretty good folks. And the more I understood how they found themselves in that terrible bind, it was just a lot of really bad decisions, right? The technology was good. They actually had a financial backer who was really strong, who was still a supporter of the company. It was just a series of bad decisions. And then a lot of that driven by the inexperience, because they hadn’t been in the business environment before — they just started it right after their PhD programs — I felt this company shouldn’t die because of financially inexperienced decisions. So I decided to get involved. I had some time, of course it was on my time. Rolled up my sleeves, figure out what’s going on. I’ve gone through the restructuring processes before. So I was able to jump into that and go talk to the bankruptcy judge and buy some time, and then just start to untangle the mess. And so I brought in these IP lawyers who said, “there’s really important, valuable patents here around this brave new world of nanotechnology. And so there’s value here if you can figure out a way to make the mess go away.” So part of this job was at the end of the day, if we could get out of bankruptcy and the litigation, we might just sell off the patents and have a return and move on. Or we were trying to actually build something. At that point, I had taken a deep dive in “why had so many nanotechnology companies failed?” And at that point, most of them had — about $4 [billion] or $5 billion of venture money went into a nanotech company circa 2000, about $12 billion of government funding had gone into supporting growing nanotechnology initiatives and universities and companies, and then another $4 [billion] or $5 [billion] or $10 billion [inaudible] these days went in with corporate, and very little came out. And what I realized was, taking a deep dive, is that a lot of the first round of nanotech companies looked a lot like Pixelligent — brilliant scientists , nobody from a manufacturing perspective or a business perspective. And so really what I decided is that, if we could get in and find a way to make these products, these materials at scale and manufacture them, then there’s potential here, because at some point there would be a billion dollar company here. In the world of nanotech, it just has to happen with as much money and talent and energy was going into it. And so if we could crack the manufacturing scale-up code, where almost everyone else failed, then we would have a shot at becoming a meaningful company. And so as part of that, we went after a very large government program just after getting out of bankruptcy, and it was a hail Mary, and it was one of the first programs focused on the manufacturability of a nanoparticle versus the invention of one [inaudible] . And that really launched the company. And since then, manufacturability is deep in our DNA as the invention of human service . And that’s really what sets us apart. So when we have fortune 500 companies, can’t talk about most of them, but one of them was [inaudible] and that many others come and visit us and kick our tires. They see that we’re different because they can see our manufacturing lines right next to our R&D labs. And so part of it was, I felt that there was the potential to build something meaningful that could have a big impact, would help in the world of sustainability because of the way we make the materials and the efficiencies that they bring, and, ultimately, there were going to be some really big successful companies in the space. And if we can get the manufacturing down, that we would have as good a shot as anyone.

James Di Virgilio: 29:48

So, you build out this broad strategy, which was very well laid out right there. How does it go from that to something more narrow — strategy into actual tactics, as you moved along through the curve of progression with Pixelligent?

Craig Bandes: 30:01

So you start with, “okay, we have to know that we can manufacture whatever, right?” So the first thing is to hire the right people. So I brought on, pretty early on, a great senior executive and a manufacturing group , understanding of our business. And I told them when you join, “look, here’s the deal: walk down to the scientists , see what they’re doing. And if there’s anything that they’re doing that you think won’t scale, we’re going to tell them to stop.” And they came back and said, “there are a number things that they’re doing that won’t scale. They are using materials that are [inaudible] … or they’re so toxic, you can’t put more than a gallon of them in the building, or you can be shut down by the fire marshal, or downstage processing, and environmental and safety and health issues that no large company will let you go into their building, from a manufacturing perspective. So very early on the tactics were, “okay, we’re only going to make things in the lab that we have a 75% chance that we believe can be scaled, and not violate those issues of safety and scalability that are required to be in fortune 500 supply chains .” So I think that was the key first step around manufacturing, tactically. And then it was okay, how do we build a new manufacturing line that has never existed before that makes these nanoparticles at scale? At that point, we’ve made them like a beaker [ inaudible] , right? How do you start to put these in large, 30, 50, 100, 200-gallon reactors that are making tons of material and still keep the same quality — which is really what set us apart from everyone else in the world, with the quality of the particle? And so we spent a lot of time and cracked that code, and a lot of money to crack that code, both from that program we got from the government, and then more equity that we raised around it. And so, tactically, it was just really spending time stage-by-stage. And from the scale-up perspective, there are steps you have to take so that you don’t just start with a coffee cup and go to a 200-gallon reactor. You start with a coffee cup, you go to a Crock-Pot , you go to a pressure cooker, all along the way to make sure that as you scale, you are able to control what’s happening. And we did that very methodically. So from that perspective, I think tactically is what we did there. Then the other side of it was to get out there into the market, and really just explain that what our technology can do, because we didn’t really know yet which customers in which markets were going to care most. But we started going out to conferences very early on; in generally the area of advanced materials and electronics, and slowly started to figure out after many, many of these trade shares and conferences, which areas that we were seeing the most pull from, and then we would focus our energy and capital around those. And we’ve kind of followed that same methodology throughout. And then we started seeing pull from Asia and, “okay, let’s go over there and start meeting with central customers and partners.” And then from there, “okay, we need a distributor because we need someone that can import this for us.” And , and then if you start with one and then you’ve got two, and then you get five , right? And so you start with what is the big problem that we need to solve, or prove that we can solve, to get the credibility? And then what’s the next one? And then what’s the next one, and what’s the next one? And then, tactically, bring in the right people to execute out all those plans.

James Di Virgilio: 33:03

Really well said. That’s a nice curve of progression through strategy, down to tactics being flexible and nimble, but then really making sure that you solve, solve the code-breaking problem that either breaks you or breaks for you. And scalability is certainly one of those things that affects a lot of companies and it’s often too late by the time they realize it. So lastly, now we’re standing today where you are, you’ve built Pixelligent to where it is, of course you and your team and everyone working there, you’ve utilized all of the strategies and tactics. You’ve mentioned you have this wealth of experience in front of you and behind you. What are you looking at for Pixelligent into the future?

Craig Bandes: 33:36

I think we have a really unique opportunity over the next three to five years to become one of those first companies to really break out in a market that has been waiting for somebody for 20 years. We have the right combination of the right technology at the right time. When I say “at the right time,” you know, the materials that we make, to get geeky for a second, they’re referred to as “high index materials.” It’s a way for us to get more light into or out of the system or bend light in a way that makes something work better. And that was a(n) interesting concept. And that’s kind of cool when we first started doing it in 2013, and now we have to have that in these next generation displays, augmented and mixed reality devices that we’re all going to be wearing in the sensors that are moving into really becoming part of everything from self-driving cars and drones, and everywhere you touch there’s a sensor… That all of these products now require the materials, the types of materials that we make, in a proprietary way. And so we’re having some of the best companies in the world approach us about integrating that into their technology. Our challenge now is that we’re supporting some of the biggest technology companies in the world with a very small, relatively small team, less than 50 people. And we have to scale that quickly now to not lose these opportunities, because they’re now expecting us to look like the companies we compete against, which are massive companies: Dow, DuPont, Merck, and others at that scale in electronic material space. And so we now have to prove to them that we can deliver at that same level. Now they’re saying they’re bought in on the technology. Now they have to buy in on our capability to really deliver, to give them the customer support that they need, the quality metrics that they demand, and then the ability to supply them wherever they are around the world. So now it’s a matter of, back to your question about strategy and tactics, and we have the strategy of where we want to go. We have the customers, and now tactically, how do we start to go do this? So, I was in Korea. I first shipped out of the country in a long time, three weeks ago, and was able to get an expedited quarantine time. And we closed a partnership with a large Korean partner who is going to be a manufacturing partner for us in Asia. Critical staff . We started that 18 months ago and worked through a number of them before we found the right one and had to go there to meet the CEO. And he had to meet me, and make sure that it was the right thing — thank goodness it was. And so we’re putting in place the infrastructure also on a global basis to be able to go do that and not entirely on our own, even if you have all the resources, all the cash you need, it still makes sense to partner , especially if you’re going into new markets and new regions that you’ve never built anything in before. And so it’s continuing to execute on what I think I have a pretty good handle on, of expanding the types of partners and stakeholders that can really help us execute a pretty big strategy on a global basis and realizing that you can’t, and you shouldn’t, do it alone. And just making sure you’re picking the right partners and the right people to help you get there along the way.

James Di Virgilio: 36:26

And perfect. That’s a wrap. Great job, Craig, great answers, really insightful stuff, really logical linear thinking, which makes sense from a finance guy. That’s , that’s how we tend to do things. And from Radio Cade, I’m James Di Virgilio.

Outro: 36:39

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. This podcast episode’s host was James Di Virgilio, and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeek. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

Weaver Gaines shares his experiences as the CEO of several startup companies in terms of the highs, the lows, the expected, and the unexpected: “So I think you can inculcate a culture from the top, from the beginning, that says, ‘We don’t lie. We don’t cheat. We don’t steal. And we’re not going to tolerate people who do those things.’ You can make that happen throughout your company, regardless of its size. But the other stuff, the commitment to the task, the belief in what you’re doing, all of that stuff, has to be established when the company is small and then you hope it will permeate the company as it grows.”

Gaines has served as the CEO of Evren Technologies, OBMedical Company and Ixion Biotechnology. Additionally he has been the chairman of several companies and non-profits, and is a member of the Keck Graduate Institute’s Corporate Relations Board.

In this episode, Weaver shares with host Richard Miles the importance of a CEO’s role to encourage teamwork, foster trust in a company, and grow — in a way that’s not just about the money. 

TRANSCRIPT:

Intro: 0:01

Inventors and their inventions. Welcome to Radio Cade, a podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. Starting in running your own company — It’s not for everyone. For those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. We decided to go out and talk to some of those people and find out what they’ve learned, what they’d repeat, what they’ll never do again, or hear stories from their first year, then from the period when they realized they’re going to survive and how they intend to position their companies for the future. We’ll find out what a CEO’s normal day is like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is it time to move on? Join us for CEO 101, a limited series of deep looks at people who are their own boss — for better or for worse. Welcome to another episode of CEO 101, a series of special episodes in which we talk to and about CEOs of startup companies. I’m your host, Richard Miles. Today my guest is Weaver Gaines , the CEO of several companies, including Evren Technologies, OBMedical, both of those are medical device companies, as well as Ixion Biotechnology. He’s also served as a chairman of numerous companies and non-profits, among other things. Welcome to the show, Weaver.

Weaver Gaines: 1:18

“Well, thank you for having me here,” I think is the formulaic response to–

Richard Miles: 1:22

That’s right, there’s only one right answer. You’re not going to be here. Weaver, you’ve done a lot of stuff in your life and your career. So why don’t we just start with a short overview of your career?

Weaver Gaines: 1:31

Okay. Well, one way of thinking about my career is, “here’s a guy who obviously can’t keep a job.” I went to law school primarily because even though I was an ROTC commissioned officer, everybody else was trying to avoid being drafted into the war in Vietnam. And they were all going to law school and they were on the debate team at Dartmouth, so I went to law school too , with about that much forethought about it. And when I graduated from law school, I went on active duty and I spent two years in the army — one year in Europe, in Heidelberg and Berlin. And one year in long been Vietnam — an experience for which I will be always grateful. The whole experience was extraordinary. I’m glad I did it. I can’t talk anybody into doing it now, but I think it’s really one of the formative experiences of my life. And I’m glad I got involved in it.

Richard Miles: 2:17

This is being in the military or being in Vietnam, or both?

Weaver Gaines: 2:19

Both. Well, the military itself is an extraordinary experience, and being in a world at war where there are people who are actually trying to kill you every day, although you could argue that that was like being in New York, and , um , it was a different circumstance and I’m glad I did it.

Richard Miles: 2:35

And you were in an infantry unit in Vietnam, correct?

Weaver Gaines: 2:37

No, I was not in an infantry unit in Vietnam. I was a company commander in Berlin, but when I got to Vietnam, the army had just invoked the update to the military justice system, in which for the first time, if the defendant asked for a lawyer, he got a lawyer. Before then, he only got a lawyer if the trial counsel , the army’s prosecutor was a lawyer. Otherwise officers served in that role and the army and its usual degree of incredible forward thinking came up on the day where they had to supply a lawyer to everybody without any lawyers . So a lot of non-JAG lawyers got JAG positions — Judge Advocate General positions.

Richard Miles: 3:14

You had a law degree.

Weaver Gaines: 3:15

I had a law degree, and by the way, it made the judge advocate guys really mad because they had signed on for four years in order to avoid combat. And here were all these combat arms like me. I only had two years and also avoided combat, but we didn’t avoid people shooting at us or setting–

Richard Miles: 3:34

You were in a combat zone.

Weaver Gaines: 3:35

We were in a combat zone. And then I went to work for the law firm that I had intended to go to work for. And I worked for them for a bunch of years and decided that being in a law firm wasn’t that interesting. So I went to a corporation and in the middle of that gig, I realized that, really, I wanted to do it more than I wanted to give people advice about how to do it. So I now call myself a recovering lawyer. And while I provided legal services to the companies that I’ve founded, mostly I’m being an executive and mostly in financial or life science businesses. So to get to the crux of CEO 101, I came to Gainesville after I had spent a year on the national reelection campaign for Bush-Quayle in 1992 . And since Bush didn’t get reelected, clearly doing something in Washington, D.C. was not in the cards. I came down to Gainesville where I had a weekend place and a friend said, “Let’s start a biotech company.” And so that’s how I started my first entrepreneurial biotech company.

Richard Miles: 4:34

So, Weaver, I’ve got to say that the first parts of our lives eerily track one another. Of course I was in the army as well, got out of the army. And if things had gone right, I’d be in the Jeb Bush administration right now. But things apparently didn’t go that way. So I moved to Gainesville too , but I didn’t start any successful biotech company. So apart from that small asterisk, essentially we’ve lived the same life.

Weaver Gaines: 4:55

Well, I can’t say the first one was a successful biotech company. It was named Ixion Biotechnology and I picked its name, a Greek name, very common in science to use Greek. Ixion sounded good. It said that Ixion had been condemned by Zeus to be bound to a burning wheel for eternity. And since the product we were thinking about was going to be used to treat recurrent kidney stones, I thought, well, that sounds like being bound to a burning wheel, that’s not bad. And after the company had been going for two or three years, I asked my very first associate, the first person who joined me, I said, you know, I don’t know anything about this guy, Ixion, whose name, by the way was pronounced ex-eye-on, but I gave up. Everybody called it Ixion. And he comes back to me and he says, “well, do you want to know why he was condemned by Zeus to be bound to a burning wheel for eternity ?” “No. Why?” “Because he attempted to rape Hera. That’s why.” So I named my first company after an attempted rapist.

Richard Miles: 5:50

So marketing was not really your strong suit–

Weaver Gaines: 5:51

Absolutely not . Nobody knew that except us. And so we never told anybody, and I think this is the first time I’ve ever broadcasted it, for that matter.

Richard Miles: 5:58

Anyone owning Ixion stock out there, maybe now’s the time to sell.

Weaver Gaines: 6:02

Now’s the time to sell or to put it on 4Chan or something like that, but that was an enlightening experience, Richard. I made, I literally made every mistake a startup entrepreneur could make, although there were some mistakes I couldn’t make because an earlier mistake had sorta foreclosed the possibility of–

Richard Miles: 6:19

So we’re going to get into that. But before that, I wanted to ask you. So you get out of the army. This must have been what? Early 70s-ish?

Weaver Gaines: 6:25

Yeah, 70s, basically.

Richard Miles: 6:26

And you’re an army brat. So what brought you to Gainesville? Did you have a family connection here?

Weaver Gaines: 6:32

Okay. So my dad was a graduate at the University of Florida, ROTC graduate — World War II, Korea, Vietnam vet himself, and my sister had gone to the University of Florida, one of my sisters had gone to the University of Florida and her best friend here was my current wife, Mary True. And my sister — I’d been married once before — and she said to me, “Look here, Weaver every time you pick out a girl for yourself, you do a poor job.” That’s not exactly what she said, but that’s what she meant, right ? Yes. “I’d like to pick out your next girl for you.” And I said, “well, I can’t do any worse than that.” So, she was from Gainesville. Mary was from Gainesville. So I got to know her and I got to date her, and then we got married and I told her if she would just keep her apartment in Gainesville and not bring her car to New York for less than the cost of parking the car in New York, we could keep the Gainesville apartment . So that’s how I ended up with a place in Gainesville.

Richard Miles: 7:27

This was planned from the very beginning,

Weaver Gaines: 7:28

Yes, everything thought out carefully in advance with the primary reason for changing directions, being that I had cracked my shins on something and it hurt. And so I would stop to see where I was going. That wasn’t it. So that’s how I got to Gainesville. And that was in late 1992 after the election with the Bush-Quayle campaign.

Richard Miles: 7:46

Okay. Prior to that, you were living in New York?

Weaver Gaines: 7:50

Prior to that, I was living in Manhattan, New York, except for one year in Philadelphia, where all I could think of was how to get back to Manhattan. Philadelphia is — sorry, Phillies . So I started the first company, as I said, being completely ignorant. And that’s probably the only reason why anybody would start his first company.

Richard Miles: 8:10

Take us back to the first few weeks, even of what that was like, first of all, start with what was the core idea or the core business model insight? And then what were your first steps? Did you just sort of file the papers and rent a space somewhere? Or what was–

Weaver Gaines: 8:23

Yeah, basically well, sort of that. I got the idea of starting it from a fellow I’d hired at one of my previous jobs who said, “look, let’s start this biotech company. I have a brother who’s a research scientist, the University of Florida, very smart guy.” And he was a very smart guy. And he’s got some technology, which is really exciting. And he had two completely distinct technologies. One was a stem cell treatment for type 1 diabetes. And the other was a probiotic treatment using a bug called Oxalobacter formigenes, you know how that rolls off the tongue. So the very first thing was to learn to pronounce Oxalobacter formigenes.

Richard Miles: 8:59

Now I see why Ixion was a more attractive alternative–

Weaver Gaines: 9:01

Yes, right, than “Oxalobacter Formigenes Company.” And so the first thing I told him was, “well, I can get the company started, but really, I don’t know anything about biotech.” And he said, “well, you don’t need to, my brother knows about biotech. You need to know about starting companies.” That turned out to be wrong, by the way. And so I said, “well, the very first thing to do is to kind of get our arms around the intellectual property.” Y ou got nothing if you don’t have that. And the intellectual property was resident at the University of Florida, and the University of Florida had an officer in charge of licensing technology. And on a good year, they would license two or three. They license 90 or 100 now. And on a bad year, they didn’t get much done at all. And so it took about a year to negotiate the license for the technology, but you really couldn’t do much else. I mean, I was running it out o f my house because you really couldn’t do much else, right? Because you didn’t have anything to do i t with.

Richard Miles: 9:54

Right.

Weaver Gaines: 9:55

And in those days you couldn’t be sure you would live long enough to license it from the university.

Richard Miles: 10:00

So there was no point in continuing research or things like that or making an investment because you don’t own anything.

Weaver Gaines: 10:05

You don’t own anything. And the research has continued and a guy who’s the research side and he’s going on, doing the research at the university. And there was a fellow named Shelley Schuster who, at that time, was the head of the biotech program here at the University of Florida. He’s now at the Keck Graduate Institute. He’s the president of the Keck Graduate Institute in Claremont, California. And he said, “I have some space in the Progress Center. Why don’t you come out there and have an office in my space while you’re trying to license the technology? And I won’t charge you anything for it.” So yes, I did arrange for an office, but I didn’t pay anything for it. And I went out there and got the office in Progress One, which was, at that time, owned by the university and set up my first computer to demonstrate, yes, we were a company because we had an office–

Richard Miles: 10:48

It was a physical, awaiting a computer?

Weaver Gaines: 10:50

No, no, it was an IBM. It was an IBM. It had like, I don’t know, 250 bytes of board memory, or so, it’d use the big four-and-a-half-inch floppy disks. But then we got the license. Now you’re going to actually start trying to do something.

Richard Miles: 11:06

So after you got done with your bottle of champagne, from getting the license–

Weaver Gaines: 11:09

We couldn’t afford champagne. It was a bottle of cold dock , but , um , yeah, we got the license and now we were actually in a position to try and do something. So there’s a whole bunch of things you try and do to get ready to do the thing that you most need to do. So what you most need to do is find money because you can’t do anything without it in the startup world, but you can’t just go say, “give me money; I have an appealing face,” — even worse if you have my face. And so you have to do things like come up with a business plan, think through how exactly you’re going to exploit this technology. What’s feasible? What isn’t? What kinds of research needs to be done? Where are you going to get money to do the research? How far do you have to go in the research before you can make a plausible claim for the money? One of the big mistakes I made was if it’s a really brilliant idea in a magnificent market, they’re going to give you money. No, they’re not. And in this case, it was two, basically, pharmaceutical preparations. And I took a long time to learn that those are decade-long projects — and that’s if they’re ready to be taken out of the university, if they’re developed enough to be taken out of the university, which they said not — another one of my mistakes. And I also didn’t know then, like I know now, that about 90%+ of them will fail. They will not, in fact, ever reach the market — and that’s assuming you can finance it. I’m just talking about the ones that go through the process of bringing a biotechnology, pharmaceutical entity to the point where somebody will buy it or at least be willing to support it to the point where it can be sold, mostly fails.

Richard Miles: 12:40

It’s one of those statistics you really don’t need to hear early on.

Weaver Gaines: 12:42

No no, well, actually I said, “if you knew, if you knew when you started what you will learn along the way you would go into another line of work,” like, I don’t know, bicycle repair.

Richard Miles: 12:50

Something more lucrative, right ?

Weaver Gaines: 12:52

Right, plumbing.

Richard Miles: 12:53

Plumbing. Yeah .

Weaver Gaines: 12:53

So you have to develop a business plan. A lot of people think that you can get somebody to develop a business plan for you, but you can’t. You really have to do it yourself because that’s going to be where you learn about the things you need, but don’t have, and think through how you’re going to get them and then make some guesses about what it’s going to cost you to get from here to there, and with your business plan, and your intellectual property, and some sense of people you might be able to get involved with you that you can talk into working for nothing or nearly nothing, because you’re likely to be working for, not very much money, particularly at the beginning. Quite common for you to go without pay for months at a time, which by the way, Richard, means that if you want to do this sort of game, you can’t be in it for the money because t hat’ll never be good enough. You have to be in it because you think you’re trying to do something that’s worth making some kind of sacrifice for. So when I left the campaign, when Bush lost in 1992, the first thing that happened was I got a job to go to work for a financial service company. And I thought to myself, “well, if we get to the end of the day and they say, ‘okay, Weaver, w hat did you do with your life?’ Say w hat — made a lot of money?” That just didn’t seem very satisfying to me because you can make a lot of money a nd people don’t do that, and there’s nothing wrong with making a lot of money. Good for the people who do. But for me, I thought, you know, my father was a s ervice m an. He spent his life in service and that’s w here I felt a little … smarmy. If that’s all I was going to be able to say, “he made a lot of money,” but if you could say, “well, I tried to cure type 1 diabetes.” Even if it didn’t work, I tried to deal with people who a re suffering from recurrent kidney stones. You ever had a kidney stone?

Richard Miles: 14:33

I have not. I’ve seen people who’ve had.

Weaver Gaines: 14:35

You don’t want them.

Richard Miles: 14:36

Not something I want to do.

Weaver Gaines: 14:37

And it turned out, by the way that, that, wasn’t what we ended up trying to get that probiotic to do, because that costs too much money, a long shot, too much money. It ended up being a treatment for a condition called primary hyperoxaluria, which is a genetic condition in which half of the people who have it will die before they’re one year old and the rest will die by the time they’re 12, and there’s no cure. There’s nothing you can do except a kidney-liver transplant.

Richard Miles: 15:01

Well, good point that you made there about doing something that you feel makes a difference, and David Brooks, the author, talks about the difference between resume virtues and eulogy virtues, which I think is a nice way of encapsulating ’cause a lot of what we do, certainly as early adults, what we focus on is resume virtues.

Weaver Gaines: 15:15

Sure!

Richard Miles: 15:16

What’s going to get me my next job? What’s going to get me promoted? What’s going to make me look really good? But if you think about it, when you’re dead and gone, and they’re saying, “Weaver Gaines…” And they just rattle off your qualifications and degrees…

Weaver Gaines: 15:29

It’s the same sort of dissatisfaction. And Richard, you and Phoebe have achieved this in your lives with the Cade Museum, and what it represents in terms of contribution to, not just our local community, but to the country and to the world.

Richard Miles: 15:42

Well, thank you.

Weaver Gaines: 15:44

So you know what I’m talking about. You can only put up with some of this stuff if you’re motivated by something besides the money.

Richard Miles: 15:50

But let’s talk about those first few days, because as you well know, from your first few days, it looks really daunting because you wake up and every day your to-do list has a hundred things on it. And all of them are objectively urgent. They all have to be done first, right? Because you get an office. Well, great. Well, your office needs a phone. Well, does it have a phone in it? Maybe it doesn’t. Well, you get a phone and you have to have someone to answer the phone and get the mail, and all of those things were sort of “must-do,” but yet you’ve also got to raise money. So one of the most crucial decisions early on is your first hire, your first couple of hires. Did you have any help in making that decision or was it the first person who walked through the door and needed a job? You said, “go get a phone, go get the mail.” ‘Cause that’s sometimes how it happens, right?

Weaver Gaines: 16:30

Well actually I would say what happened in this case was that, because Mary had lived here for a long time, she knew a whole bunch of people: college graduates. Master’s degree in history and he’s helping his wife run a deli, and he became a friend, and he came to me and he said, “either you have to give me a job or I’m going to kill my wife and go to jail. Those are my options. I can’t afford to pay a fine, just as long as I have a job.” And it turned out that one of the critical things, on those first few days, is that there be somebody else there. So while you may have to do everything yourself, sometimes you just can’t do it all today. And even if you could do it tomorrow, even if you could do it tomorrow better than the person that’s working with you, you just can’t bring yourself to do one more thing today after you’ve gotten the mail arranged for the phone, and arrange for the post office to deliver the mail to you the way they said they would, when you put the post office box down and all that sort of stuff … It helps to have somebody there. And somebody you can go in and say, “could you get the phone? Will you answer the phone?” And all that sort of stuff.

Richard Miles: 17:33

Right.

Weaver Gaines: 17:33

So the very first hire actually was critically important, but did not functionally supply one of the nominal things that we needed, a person who could oversee the science and a person who could handle the legal stuff and all the things that you think of go into a company. But if you’re the only guy on the ground, there’s one person you want to have there that you can turn to and say, “I just, I can’t face this today.” And they’ll do it for you. So that was the very first hire. He was terrific in that role. He later worked for me one other time. In between times, he worked for another one of our local companies that got acquired by SmithKline .

Richard Miles: 18:10

And what was his background?

Weaver Gaines: 18:11

History major — master’s degree in history. Bright guy, competent, and totally competent and enthusiastic and got caught up in what we were doing. And [he] later took over a lot of things just because he was there, and he was smart, and he could do stuff. And not because he had any background in science or engineering or anything else.

Richard Miles: 18:30

This is what we tell people from our limited experience with tech companies is that, people make this assumption, “well, a tech company is just full of engineers and people like that.” It’s like, well, no, every company needs a fairly broad array of talents to just make it to that first milestone.

Weaver Gaines: 18:44

Absolutely.

Richard Miles: 18:44

Because again, if you don’t have somebody who can help you do all the mundane things that need doing — a room full of 10 engineers that don’t answer the phone or answer the mail is not going to make it.

Weaver Gaines: 18:53

And also if you have a company of all engineers and you aren’t, you think you’re speaking their language — it sounds like English — but it’s not. It’s “engineer’s speak.” And it’s hard to communicate with 10 engineers without a translator.

Richard Miles: 19:06

So let’s fast forward a little bit, maybe if we’re talking about Ixion or it could be any of the, one of the companies that you started, and I don’t know what the timeline for these companies was, but let’s say you’ve hit your first, maybe, good milestone — whatever that is, and whenever that is. But inevitably, almost every company that succeeds has had at least one, maybe two or more big setbacks. What was, if you’d like to share the details without triggering any lawsuits, what was maybe one of your first big setbacks and how did you recover?

Weaver Gaines: 19:32

Okay. Well, I would say that the setbacks tend to come in categories. The one that you’re most conscious of most of the time. So if you’re the CEO of a startup company, you have several jobs and they’re all full-time jobs. And one of them is actually making sure the entity will function, and that it does have telephones and so forth. You don’t have to do it, but you have to make sure of it. And one of them is to make sure that the science is moving forward because it’s never fully developed when you get it. And one of them is raising money. And so basically you’re always raising money. The biggest science setback came when we could not replicate in the company’s labs, the results that were taking place in the scientists’ labs at the university. It was critical that we be able to do the cell culture that he was doing in order to have a product that we could show off to get some more money, right? We couldn’t get it to work. And this is going on for a long time. Now, competent scientists working hand in glove with the people at the university, we can’t get the cells to reproduce? Same refrigerators, same T75 flasks. They won’t grow. “Why not?” A scientist is rolling his eyes. You know, Jesus, he comes out, he can’t get them to grow out there , at the Progress Center either. So the answer to that one was that it turns out that there are two manufacturers of T75 cell culture flasks: Cornell Glass and Phillips . And he was using one and we were using the other — their nominal specifications were identical, but it grew in one, it didn’t grow in the other. And you tell this to people who are cell culture experts, and they say, “Well, yeah, everybody knew that.” I wish they would say, “That’s not possible.” What they say is, “Everybody knows that.” Yeah. Right. No, it made a difference, but that set us back by months. Well, when you’re burning cash every day, whether you’re being set back or not, any one of those kinds of scheduled delays will eventually turn into a financial problem. And the setback comes when you go to people and you say, “We’re not going to be able to make payroll next month. There’s not enough money. We got maybe some coming in, but we’re going to all be working with no money or very little money…” Because some people can’t work with no money. They can’t.

Richard Miles: 21:44

Yeah.

Weaver Gaines: 21:45

And so you say, “Well, okay,” and one of the ones, this guy I was telling you about, Teddy, said, “Well, I can defer income.” So that was one of them. One of them was, as sometimes happen, you’d get an agreement to make an investment from an angel group or a high-net-worth individual, for example. And you’re very close to closing the agreement, and it falls out of bed for some reason or another. And you’ve made the mistake — one of the many mistakes — you’ve made the mistake of thinking it’s going to close around this day. And then it doesn’t. And now you don’t even know if it’s going to, because the problem that came up is one that isn’t immediately obvious how you’re going to settle it, because it’s a fundamental issue in the deal itself. And those are grim.

Richard Miles: 22:25

It’s not in some little insignificant detail.

Weaver Gaines: 22:28

No, they’ve thought it over and they need 45% of the company instead of 20% — something major like that, and you can say no, and they say, “Fine, I’ll pack up my bags and wish you the best of luck.” Or you can see if rolling over on your back and exhibiting your unprotected belly will work, or if there’s some other option that might help out. And then there’s the one where you have the fight with the big investor. He’s already invested. He now basically could control the company. He hasn’t yet. You’ve had this conversation that goes, “Well, I invested in you because I believe in the management of this company and I’m going to sit on the board, but I’m going to be influencing as a board member and not as a big investor.” And then you come to a point where you don’t agree with the big investor. And he says, “Well, have you forgotten who owns this amount of money in your company?” And you say, “No, have you forgotten that you said, when you invested, that you were going to rely on the management?” And he says, “No, and I stopped relying on you because I have the money and you’ll either do what I say, or you’re going to quit or get fired.” And “get fired” appeared to be one of the alternatives that turned out was the one that happened. But , uh, all kinds of grace, of course.

Richard Miles: 23:35

Right.

Weaver Gaines: 23:35

He took over and put one of his young proteges, the Swede — he was a Swedish guy. In fact, he was the only Swedish multi- millionaire I know who was an actual member of the Communist Party. Really interesting, very interesting, cultured man. So that’s an example of an actual death experience. Yeah. Right.

Richard Miles: 23:52

Weaver, earlier , we were talking about institutional culture, and it kind of fascinates me and I think it does you as well. And one of the ways in which institutional culture changes is related to the size of the company. And so you’ve been in companies literally where there are a couple of people — that’s the way it starts, two or three people — and you hesitate to even call it a company, right? It seems more like a family or a frat party or something, right? Not an actual company, but then there’s a certain point at which you do have to start resembling an actual company with titles and sort of clear responsibilities and divisions. What does it do from a managerial standpoint? If you’re the leader, what things do you have to consciously do differently? Because you now, instead of two employees, you’ve got 20 or 200 employees.

Weaver Gaines: 24:33

Yeah, well first I think, organically, there’s a theory of “span of control.” I’m sure you’ve heard of “span of control.” And some people say, “The most people you can really have usefully reporting to you is somewhere between five and seven, maybe 10.” So early on in a company — when there’s five or seven or eight or nine people in the company — one of the things that’s true is you pretty much all know what the other person’s strengths and weaknesses are. You don’t give a person with a weakness a task that you know plays to the weakness, and you don’t keep a person whose strength from doing that. But you all know what it is. And you, the CEO, can really have a material, substantive effect on all of the major decisions made by your company. And then it goes over that number. And two things happen when it goes over that number — up to about 25 in my experience — one of them is: it’s no longer the case that you really can do everything. And you mustn’t, you have to start relying on people. And sometimes that’s a different person. So the person who could handle lab operations, when there was one person in the lab, can’t handle lab operations when there are 10. It went outside their “Peter principle.” They’re not competent at lab management, as opposed to–

Richard Miles: 25:40

Working in the lab.

Weaver Gaines: 25:40

Working well in a lab with some scientists. The second thing is: you no longer know all of the strengths and weaknesses of all of the people in your company, although you should still know who’s good and who’s not, and the people who are reporting to you. And as a CEO, you must resist the temptation to meddle in the operations of the people who are now responsible for operations of their own. This is one thing that’s really disabling to people. It’s the sense that two things happen — they’re both bad. One is: you tend to make decisions where you don’t know what’s happening on the ground, like they do. And perhaps the worst aspect is: they start thinking, “Well, he’s going to be the one staying up at night, not me, because he’ll double-check my decisions. And if he doesn’t agree, he’ll tell me to change it.” And if you want a comfortable-running company, you can’t let people think they can move hard decisions to you that is within their area. So I tell people, “Look, there’s three kinds of decisions that affect you,” — and this starts at around 20 people — “One is the kind of decision I expect you to make. And I don’t expect you to tell me, because it’s the kind of decision you should make. And I don’t want to be bothered by being told you did it because it’s your decision. And the second is the kind of decision that I expect you to make, but I do expect you to tell me. It’s something I need to know, but I don’t need to prove it. And I’m not going to disapprove it. And the third: this is the one where you’re about to make a decision that could result in a hole below the water line,” — for all you Navy guys out there — “that one you have to consult with me in advance.” And inevitably, these people say, “Well, how will I know which one’s which?” And I say, “Well, you have to use your judgment.” And by the way, if you get it consistently wrong, you’re in the wrong job. So you have to get this sort of thing right. But I don’t want you to bring Category Two decisions, the kind you need to be making, to me for prior approval. I’ve got all the hard decisions already. You have those. Then, when a company gets to be about 100 or so, you need a lot more bureaucratic structure than you had before. You can get along with a lot of informal arrangements — doesn’t have to all be written down. Yeah, it’s useful to have an organization chart and so forth, but you don’t need it. It’s a bleak day in a company’s existence when it needs a Human Resources department, because that means there will be human resources — people there who are basically spiders or vampires, you pick the name, and that company is a completely different company. And the way you nurture some kind of camaraderie and corporate culture has to come from the top-down and it has to filter through the CEO — so there is no escape from this — to see if you can inculcate that with the janitor in the lab, who’s working for you and whose job is important too , but not at the level that you’re going to go in and pat him on the back and say, “Nice job, Junior, you know, I really appreciate your mopping.” ‘Cause, you know, it’s not gonna work.

Richard Miles: 28:26

Right.

Weaver Gaines: 28:26

And the other thing you have to do, in my opinion as a CEO, is you cannot rely for your information entirely on the people who are reporting to you. So you actually have to get up and walk down into the lab and say, “So how are things going here?” “We’re completely out of beakers.” “You’re out of beakers! Is that right? Well, does Joe know that?” “I’ve told him several times and we’re still out of beakers.” “Well that’s interesting. Okay. Thank you.” I mean, people will talk to you. Ross Perot, you’ve heard of Ross Perot–

Richard Miles: 28:52

Yes, yes.

Weaver Gaines: 28:52

Ross Perot ran a company and his cafeteria, you sat at the next seat at whatever table was open — they’re trestle tables — and he would sit down with whoever was at the table and say, “Talk to me.” This did two things. One: he learned what was going on. And the second thing is: the people who reported to him knew he would learn what was going on, which is also useful. So I think you can inculcate a culture from the top, from the beginning, that says, “We don’t lie. We don’t cheat. We don’t steal. And we’re not going to tolerate people who do those things.” You can make that happen throughout your company, regardless of its size. But the other stuff, the commitment to the task, the belief in what you’re doing, all of that stuff, has to be established when the company is small and then you hope it will permeate the company as it grows.

Richard Miles: 29:37

Weaver, we were talking about this earlier in a different context: Contrary to popular belief, CEOs are not superhuman.

Weaver Gaines: 29:43

Really? That explains a lot.

Richard Miles: 29:46

I know, I’m bursting your bubble.

Weaver Gaines: 29:47

That explains a great deal.

Richard Miles: 29:49

And certainly when you start out and you founded your own company, as we’ve already talked about, there’s no shortage of things and worries to occupy your day. From the minute you get up to the minute you go to bed, you can be working in the company and often you do. At a certain point, that’s not a great personal-life-work-life-balance strategy — particularly if you’re married or you have children and so on. What are some of the things that you have seen, both good and bad? How should CEOs think about their commitments to their company, but then the commitments to the rest of their life? Because they’re just not probably gonna make it very far or, we’ll put it this way, they may have a successful company and ruin the rest of their life. What have you seen, in terms of successful strategies, to avoid that? And then, are there any horror stories you can relate in which people did the exactly wrong thing? Let’s leave out, say, the first 30 days in which, okay, you’re just going to be working 24/7. Everyone gets that. But let’s say you’re a little bit further along. You’ve got some employees, maybe even some revenue, but yet that feeling hasn’t gone away, that you gotta be Johnny-on-the-spot all the time.

Weaver Gaines: 30:49

Let me start by saying when I started my career, it was as an associate lawyer at a big law firm on Wall Street. And there was no work-life balance. It was just work. And I think maybe half of the people who started in that law firm with me, including myself, were divorced in the course of six or seven or eight years. You basically communicated through notes on the refrigerator ’cause you were working till 10:00 many nights and almost every weekend. When you’re in a startup company, it’s more than 30 days that it’s like that. And you’re really asking the people who are around you — I don’t have children, so I didn’t have that particular problem, but I do have a wife that I cherish — and you’re basically saying, “Look, you’re signing onto this with me. Are you okay with that? You know what you’re signing on for? Because I can get a job that’s 9:00-5:00 or 9:00-7:30, if it’s a bigger job than that.” But it reminds me of when I was growing up, army wives — they knew what they had signed up for. Foreign service wives knew what they’d signed up for. They’re going to make a sacrifice too, and, in some cases it’ll be a big one, and you can’t do it alone, I don’t think. I mean, maybe for a bachelor, you can, but if you’re married, you have an intimate relationship with somebody or you have a close, personal relationship with somebody. They have to be on board with you too . Or you won’t be able to do what I think needs to be done to be a success in the first couple or three years of a startup company, because it’s going to be that long before you get to the place where you can take a breath and, “Where’s the dog?” “The dog died last month.” You know, I mean it didn’t, you know, we never had a dog.

Richard Miles: 32:18

Right.

Weaver Gaines: 32:20

I think that the thing that probably engenders more work-life balance is increasing exhaustion in age than it is any kind of conscious stratagem that I know of. And when I look around at the people who are successful CEOs, they may not have dark shadows under their eyes now, but they all went through it. And as I said, you need that team at home who’s willing to back your play and understands what’s involved. I don’t know any other answer to give you, Richard. I mean–

Richard Miles: 32:48

No, it’s a good one. I found, just in my very limited experiences, there’s a step of humility and trust, once you start seriously delegating your responsibilities, right? Where when you first start out, you just think, “I’m the only one that really understands this company, this technology. And it’s so important — my understanding of it — that I really can’t ask somebody else to do it.” But at a certain point, you realize you’ve got to make that step. You’ve got to hire that person, mentor them, teach them, because otherwise you are a prisoner of your own creation, right? You will never break free–

Weaver Gaines: 33:19

Never.

Richard Miles: 33:19

… Until you are able to find and train–

Weaver Gaines: 33:23

Community service.

Richard Miles: 33:23

… Those people. What I find in many instances, and this is what’s really gratifying, is you find people who can not only do it, they can do it better. And that’s when you realize like, wow, if I really want to build something, first it’s a trust issue because you don’t think they can do it better. And then it turns out they’re really good at it — not always, obviously, there , there are some misfires. And I think that, to me, from what I’ve seen is the secret to building — as we said earlier today — something built to last is a recognition there are talented people out there that can do this job. I’ve got to find them, I’ve got to train them, and so on. And then you’re off to the races.

Weaver Gaines: 33:55

All true with this corollary. It took me a while to realize that just because it was different, didn’t mean it was worse. So somebody who did something different from the way I would’ve done it, didn’t mean they were doing it worse. And in fact, my goal in hiring people was to hire people I thought could do it better. But the very first thing I had to get used to doing was the judgment that that was good enough. And then after a while , I got to thinking, “Well, maybe it’s not only good enough. Maybe it’s actually better than the way I would have done it.” But that first step, in which it gets done differently and you think, “Oh my God, you know, we’re doomed! This is not going to — I got to step back in here.” So good enough was the first thing to do.

Richard Miles: 34:34

Yeah.

Weaver Gaines: 34:35

But sometimes you can’t find somebody that you think is going to be better. You’re happy with somebody fogging a mirror because you have to fill this position. You need a quality person because otherwise you can’t pass the FDA audit. And this is the quality person you could get in Gainesville. This one. And the one thing you know for sure is he knows more about quality than you do, but that’s all you know, and not looking good, right? And recalls are going to be bad — that sort of thing. But even as people take up a bigger share of the burden, the burden itself is growing. So the company is getting bigger. And if you’re lucky enough to actually have a product, which has now been approved by the FDA, well, somebody has to be the manufacturing manager because you got to make sure it’s made. And then somebody else has to be the quality manager to make sure it’s made right. And if you’re dealing with a distributor , somebody has to be in charge of the distribution program in the marketing and sales operation. And you, the CEO, are responsible for all of those things, whereas before you had only the scientists and you and there’s still — notwithstanding Einstein and quantum mechanics — there’s still only 24 hours in the calendar day and you have to spend some of them sleeping, and you really do need to spend some time with the other person or persons in your life, even if they’re taking the short end of the stick for a while. And so sometimes it’s not possible to assemble the dream team right away, as you have to do with what you got.

Richard Miles: 36:06

Weaver, one final question and that is: In any of your CEO experiences or leadership positions, have you ever gone in with sort of a personal exit plan? Do you say, “Okay, I’m going to do this, but I’m leaving after 10 years,” or “I’m leaving after we hit this certain milestone,” or is it more, “I’ll play it by ear. I’ll see how it goes. And if it turns out well, I stay.” How has that sorted itself out for you?

Weaver Gaines: 36:26

I have never gone in with a personal exit plan, but you remember my planning skills are … defective. Um , more often than not, the exit has been attributed to an exogenous circumstance. Something happens, and it’s appropriate now for you to leave. So, in the first company, Ixion Biotechnology, when the Swedish investor took one of the two technologies and left the other one behind, left the stem cell one behind, and getting together with all of the scientists and everybody, we determined that it was going to take five more years and maybe $20 million to see if it would work. We decided that was not a good play, that we couldn’t justify taking $20 million of somebody’s money, knowing what we now knew. And by the way, that technology has never worked, although, other people have tried it. We could do the stem cell magic — we just couldn’t do it in commercial quantities, couldn’t make enough to sell. So that resulted in leaving. I mean, that’s what we did. In OBMedical Company, the failure of an investment involving one of our local Florida investment groups, — whose name I won’t mention over the air because I can’t mention it without running the risk of a lawsuit…

Richard Miles: 37:33

We’re a lawsuit-free podcast here.

Weaver Gaines: 37:35

Right . When that was over and it was necessary to go out and now solicit people who had already contributed when you told them, “Okay, we have a term sheet and we’re ready to move forward.” And now you’re going to have to go back and say, “We had a term sheet and we’re not ready to move forward because the other guy’s a jerk.” And everybody’s going to think, “Yeah, well, was he the only jerk in the room?” And my sister was dying of a glioblastoma. I said, “It’s time for a new person to come in — a fresh voice. You’ll put up with what CEOs put up with, which is the new CEO, can blame everything on you for a while ” . And in fact, that’s what happened: A really good guy came in that I recruited, and who pushed the company over the finish line till it was sold. I stayed on as an advisor, so that wasn’t planned. And this current company that we’re doing, I did deliberately promise Blythe Karow, who’s the CEO right now, who’s taken over — I’m the executive chairman, because she’s not quite the complete CEO, and I’m not quite the board chairman, but it’s gradually getting to the point where she’s going to be the standalone CEO. When that happens, when the board says, “Okay, she’s ready. Are you ready?” I’ll be ready. But that will be more planning than I’ve ever done before. And I think she’s probably ready now, but we need to get through this next round of financing and then we’ll see what happens. So, I don’t know, ambiguous answer to that question.

Richard Miles: 38:52

Good answer, and well thought out. It’s been a great conversation, Weaver, and I feel charged up and ready to go. I’m going to go out and acquire a company.

Weaver Gaines: 38:59

There you go.

Richard Miles: 38:59

Now I’m sure that the job offers will flood in, I said —

Weaver Gaines: 39:02

Any moment.

Richard Miles: 39:03

And that ends our conversation, Weaver Gaines, so you’re ready to go, but I appreciate you coming on the show and look forward to seeing what’s next for you.

Weaver Gaines: 39:09

Thank you, Richard. I appreciated being here. It was a lot of fun.

Richard Miles: 39:12

Great. Thank you.

Outro: 39:14

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. Richard Miles is the podcast host and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeak . The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

As a first-time founder and CEO, guest Vinny Olmstead reflects on what it felt like to start something new: “The one word I would use is just excitement. If you were taking a picture, I think you would see wide eyes and a smile on my face… In my early days, as I was looking at opportunities, I was hyper focused on solving some type of problem and spending a good amount of time to figure out what the solution would be for that type of problem.”

Olmstead is the Co-Founder, Managing Director, and Partner at Vocap Investment Partners based in Vero Beach, Florida. Prior to Vocap, Olmstead was CEO of Bridgevine, an advertising technology company focused on customer acquisition.

In this episode, Olmstead talks with host James Di Virgilio about his experience as a CEO and investor, and to share his advice for entrepreneurs that are trying to rise above the crowd to get funding. 

TRANSCRIPT:

Intro : 0:01

Inventors and their inventions. Welcome to Radio Cade the podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. Starting and running your own company. It’s not for everyone for those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. We decided to go out and talk to some of those people and find out what they’ve learned, what they’d repeat, what they’ll never do again. We’ll hear stories from their first year, then from the period, when they realize they’re going to survive and how they intend to position their companies for the future, we’ll find out what a CEO’s normal day days like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is the time to move on, join us for CEO 101, a limited series of deep looks at people who are their own boss for better or for worse. This episode of Radio Cade, CEO101 features and interview Vinny Olmstead, Managing Director of the Florida based venture capital firm, Vocap Partners.

James Di Virgilio: 0:59

Vinny, take me back to a time that was a first time for you, either as a company, founder, CEO, whatever you feel like was kind of that first experience. And describe for me what it was like to start something.

Vinny Olmstead: 1:13

The one word I would use is just excitement. If you were taking a picture, I think you would see wide eyes and a smile on my face. And if you peel back the onion on that a little bit, in my early days, as I was looking at opportunities, I was hyper focused on solving some type of problem and spending a good amount of time trying to figure out what the solution would be for that type of problem. And I’m sure at one point it will get into learnings and how that evolves. But early on it’s a lot of them spend time doing some research. I came up through the finance rings . So a lot of times finance people think about businesses through the lens of Excel and spreadsheets, a little different than engineers do sometimes a little different than sales folks do at times, but me personally, came up through the finance route. So a lot of what I did was think through business model think through pricing, think through the market and those types of things, and try to think about how that solution could grow into something very large. And without knowing it , trying to take a look at competition and find to look at where the needs here . So I answered the question in a couple of ways, which is facial expression. And then a little bit of experience probably on and through the prism of CEO, that has a finance background, which is sometimes good. And sometimes it needs to be complimented.

James Di Virgilio: 2:31

So you had mentioned very early on, I know you started some companies in your teens, let’s go back and visit that. Why start something then like what attracted you to a certain project at that stage of your life?

Vinny Olmstead: 2:42

One of the businesses I’ve started in my teams was an events business. So I grew up in a small town in upstate New York called Binghamton, and I chartered buses and charged people. And we’d go to sporting events in New York or Buffalo or Pennsylvania or whatever. And it was pretty lucrative. So comically enough, simultaneously I had typical hourly jobs at McDonald’s and things like that. And all of a sudden I realized, wait, I can, A) have fun and B) charged people some okay money and C) make a lot more than minimum wage, which I think was $3.25 and so that blended a little bit of fun passion in a way to make money.

James Di Virgilio: 3:19

Did that strike you at that age is something that was, I don’t want to say abnormal, but like how many of your friends were thinking the same way you were at that time?

Vinny Olmstead: 3:27

I don’t think a ton. And I did a lot of the typical stuff, pre college of different types of whether it be mowing lawn business and hiring three other people through business and hiring five other people somewhere along the way. I got the leverage thing early on, which is good. Right? You can work hard at yourself and make an hourly wage early on. I realized either charging, not based on hour or leveraging other resources in order to make money made a bunch of sense. And that was sort of one thing that I saw early on you’re right. You don’t see it a bunch, but I also have a 18 year old son who’s about to graduate college and he’s got sort of the entrepreneurial bug also. And as I look at his peer group, a majority of them are willing to take that hourly rate and he’s taking a lot more risks and he’s sort of following that path a little bit, but back then, and now people like the idea of entrepreneurial-ism, but sometimes they don’t get the scale. And some of those important things that may make you at least outsize your profits and or outsize your business, those types of things.

James Di Virgilio: 4:26

That’s really interesting. If you look at entrepreneurship through that lens is a way to view the world. And at the Cade Museum, we spend a decent amount of time creating a culture of innovation, which is to flip some of those hourly mindsets. If you will, into a, Hey, you also can create these things . And some people are born with it. I think a curiosity about how to improve things, but it also can be cultured. And so failure, something you mentioned is obviously a direct thing that many people, especially people that don’t want to dive into creating something, feel a question I get a lot also as an entrepreneur is , well , aren’t you afraid that the things you’ll do will fail. So for you, did you feel that, I mean, you started early, you started earlier than most people was failure ever, something that entered into your mind, or you just saw an opportunity to improve something.

Vinny Olmstead: 5:10

Its funny. I don’t think I ever thought of it as failure per se, right. Things didn’t work. And I just went to the next thing and didn’t really worry about it early on. That didn’t matter. I wasn’t taking other people’s money. When you take other people’s money. It’s a little different, a little different situation. I didn’t really think about it as failure. I thought about it as an experiment and then I’m moving on. And again, early on it wasn’t about building the unicorn. It’s about building a cool business that made some money. Also early on it was a lot about where I was passionate or where the ecosystem is. I failed a bunch. Don’t get me wrong in a bunch of businesses that fail, but I never thought about it as failure. I thought about it as a stage. And then just move on and don’t worry about it.

James Di Virgilio: 5:45

You had mentioned hiring some people in these early ventures. How did you go about hiring people back then? Was there a rubric? Was it a feeling what led you to make a decision on who to hire?

Vinny Olmstead: 5:55

I don’t know if this happenstance or not happenstance. I’ll give you my early, I was 12 years old and I had a paper route. And so delivering newspapers as second route became open. And I said, Hey, I’m going to take that route and hire a couple of folks who filled in when I was on vacation, I can do the whole thing if I need to. And if not, I will have some folks help. And then I got another one after that. And so I think that was where I started learning. Holy cow , I can make a bunch more money. These folks think we’re making pretty good money, but I make more than I’m making some off of them. And then coupled with that, it’s not avant garde now, and I’m dating myself, but you used, it deliver newspapers every Monday night and you have to go collect for a week’s worth of newspapers. And back in those days, I pioneered the, I would just have people put the money in the envelope underneath their front doormat and I’d pick it up every Saturday morning and not have to talk with them. But as I delivered the papers, I would pick them up or I would have the employees pick them up. So two things you learn there is leverage people and then improve process wise. And a lot of people liked it because coming to their door at six o’clock at night, and then Monday when their little dinner wasn’t the most perfect time. And it just seemed to be easier for them process side, serendipitously hiring a few people. And I did that for, I think, four or five years subsequent to that also . So it wasn’t like one week it kept me going until I sorta hit my 16 or 17 year old age, newspapers were done for me at that point.

James Di Virgilio: 7:12

Now, were your parents entrepreneurs, or did they view you as like a total anomaly?

Vinny Olmstead: 7:16

A completed anomaly. My father was an elevator mechanic and my mother worked in the home health field in the payments area, but they weren’t entrepreneurial and they weren’t risk takers . And maybe that’s why I ended up as a little bit more of a risk-taker , but they were not at all.

James Di Virgilio: 7:31

Did they have conversations with you? Vinny, what are you doing all this stuff for? You should be getting educated this way or focusing on these things or were they supportive?

Vinny Olmstead: 7:39

They were actually pretty supportive like back into the newspaper days when I lived in New York and it was degrees below zero, and my father would take the minivan . And as opposed to me trying to bike or push a shopping cart around newspapers , and then he would drive me around. They were , they were very supportive in anything that I did. They sometimes wonder whose kid I was, because it wasn’t what their typical path was, but they were supportive the entire time.

James Di Virgilio: 8:00

That’s great. It’s always great to hear that. Especially like you mentioned, you just sort of come out totally different and I can imagine as parents, they’re truly wondering where did Vinny come from? So, so you then obviously go on to a higher level of CEO ship. We’ll call it. Now, we’re calling a CEO in this case, really anything where you’re going to be running something, as you mentioned, either for other people there’s other investment or it’s yourself, and now it’s a much larger and full scale operations . So we’re still gonna focus on the early stages and what you would consider to be your first CEO role with that definition. So with that, how different was your first year as a CEO from those early years of startups?

Vinny Olmstead: 8:36

It’s a good question. And it’s sort of the step two and sort of the path. So in the earlier days, it was sort of from the hip, solutions that revolved around things that I had worked passionate about in the early ages, in your teens and in your early twenties, it’s more about things that are going to the sporting events and chartering buses and all that of stuff. It was sort of a pastime and a passion, and it was more viewed as a opportunity for a period of time, but not for a long period of time. Whereas when you get into your twenties and your thirties, you’re more thinking about it from a career perspective and the mentality then was grow it and own it forever or own it for a long time. The mentality is changing a lot in the last 20 years in regards to wanting to grow it and sell it after seven years and becoming a unicorn and all that fun stuff. But at that point in my life, it was more about grow something sustainable. So that’s one, is your looking to grow something in perpetuity. And then there was just, I guess, that next iteration of polish around the PowerPoint presentations and the Excel spreadsheets and putting something down on paper versus just doing it, right. Which by the way, now that I’m in the VC world is very interesting. And seeing in that stage is that you often see doers and then you see folks who like to put things in Excel and PowerPoint, and they’re not as much doers. And so I would say my second phase was adopting not only the Excel and some of the skillset that I got through college and my early days as a CPA and accountant, it was the actual combining that with the doing mentality. And so again, so I think the themes there are, you look for something that’s sustainable in perpetuity. You look a little more institutional per se, and combining the doing with a little bit of the planning, I would characterize it that way.

James Di Virgilio: 10:17

And if you’re looking at your time in this early CEO stage, this early venture stage, and obviously now you have a whole different set of experiences, which we will get to later as a VC now, but at that time, the biggest question on most people’s minds is how do you get funding? How does anyone get funding nowadays? How do people get funded? How did you get funded for the projects you were working on?

Vinny Olmstead: 10:39

The way you get funded is evolved. And there’s a much more of an ecosystem, but I don’t think that the actual channels of getting funded have changed. Although funding has become much more ubiquitous. I would say, you’d go to the friends and family. And I put as much as my own money and my own salary as possible, which became easier later in life was much harder earlier in life. So you go out to those friends and family and at first, you’re a little bit nervous about asking and you should be, if you take it serious, but even then it was go to the friends and family and then ultimately go to that next institutional role. And then you start working up toward your C) and or your A) or your B) the most important thing to all of that is you gotta be networking every single minute. You have to be fundraising and networking every single second. Even if you’re talking about a solution, you have to excite people. And that took me a little while. It’s not that I mind asking for money, but it was a little bit uncomfortable and there’s nothing wrong with asking for funding for something that you really believe in. And you’re really passionate about. So it was the same sort of ecosystem back then, the friends and family seed and starting into A) and B). The problem then there was just wasn’t as much money the world didn’t watch shark tank and understand all this entrepreneurial-ism and stuff. So it was harder to find outlets. There wasn’t really much online, back then and all that. So it was there and it was sort of similar. It just wasn’t as easy to get to nor was there as plentiful amount of money out there as there is today.

James Di Virgilio: 12:02

Yeah, the brand awareness of entrepreneurship was obviously much lower. And as you mentioned, the tools to access, it was much smaller. If you could go back in time to these stages you’re discussing right now. And this is, I think a good one for really anything that pops into your mind. First kind of the first thing that pops into your mind, what wisdom would you give yourself at that stage? Learning everything you’ve learned now.

Vinny Olmstead: 12:22

These are all things that are somewhat standard that you would think through, but don’t be afraid to hire great people and try to understand what great means. And don’t be afraid to hire people that make more money than you, or have a lot more experience. And that’s the thing we never with a lot of entrepreneurs, they really struggle with that, acknowledging that you don’t have deep experience around repeatable sales processes or deep knowledge around product requirements. There’s nothing wrong with that. Don’t have the pride to think that as CEO, you need to know everything and that you need to have the experience in every single verticalized aspect of your business. Go get the right people. And on the heels of that real quickly, one of my mistakes with one of the companies that did well with and sold. I had the opportunity to take a lot more money. And I didn’t, and it definitely inhibited the growth of my company, and I wish I would raise more capital. So get the right people. And I was very prudent with the money, and I was very in tune to my investors, but I should have taken more.

James Di Virgilio: 13:17

Yeah its interesting, we’re going to talk a lot about funding as we get towards the end of this. And I have so many questions on that, myself being a finance person and investor, and we will get to that one. So save, that for further probing, let’s talk about the middle years, and this can be the middle for you as you think of your own career and experience in life, but the middle years as a leader, how did your normal day to day change from these earlier years?

Vinny Olmstead: 13:38

Yes. So the most interesting part in all of that, the theme there was how to let go, because it’s sort of this interesting thing. It’s not as though I couldn’t do a bunch of this stuff better than select employees, but you have to let go and let the leverage down. For example, back to when I was on the paper , boy , you have to let them go, let them deliver the route , make sure it’s on time. You can’t walk with every single person or ride with every single person. And it’s the same theory when you’re running a business, it was a little bit harder to let certain things go. I was pretty good at Excel and financial modeling. I could do the Excel, but it was dumb for me to do the Excel because I had other people that could, you have to let go. So the middle years is about where are your priorities and allocation of time are best spent in order to create the greatest value. And that’s easy to say, but it’s really not hard to do personally. And for the CEOs that we see, even in our investments today.

James Di Virgilio: 14:29

Optimization with your time, your own focuses, right? You recognize when you reach a certain age that no matter how smart you are, you just cannot do everything. And on top of that, there’s certain things you should do that will yield more, not obviously just for yourself, but also for your team, for the project you’re working on. How do you begin to trim away? Some of those margins, some of those things like how do you create a funnel to say this is priority one task? And this one I should probably think about delegating.

Vinny Olmstead: 14:54

It goes back to my point around hiring some of the right people, but it’s not always about hiring the right people. It’s also about the mentality of that. There’s a lot of different ways to do it. One thing I see that works pretty well and worked for me, there’s this thing called the entrepreneurial operating system. It’s basically a management system where you meet with your team quarterly and you review your mission, vision, values, all that fun stuff once a year, but you go through what priorities are. And it’s sort of a healthy way with no titles to get into a room with your top management team and to help prioritize. It was fairly enlightening for me to hear people say, you shouldn’t be doing this. You should be doing that. And you can still do ELS, or you can bring in a facilitator either way. It was a good way to prioritize . And then it was a good way for folks not to feel uncomfortable, to say, you need to not allocate your time to doing all that Excel spreadsheet or drawing out the HTML for the buy flow of a commerce and things that you shouldn’t be doing. It’s okay for people to interview you and say, where are you thinking about interviewing? You are having conversations about where you want it to go, but you have to let go. So that’s just one example of ways to sort of take care of that. And the second one was I, I didn’t accept which I wished that I did it. Must’ve been a seed investor with the company bridgevine, which is a Florida company. We were, I think 500, I think seven times fastest growing 57, the highest. But one of the things he kept telling me to do is hire sort of a chief of staff to keep you organized. And I don’t know why I just was stubborn and didn’t do it. And now, whereas what we tell our CEO is, Hey, you know , hire a chief of staff to help you organize. So when you go to these meetings and you have follow up , they can really make it happen. Or if you need a quick project done or research on competitor or market, you have somebody to do it. So you’re not sitting there doing that. So two things I think helped facilitated one, which I adopted. One of which I refused was the EO’s system. And then also the chief of staff and chief of staff starts getting pertinent when companies sort of are starting up into the 5 million and above in revenue, because that’s also a time where it starts getting complex to scale.

James Di Virgilio: 16:50

Yeah. And that’s great. You segwayed perfectly to my next question, which is during these middle years, how do you go about handling, growing and expanding? Oftentimes it happens rapidly and oftentimes the CEOs may or may not have had a lot of experience with handling something that’s growing that quickly or scaling that fast.

Vinny Olmstead: 17:07

Its a good point. And when our CEO Bridgevine, it went from a million to six to 11 to 18 million in revenue, over five years, growing from nothing to one and going up, and it was good because a software company, but it also leveraged the early days, early days, the mid days of the web and online demand generation and all of that, but not easy. And then the hardest part about it was the people part of it. And it wasn’t only that you’re hiring t he r ight people. It’s that people that had generalist jobs t hat had five jobs, they may have had five different responsibilities. And as you get larger, you need to be able to motivate them, to be excited about taking a more narrow role that does more, as opposed to running HR and p roduct. Now you have to put p roduct in a separate bucket o nto itself. So I think managing people A) are they capable of scaling? If they’re not, they may have a VP level, but should be a director. Can you put them into a director role and then how to narrow what their responsibilities. That was the hardest part. I think about the scale, getting the infrastructure in place for f our data centers and all that was fine. There’s a lot of other things that were they’re hard, but they’re not that hard. A nd the people part is by far the hardest part.

James Di Virgilio: 18:16

What was the most rewarding experience or set of experiences when you reflect back on your middle years?

Vinny Olmstead: 18:20

The fun part of all of this is creating a culture that is great to work in and creating a culture. When I described earlier, my eyes getting open in a smile on my face is trying to create an environment where it may not be because you’re running the company, but it may be because you’re running products that you have the big eyes and smile on your face because you’re really creating something. I think that’s probably the best illustration.

James Di Virgilio: 18:46

That is the joy, right? This idea of creating, improving . There’s nothing like it. And I think even people that wouldn’t say they’re entrepreneurial, if you can kind of get granular and say, well, let’s talk about a time in your life. You created something. There’s always this different level of passion and connectivity to it. All right, let’s move to now, we’re going to call it now so that you can call these your mature years. Of course, maturation never stops. Let’s just go with now, how is your role now different than it was in the middle years in the early years?

Vinny Olmstead: 19:12

So a couple of things there. So in my later years, I went from operator to a venture capitalist and this was about nine years ago. And when I started, I actually was CEO and started the fund at the same time with the blessing of the board. But I would call that some of my more mature years versus earlier. And so how is it different? One of the things that was very different in my middle years and now mature years, and this is for the whole industry is there’s a lot of ways to grow businesses fast because of all of the different plugins solutions out there. And so when I coach CEOs, or when I look at businesses as an example, I don’t want them to create a new commerce platform. They can go plug in Shopify. And so one of the things I think I thought about earlier on is you take everything under solvers and you have to do everything yourself. In my later years, I adopted more to, Hey, I can plug stuff in and the value is more speed to market than it is sometimes proprietary type items, like a commerce platform as an example. So whenever they agreed in the Lunchables, which was like Oscar Meyer and an Oreo cookie from Dole , the Lunchables is a great idea. You don’t have to own every component of it in order to get to market faster and perform better. And as life goes on, both with technology evolving and adoptability, it’s , it’s more of a norm now, but it wasn’t in 2011. It is becoming that right now. But it’s the embracement of that aspect of solutions that can plug into your solutions.

James Di Virgilio: 20:39

And you are just like nailing every segue. So here’s another one. What are some of the new challenges CEOs face today that perhaps they were not facing 20 or 25 years ago?

Vinny Olmstead: 20:50

That’s a great question. When I look across my portfolio and we back great CEOs and they sort of bifurcated into two buckets, which is some with less experience and some with more experience. And I think one of the hardest parts of the ones with less experience is the true accountability and expecting people to work as hard as you’re expected to work. It’s a little bit millennialism is a little bit of a challenge. And so I think that’s the number one difference that I don’t know if I didn’t tolerate it, or if the norms were different, but now it’s often tough to get to that accountability and to have people and accountability states. That’s a lot of where we spend our time. A lot of management teams, these CEOs make 50, to hundred thousand bucks and all of a sudden they need to bring in somebody who runs XYZ. That makes $225,000. There is a lot of concern and consternation about bringing in people who make more than you and have more experience. And we spent enormous amount of time having those types of conversations and say, you need to balance your equity with what your overall goal is and your priorities. And so that’s the second part. This challenge was challenge to me too . And it’s a challenge when I worked with our CEOs now.

James Di Virgilio: 22:01

We could do an entire podcast on team building and culture and pay and meritocracy. And that exact principle of does there need to be this triangle hierarchy where the person X , Y , Z makes more than someone else, or is there room, as you’re mentioning to have a more market-based or creative, or just what’s best for the venture mindset. So how do you handle the pressure of the media of public opinion of your own employees? How is that handled as you become a notable CEO with prestige?

Vinny Olmstead: 22:29

So one is you’re going to have to face the fact that the accountability is on your shoulders and it’s human nature for your employees, whomever, they report up to whether you’re one of the greatest CEO or whether you’re Elon Musk or others. People are still going to have fun with you a little bit. And sometimes you have to have some pretty thick skin just don’t let that part of it bother you. It’s just part of it. The other part, which follows you as being early to middle to late stages is it’s great to be friends with everybody, but you have to be cognizant of how you handle employees and people inside the workforce. It’s human nature to have certain things in common with people inside your organization, but it may look like you’re favoring them just because you both like Florida Gators and whatnot. So there’s those aspects that you have to be very cognizant of. And you have to separate yourself a little bit. You may not be able to cope with certain people and not other people. And so types of that hierarchy. So it doesn’t create imbalance or odd things inside and thick skin because they are going to have fun here especially they like to have fun.

James Di Virgilio: 23:24

Yeah, it definitely really important for leaders to have thick skin . That seems to be perhaps a quality. I’m sure you’re spending more time with your CEOs today that you’re working with and maybe you would have in years past.

Vinny Olmstead: 23:33

Yes. There’s a good example. There’s a product that I created at Bridgevine. And I think 80% of the company disagreed with me on wanting to roll it out. I knew it was the right thing to do, and it ended up being the valuable aspect of the business, but it was a turbulent time. It wasn’t like a all out civil war, but it was, I don’t understand that we shouldn’t be doing this. We should be focused over here. And I just said, and this is my decision going to the board. This is my decision. This is what I think is right. There is dissent . And it ended up paying off, staying true and staying part in what you believe it was tough, but ended up being a good outcome.

James Di Virgilio: 24:10

Yeah and that is the role obviously of a leader is to go out there at times. And if you really believe in what you’re doing and you think it is best that you have to put yourself out there with it, otherwise, nothing great is going to get done. So what was one of the most challenging experiences that you’ve had rather recently, it’s really just been a difficult spot.

Vinny Olmstead: 24:29

We’ve had a shutdown on business and that’s never fun or stop supporting a business, which is never fun because you’d go and you back these entrepreneurs, like even in COVID times, there are two different outcomes for our companies. One was they thrive because everything’s coming satisfied. And another instance COVID, wasn’t good for the market. And I don’t want to tip off with the company is but sitting down and saying, I can’t fund you anymore. If the business is going to take two to three more years to come back and you’re going to have to either cut back your salary. People salaries, certain things, but I also invest on behalf of other investors as a fund. I have limited partners who invest in me. I can’t support you . I think you’re great. Your business model was good. Last year. Your business model has become less good this year and I have to move forward, I’ll support you, two need to be on the board, but financially I can’t throw good money after that. And that’s a hard conversation.

James Di Virgilio: 25:24

Yeah, thats an excellent example of a very real world . And sometimes out of our control, right, as entrepreneurs scenario. So now let’s launch into this fourth piece, which is a strategy phase. So this can encompass any part of your time in life. I think obviously as a VC, a lot of this stuff is going to apply to the questions I’ll ask because there’s so many interesting things happening. And of course you’re based in Florida, which a lot of people would describe as a pioneering very early VC world, where perhaps 20 years from now, the state looks very different. So when it comes to strategy, you launch your VC firm a decade ago, essentially, or almost a decade ago, and you have to create a strategy, VCs, have different strategies, different niches, they work in, how did you create yours?

Vinny Olmstead: 26:05

And that’s a great question because even when I was on the other side of receiving capital, I never thought there was like a strategy behind venture capital. And now I’m realizing that there is very much so a strategy behind venture capital and like our portfolio companies, that strategy has to really evolve. So I’m on my third fund. And if I go back to the first bond versus the third fund, our strategy has evolved fairly significantly. So when the first bond that was sort of more of a reactive fund, it was sort of doing it fun , sort of doing it reactively. Didn’t have the infrastructure of the relationship because it was coming hot off the heels of many years as an operator, as opposed to an investor. And I was investing in seed A and B stage companies and they’re around technology. So at a high level, and my strategy was a pretty big umbrella technology. So fast forward into phase two, I started really narrowing that down, which is I could provide the best value for folks are in the one to $10 million range, had a couple of good employees, had some product markets fit . And so it started really focusing around A stage investing. And although I had done some B to C stuff, the B2B SAS type of some things seem to be the companies that were doing better. So went to that next level of, okay, I’m going to invest in Baystate businesses that are doing SAS and or repeatable revenue. And then we get into three and I’m like very similar to other companies. My fun one was sort of by myself , my current CFO and partner, Wendy Coya and a junior person, fun too I had brought on another managing director who also was an operator and sold his company. So we were like-minded in that regard. And he was thinking about going out and doing the angel round funding. And he decided to come in and I said, look, I went through that, don’t do it. Jump on board, with me. We have very similar mindsets, but it caused us to have a lot more interrupt in strategic conversations, adding that second very experienced person. And so if you fast forward to fund three, our team goes off campus quarterly, and it’s all around strategy . So we went from sort of haphazard to somebody structured . So now it’s very clear A stage enterprise software around the future of work around transforming healthcare and around the science of selling. And we are disciplined along those three. And I imagine when we got to fund four , it’s going to be the same thing. So the common theme is that even VCs have to continue on the strategy, not just similar to the portfolio companies that I have, and they have to evolve with the times and it comes through with the I’m sure we can talk a little bit about funding, but even the world , the funding has changed series A used to be 3 to 6 million. Now it’s sort of seven to 12. And so our strategy has to be smart on that side.

James Di Virgilio: 28:42

That was perfect in fact, you answered multiple other questions by telling me the story of how the model and strategy changed over the years, which is really the goal and how it will change in the future. And I think that is a key mark, obviously, of someone who is still highly in tune with innovation and not stagnation. And recognizing that professionalization of something is a constant refinement. You never reach your end goal, but you should always be getting better and more refined, more processed. And not as obviously what you described, speaking of funding, there’s two questions I want to ask here. One are VCs this big, bad, evil empire that is spitting good ideas and entrepreneurs out of it, or is it a necessary nurturing, useful, helpful tool?

Vinny Olmstead: 29:22

So I was on both sides of that and I agree venture capitalists behind me. And I was savvy enough to know, I think when they were helping, when they weren’t helping. And when I had my VC board, I had one guy who was always cognizant of balance sheet, another guy who was very good at sales, another guy who was thinking strategy, but I sort of leverage them and use them that way. I didn’t use them all the same way. And so I had a very positive experience on that. There are a lot of nightmare scenarios with VCs , and I think it’s a quasi healthy tension, right? Because as a VC , you want to be friends with the CEO , but you have to push them a little bit. And there’s always tension with pushing them, hire that chief operating officer, because you need it. And well, I don’t want them to , I only want a director of operations. I get that. But one year from now, you understand that six months for that CEO to even understand your business. And you’re going to be a scale on a size where you’re going to grow into this particular, he or she in order to move forward. So if you went out and did a survey of my CEOs, I think they would all be pretty favorable, but also state that there are times of tension and disagreement. And it’s how you handle that tension and disagreement. And then the obvious is when companies aren’t doing well, VCs plan management management, blames the VCs and how you handle that, which is sometimes potentially switching out a CEO and sometimes selling a company and at sometimes putting some more, million dollars in to let them fulfill their strategy. And so it’s like everything in life, it’s communication and how you communicate. And there is definitely a healthy tension. There there’s been bad actors out there in the marketplace. And look , there is dissension. Sometimes you told me you were going to hit this amount of revenue. Now you’re going to spend twice as much and get paid half amount of revenue. We do have an issue here because this is what you supported. And so there are those moments also.

James Di Virgilio: 31:08

Let’s talk about philosophically yourself, your VC venture, how you view things, of course, because we can’t reductively say what all VCs do. But in your case, when you’re taking on a new project, are you thinking more along the lines of I’m taking on this project? Because I believe in it, I want to be able to help this entrepreneur funding as a part of that. I want them to grow because growing will help the world around me. Or are you looking at it straight numerically saying, I think this company is going to make a ton of money if they do X, Y, Z, and I’m in it to make sure that the money is made.

Vinny Olmstead: 31:36

I think it’s somewhere in between, right? So I know it’s a huge and growing market, but there are a lot of huge and growing markets that we won’t go into because philosophically we don’t agree with them. So I want to believe in the company’s missions and visions. Otherwise, even if it’s a great opportunity, I won’t invest there. So I wouldn’t go through and say, I have a hard rule of I’m not investing in X, Y, Z, but when it really comes down to it, you have to believe in the mission and the vision of the company. It’s not pure economics . It truly isn’t . I was invested in a great company called your cause, which was basically a payments platform for social good. And they did things like integrating the HR systems of AT&T and enabling the employees of AT&T tens and tens and tens of thousands of them to give whether it be to their favorite not-for-profit or when Katrina hit or whatnot. And I loved the mission, the CEO and I who’s a great guy. He went and believed in his passion, we sometimes hit clash heads a little bit, but I loved his mission, vision and the purity of it. And healthcare ones we invest in are all around chronic care. And as a matter of fact, one of the recommendations made to the CEO there at a company called Time Doc that I invested in on the board is they’re helping people with chronic diseases, through a software platform, enabling physicians. And they also have caregivers that help somewhat. And I’m like, I want to hear how you’re helping people. I want to hear how you’re helping the person, that they didn’t realize that they were deaf or couldn’t get to the doctor or couldn’t get food and you guys facilitated it. So I think for us, at least at Vocap, yes, we are capitalists . And we are sort of trying to make somewhere between five and 10 times off of each investment, knowing that 30% to 40% of them might fail. But I do think that if they were not within our value system, we would not be interested in the business.

James Di Virgilio: 33:18

And it’s really interesting. And again, it could be another podcast for a different day, just talking about freedom, capitalism, private property funding, ideas, this idea that obviously, if somebody makes a gazillion dollars, it’s not a zero sum game. It’s not a fixed pie. They’re not taking money from someone else to get there. And the only way for that to happen is for people to use whatever they’ve created. So there is a level obviously of marketability and market growing that if you believe in what you’re doing, and of course you’re doing things ethically in the right way, the larger you become, the more people you can help theoretically. So a lot of that stuff, again, different discussion for a different podcast.

Vinny Olmstead: 33:50

Thats a long podcast .

James Di Virgilio: 33:51

Yeah. That’s a long one. That’s a big one that I love that kind of high level stuff. But for now let’s get granular and talk about funding here in Gainesville, Florida, the University of Florida obviously now leads really the country with incubator companies. And so it has not quite had the success of turning some of these incubator companies into the huge names we know yet, perhaps one day that will happen. But funding is on everyone’s mind, especially in the state of Florida, where there are tons of patents being had every single year. Obviously again, we talked about at the top of the show, Florida, as an emerging VC area, you’re here, you’ve been working in it. How hard is it to get an idea funded? It seems like if you were to panel a lot of young startup companies, they would feel like it’s almost impossible to get their idea funded. How hard is it really to get an idea funded?

Vinny Olmstead: 34:35

That’s another long fun conversation. When I raised capital here for my Bridgevine company, back in early 2000’s, I couldn’t get anybody in the state of Florida or the Southeast interested at all. I had to go to the Northeast in order to raise capital, fast forward several years. And there are a good number of whether it be Vocap or Los Olas or [inaudible] is on like fund number five or six or whatever they’re on. And there’s a lot more ecosystems in Florida and in the Southeast. So there is more capital than 20 years ago when I was out raising money in the state of Florida before I was in Florida, I was in Seattle, we raised two and a half million dollars. And that was sort of a startup on steroids. You wouldn’t find public on that. And then I came to Florida and it was really, really tough. I mean, I couldn’t even get on the state of Florida venture I’m on the board and have been for 10 years and love it. It was hard on the state of Florida. There wasn’t as much money. I still think we’re not quite there yet. Right. So I think we’re still five years away from having the capital in place that other places have. And so it is hard. I live in Vero Beach, Florida. I had an open office in Atlanta group talent reasons. And because it’s easier later on to sell the company and find companies or investors to invest Florida sort of a distributed place, right? There’s no clear ecosystem. And geography is a big deal. New York, Austin , San Francisco, Austin, very, very concentrated. Whereas Florida’s ecosystem on entrepreneurs are spread out and VCs are inherently lazy and they don’t want to go to Gainesville and they don’t want to go to a Ocala. Steve Case is doing a wonderful job of trying to illuminate, all the great ideas of the secondary cities. And I think we’re getting there on that front. And I think geography is a little bit of a disadvantage. And again, I’m skewed toward thinking about tech versus broader ideas. I look at the biotech space personally, and look at stuff like that, but geography has an implication . So I think we’ve come a long way. And we still have a lot of opportunities over the next five years. And then you’ll relay this umbrella of holy cow. There are a lot of financial people coming to the state of Florida and that is going to be nothing but hell . So I’m in this town called Vero Beach, Florida. And we happened to have, I think the number one place of Ex CEOs of fortune 500 companies, a lot of them happen to have okay amount of money. And that’s how I raised both my early seed money for my company and then also my venture money. So the more you get some of these folks relocating to Florida, which seems to be happening in a rapid fashion, I think the money will continue to follow, especially for the seed side of things. As more family offices are down here and more intellectually curious people who understand the finance world are down here. So I have a lot of optimism now and going forward. And the only other point I’d make also is the hard part is there are so many new companies coming out. It’s hard to get through the noise right? Years ago, a few people wanted to be entrepreneurs. Now everybody wants to be an entrepreneur. So there’s increasing supply. The problem is there’s also increasing demand and you need to truly innovative and you need to figure out ways to really show your differentiation.

James Di Virgilio: 37:19

Another great segue. Before I ask you the last question, my grandparents live in Johns Island I’m my grandfather was an entrepreneur and he was super proud of the fact that Johns Island had zillion Ex CEOs and whatever the case was.

Vinny Olmstead: 37:32

Oh so awesome. Yeah. I can clearly see it from my window right here.

James Di Virgilio: 37:36

Yeah I figured. Yeah. Every Christmas actually my family, we drive across the state from Sarasota to Vero Beach and spend an evening. So that was my Christmas time. But , um, the last question and this one is going to be the one you just, again, segues perfectly into is all right. There’s a lot of people starting companies. There are a lot of good ideas out there. What is your advice for entrepreneurs to get funded? What are some things they can do to rise above the crowd?

Vinny Olmstead: 37:57

Yeah. So a couple of things on that front one, there’s a lot of great companies and a lot of new to companies. You’ve got to look yourself in the mirror and not be a me too . Go look at the competitive space and identify what your differentiation is. As I mentioned earlier, never stop networking. You are always raising capital and you don’t want to go to every single social event with your friends and just talk about your own business. You have to have some EQ to understand you have to have an EQ piece of it, but always be thinking about how you can network through to people. And when all of this noise, you have to be going after a big market with a unique product. Otherwise we don’t care. The reality is we want a large market and you can have a large niche, right? We have a supply chain company that does primarily around cold goods. That’s growing very quickly. And the whole market’s huge niche market. That’s perfectly fine. One of my board members, this guy by the name of Ted Leonsis who sold his company, to the first sale to all these partners, with Steve Case, he owns the Capitals and the Wizards and is just the greatest entrepreneur in the world. But he sat me down and said, you need to have your ten second pitch, your one minute pitch and your three minute pitch and you need to have it so crisp and so clear. And he seems like it’s easy, but it wasn’t as easy stated. And he’s abused need to have all of those incredible cadence and you need to convince me you’re passionate about it. And it was a great piece of advice for me. It’s one of the few things that I tell my CEOs, give me bad news as fast as you possibly can. I don’t care when I get the good news and have that cadence down, but how you talk about your company and the 30 sec, minute, five minute version. And so that would be my advice. Also, it sounds simple, but if I’m going to get a long complex story and what you’re trying to do, you cut off a lot of people.

James Di Virgilio: 39:35

That’s often stated. And as you said, because of that, it almost becomes like a trope , but the reality it’s so true. Robert Einstein once said that you make something as simple as possible and no simpler. And I think that’s also completely true with a pitch for your idea or your company for a million different reasons. So that’s great advice and low-hanging fruit and something. I’m sure that you see all the time. I see all the time here in Gainesville, is this not often done? And it’s not done well and not surprisingly, most of the companies that tend to go places are very good at that for a variety of reasons. Well, Vinny, I appreciate you spending an hour with us. I think we got a lot of great stuff in this segment, for sure. Lots of good insights. I certainly enjoyed talking with you.

Vinny Olmstead: 40:10

Likewise. I look forward to visiting the Cade Museum and visiting you all up there. So I appreciate the time.

Outro: 40:16

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida . This podcast episodes host was James Di Virgilio and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeak . The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

On what it’s like becoming the CEO of a startup and gradually having more and more employees taking over some of the day-to-day responsibilities, guest Ron Tarro says the following: “It’s almost better to view what you’re building as a machine; it’s a machine where, if you actually step back from it, the machine keeps running.” 

Tarro is the former CEO of a telecommunications software and management services company founded in Boca Raton, Florida. His own experience of developing a startup led him to becoming the Vice President of the Board of Directors at New World Angels, a group of 78 accredited, private investors, operators and entrepreneurs dedicated to providing equity capital and guidance to early-stage entrepreneurial companies with a strong presence in Florida. 

In this episode, Tarro sits down with host Richard Miles to talk about his own trials of creating a startup, as well as discussing the importance of intellectualizing business as one forges their own path within the marketplace.

TRANSCRIPT:

Intro (00:01):

Starting and running your own company. It’s not for everyone, but for those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. So we decided to go on and talk to some of those people and find out what they’ve learned, what they’d repeat and what they’ll never do again. We’ll hear stories from their first year, then from the period when they realized they’re going to survive and how they intend to position their companies for the future. We’ll find out what a CEO’s normal day is like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is it time to move on? Join us for CEO 101, a limited series of deep looks at people who are their own boss, for better or for worse.

Richard Miles (00:38):

Welcome to another episode of CEO 101, a series of special episodes in which we talk to, and about, CEOs of startup companies. I’m your host Richard Miles today. My guest is Ron Tarro, CEO of a number of companies, as well as an advisor and investor in many more. Welcome to the show, Ron.

Ron Tarro (00:55):

It’s very nice to be here. Thanks for having me.

Richard Miles (00:57):

So why don’t we start with an overview of your career. You’ve done a lot of things. We just were talking about your role in a number of companies at various stages and levels. So why don’t you give a brief summary of where you started and what you’re doing now?

Ron Tarro (01:09):

Yeah, so I started as a nerd, software engineer, and I really came through a technical track. My background was in mathematics and the sciences. I ended up getting hired by IBM in IBM labs and so was on product teams, software engineering teams. Went through product marketing and product management jobs there, where I began to focus, not just on making the product, but deciding what should be in the product. I jumped out like a crazy person, one day went I into consulting and joined the industry young, ended up in a leadership position in the management consulting group, which focused on technology companies. So it was basically back to, what should we make? Why should we make it? Who should we sell it to? Those types of things. Did that for a bunch of years. In the meantime, a couple of my pals had started a software company here in Florida, and I was based in Minnesota at the time. I did work at IBM in Boca Raton, if you’re into Florida-centered conversation, and then started a company, I started advising it. I married one of them. My wife was one of the founders of this company and that company is telecommunication software platform. And we took that company, bootstrapping it, with no investment actually, and ended up putting it out into, I think 30, 40 countries. By the time we left, its largest market segment was in hotels and resorts, so we had a pretty big market share. We ultimately sold that company to what is now part of Cisco WebEx actually. And it’s gone through usual chopping up, getting acquired by a public company, where I was a public company, vice president for several years, as part of the arrangement, they went along with the desks and the pencils and that. So since the exiting, all of that, I’ve been an advisor in the incubators here in the state with the university system, in the leadership of a longest standing angel syndicate for investment in startups, so I do a lot of that. And that’s about it. Now, I’ve been a personal angel investor along with my wife, Dana, around the state. So that’s basically it, I mean, nerd turned business person, but still likes to do macros on spreadsheets or something.

Richard Miles (03:00):

Right, yeah. Nerd turned management consultant turned investor.

Ron Tarro (03:03):

Yeah, something like that. *laughter*.

Richard Miles (03:05):

You’re perfect for our show, Ron, perfect. You’ve a great experience in that you are able to both be an outsider and an insider and watching this process unfold of companies starting and then growing and then getting sold from a number of different angles. Why don’t we start with, what’s the biggest difference between watching it from the outside, like as an advisor or something, and actually doing it yourself? When you actually did that yourself with your wife, that company, were there things that you thought like, wow, I thought I knew what this process is like, but this is something nobody told me about?

Ron Tarro (03:35):

I guess I would look at it this way: in running an early stage company, in whatever form, you are absolutely single-minded. And I would say that what I know today that I didn’t know then is probably, I have more context in seeing some of the moves that we made. So we may have turned left, we should have turned right. And seeing lots of companies making left and right turns, you begin to look at it and say, “hmm, we could have thought about that problem very differently.” Now I would say this, that in our case, I think we made most of the fundamentally right decisions. And we can kind of walk through the life cycle of a company: when to get out of the company and sell it, all that stuff was being driven by stuff. But when you run a company, the thing that you need to be particularly careful, especially as an early one, is you are single-minded in your vision. And as a practical matter, what you don’t know can kill you. And so, I think once you’ve been through this a couple of times, you step back, you begin to see all of those other dangerous–there’s a counter argument, by the way, which would be your ignorance and optimism is the reason you’ll succeed. But I guess I’m a little bit more hardened by some of that.

Richard Miles (04:36):

Let’s get granular here and talk about the very, very beginning, but from your own experience in companies that you’ve helped start or advise. The first, maybe 30 to 60 days, where you’ve got a founder or a couple of founders, they’re very excited, they’ve got a lot of energy. Why don’t we start with the mistakes? The mistakes are always fun to talk about, right? What are some common mistakes that people make in the first few weeks, did they really come to regret later on? And maybe they don’t even know that they’re mistakes when they’re making them in that first 30 or 60 days? What have you seen?

Ron Tarro (05:02):

Yeah, no, I’ll start with the very basic one. Should you even bother? Is this a good idea? Because I think one of the things, when you see a founder, is they’re going to walk into this and they believe what they believe. And I’ll actually use the test with New World Angels, which is the angel group that I’m part of and leadership of, is this idea you have is derivative. It’s not better enough from anything else out there. It’s not enough to dislodge the current state. The way to look at that would be: I have a new idea for electronic banking, but can I get everybody to take everything out of this bank, including electronic banking, and move it to that bank? There’s a speed bump. There’s something here: you’re 10% better, but it’s 20% too much hassle to do it. And so one of the big challenges is you see a lot of folks coming into incubators and applying or coming to me for advisory. It is, I don’t know, has this been done before? And if it has, you better have some sort of transformative argument. It was Clayton Christiansen; he’s one of the Harvard guys that wrote a book. Is this sustaining innovation, meaning it’s incrementally improving stuff up, or is it disruptive? It restructures how something’s done fundamentally. Obviously you want a big success, it has to be fundamentally different, not just a flavor. It’s sort of like, there’s Uber and then there’s Uber for pizzas. It’s like, okay, you can make a living at that, and by the way, don’t want to discourage you, but it may not be an investible company, and it may be a company that’s only going to get to be this big because just by the nature of how you defined it in the first place. So part one is, is it even an idea that’s going to be able to, in effect, dislodge what’s already there? And if there is something there or is it clear sailing? And the other is, is it disruptive? Is it just incrementally improving something that already exists? I mean, obviously we want to be disruptive and there’s another great book out there, The Blue Ocean Strategies book that I always talk about, which is as a startup, this whole idea of derivative ideas will repeat. So it’s like, well, if Uber gets into pizzas, you’re dead. You’re, you’re not sailing in open ocean. You’re sailing in the shipping lanes. And so you better have a pretty good argument for why you think you’re gonna be able to stay afloat, new captains, smaller boat, limited gas (meaning financing). So you end up being in a little bit of a challenging spot. So really before you imagine a company, you have to sort of hack your insight, if you will, and say, yeah, I really believe that there’s insight here. There’s an engineer’s disease, and I can make fun of engineers because I used to be one, which is: because I can build it, I should. And that’s not the case. When you look at a lot of products, you see a lot of technology is built by a technical person that is logically and intellectually interesting, and economically kind of is around. For me, it’s like very first thing. Are you onto something here, something transformative? Can we go back a little bit about how you might evaluate that? That’s definitely the very first thing I look at. Yeah.

Richard Miles (07:34):

So you’ve been, I’m sure pitched a bunch of times. You’ve been to a lot of these pitch competitions, so on. You’ve seen probably thousands of presentations by typically a young-ish or very excited team and probably a bunch of engineers and they’re onto something, they’ve proved it somewhat, and it’s withstood a few proofs of concept. Have you developed, sixth sense is not really what I’m getting at here, but do you have like rules of thumb, five or six things that for you either, you’ll say like, nope, I’m done next? You see right away, apart from what you just talked about, say, is it a derivative idea? And then the other side, when a same team that if they say something, you go, okay, I’m going to go get that guy’s business card or I’m going to call them back because there’s something about their structure. Do you have like a mental checklist or is every presentation sui generis? You just figure it out after you’ve heard the presentation?

Ron Tarro (08:22):

So actually not only do I have opinions here, actually I’ve written a blog post. If you go to the newworldangels.com blog, there’s a post up there called Back-Testing, why we said no, essentially. So you just layered it right into a whole set of things that could take an hour. So clearly it’s the idea, you haven’t differentiated the idea in the marketplace and that’s a big deal. But at the other one that I look very quickly towards is the structure of the team. Again, I should put some context here. I’m a tech guy, right? So if we’re talking about opening a restaurant and marketing shoelaces, boy, am I the wrong person, right? It’s all a mystery to me, I’m a straight up core software person. But when I look at a team that’s bringing a technology product, if not out of the university, maybe even just an open market, I’m going to go, who are the founders? My favorite founders are one business person that knows the market space, where they think it’s going to apply, and one technology person who can make stuff. Period. If you have a business person who’s hiring out disinterested parties to make stuff, it’s a risk. It doesn’t mean no, but I’m going to worry that if the money runs out, all the cash is running out the door to the consulting firm or wherever it’s going to be. So very much, I look at what that team looks like and what their direct to main knowledge happens to be inside of it. So you have a team that seems logical. I begin to look at the market size, it’s called TAM, people talk about Total Addressable Market or serviceable market. And I always do this in dollars. It’s like, all right, this is great. This is really cool, and there’s 27 people in the world who would use this. So in order for it to be exciting, they each need to pay a hundred million dollars, right? (I’m making numbers up by the way). But it’s this idea that you have a market size that’s way too narrow, and so I’m going to worry about that as an investor. Now, again, you may look at this and you may say, yeah, this is a good product. And it deserves to be in the world. But from an investor standpoint, you’re going to have a ton of uphill battle with what’s being examined. Forming a company is a team sport. I’ll use Florida analogy here, but if the founder gets eaten by an alligator, what happens? And the answer should be well, there’s three more to carry on the journey, right?

Richard Miles (10:18):

Pre morph the alligator to snack.

Ron Tarro (10:20):

*Laughter* That’s right, so this whole idea of that is a big deal. And so all of this is back to the design of your company, right? What are you trying to do? Where are you focused? Does it matter? Is it big? Those sorts of things? And by the way, this is the theme you’ll see over and over again with investors, especially. But there’s a reason it’s not just because investors want to make a lot of money. It’s actually very rational. If I go back to running our company, we had lessons learned, but we had a total addressable market for our company, in that we dominated this total addressable market pretty successfully. We made a choice to not change industries, but to go global across one industry, those types of decisions. So in essence, when you look at our company, you would have said, okay, it’s a nichey product except globally, it’s a big niche, right? That kind of idea. And so those are the kind of decisions that you’re forced to make with left and right turns. We think we made the right one because it made us a pure play to be acquired one day.

Richard Miles (11:14):

I want to follow up on something you said in your ideal team is that you’ve got an inventor and a business person, but I’m sure you’ve seen–we’ve seen it in the Cade Prize competition–particularly coming out of research universities, you have the professor, right? Or you have the scientist or whatever. And they’ve got some grad students with them or whatnot. They love their idea. They’re smart people. and they figure how hard can it be to start and run a company, right? And your heart kind of aches for them because you want to say, you need to stay in the lab. Who has that tough conversation? Is that your job when they bring you along as an advisor or as an investor, for instance? Is one of the first conversations you have and say, look, professor, you need to stick to the, and the development of the idea and the product, and you need somebody who knows how to do this. I’m guessing the successful ones listened to you, and the ones that don’t listen to you, what happens to them?

Ron Tarro (12:02):

I’ll give you the losing argument, which is, “Hey professor, do you want a hundred percent of zero? Or do you want 50% of a lot?” There’s a question here. It’s hard to succeed in most of these companies; never say never, but aspirationally, there’s always this idea that being the CEO might be cool. However, if you look at the pain in the neck that that job can be, even as a college professor, I’ve been on both sides of the technology versus business fence. Some days I really missed the corny technology story. The reality is that you’re not going to get momentum unaccompanied very easily by being a part-timer, especially a professor. And you see it again and again, where they don’t get funded. The best thing you could do as a college professor would be back to my one maker, one business person that can carry and coordinate. And if you’re a member of the academy of arts and sciences or whatever the case might be, why would you check out of that? Where’s your next idea? What’s your next core research? It’d be better as a professor to have a portfolio of companies that you have a significant interest in that, where you were the founding insight, right? The technology, whatever the case might be. And you let those things grow and nurture because the attention required, you have to choose, you can’t be both. And there are a lot of PhDs who jumped out of academia to run companies, but that’s the choice you must make, I think at the end of the day. So you can rationalize it for a little while, but I know personally a number of folks that just have not been funded because they insist on being CEO as a professor or as a doctor or something like that. And so the funding dries up because nobody wants to fund a hobby, right? Or a side hustle. My money’s at risk and you’re part-timing me, not going to happen. Now maybe again, if you can make it all work without any money up from outside or whatever. But basically go find your best friend’s CEO and found it together, and then you can be chief science officer and you can contribute intellectual property into the business in really interesting ways. You get all the benefit, none of the work, you stay to your passions. And so I think you have to be honest with yourself too. Do you want to be a professor? If that’s where you want, you want the intellectual rigor to an effect, break down new territory. If that’s what energizes you, great. If you have that one idea, you think it’s it, then you got to go all the way in.

Richard Miles (14:03):

The counter-argument you hear from these researchers is they say, yeah, I recognize I need somebody with a business background, but these people really need to understand the core idea and a core principle here. And sometimes the core principles are fairly sophisticated, like, particularly in the healthcare field or in tech field. So if a business person doesn’t really get the technology, you understand it, right? They’re probably of limited use because they may have trouble visualizing or imagining the applications of that technology, if they don’t really understand how the technology works.

Ron Tarro (14:33):

Okay, I would argue a little bit differently. All you described was your requirements in recruiting for a CEO. You’re not going to get a CEO who did real estate management, no offense to real estate managers. That’s an entire industry that has a focus. If indeed, and we’ve done a series of investments in med tech, so basically what you need is somebody who understands the marketplace for these technologies. Here’s the problem with investing in research. Science is not the thing that adds value, it’s the application of the science in the marketplace. So you need somebody who knows the marketplace. So you have to go to a professor and you have to say, “Hey, you know the science, now you need somebody who needs to know the application space for the science.” And that’s different. They don’t have to be you, but they have to be somebody who is in effect, creating value through the application of the technology. That’s a different thought process. That’s a quite different thought process, because at some point it has to be commercialized. Now, if you’re just busy selling patents, if you will, you can do that. But then hire a patent troll, they’ll know how to do all that stuff too. So you still have somebody who’s going to spend all their time thinking about that. So there’s an intellectual foundation for a business and there’s an application foundation, if you want to think of it that way, maybe. So you still really haven’t defeated the argument. My two-person model is still the best model and that’s what should be pursued to create value. You know, I’ve been in the consulting world, which is sort of the intellectualization of business, right, which is all about strategies and frameworks and methods. And I worked at a think tank, for a number of years, doing this kind of published work. I get the academic-business divide. The reality is, is putting something in the marketplace takes balls. Period. Yeah.

Richard Miles (16:05):

So it sounds like important advice. Number one is it’s not enough to get somebody with a generic business background or business skills. You really need to have somebody who understands that particular market in which you’re trying to enter with your technology.

Ron Tarro (16:17):

And came out of networks, and networks and telecommunication. And there’s some young motivated types that can come up those learning curves, and that’s all great. But listen, if you want a CEO, you probably want somebody who knows how telecom works. All the better, right? We’re going to get back to, what you don’t know can kill you, right? So they bring actually wisdom that an academic probably wouldn’t bring to the business.

Richard Miles (16:36):

So let’s talk about the strategy and the frameworks. Now let’s imagine a company and I’m sure you’ve got real-world examples of, let’s say they’ve gone through their first year. They’ve launched, they’re getting revenue. They’re doing pretty well. They’re starting to grow, but then they face some serious choices, right? Do we grow in this direction or that direction? You start having to make significant trade-offs in terms of hires or just start hiring like crazy. What are some of the pitfalls, let’s say after a successful year one, that companies make in terms of a strategic direction after that first 365 days?

Ron Tarro (17:05):

So I’ll change your 365 days, cause I’ll let that flex, and I’m going to look for certain milestones. So I carve up a company lifestyle this way, is somebody is in the phase of hacking value. It’s the idea that I have a technology and I am busy refining potential uses for it and testing that. A good program in that startup type of stuff, iCore, I think most of the academic world has seen the iCore program. If you want NSF funding, et cetera, there’s iCore, is certainly a help to that process. But this is the idea of, before I build it, should I, right? Or, and what should it do? So this is the idea of hacking your insight, right? Getting that really polished, such a way that you have an insight and you know how it’s going to be applied, then build a prototype. So I’m gonna look at a company first and say, where are you at with that, and have you established that as a phase? Second thing I’m gonna look at is, okay, let’s hack product market fit. Product market fit is this idea that somehow it’s the right set of features and it’s the right price, and you’ve demonstrated that by a bunch of things like, maybe selling it to a few people. And so hacking product market fit to me is you’re done with that based on basically a quick check. Are you having to force customers to take this product or are they excited to take it? And we can talk about how to do that. And you’re going to test your different ways to sell it and your messages and stuff like that. And then third, you’re going to hack growth, and hack growth is another way of saying, you’re going to hire more salespeople and you’re going to begin to accelerate because things start to get repeatable, right? Here’s the problem, if you haven’t properly hacked your product market fit, and now you start hiring salespeople, guess what happens? They work really, really hard and they don’t sell a lot. Or worse yet, they do sell something, customer doesn’t like it and is always yelling at you, and maybe they stop using it. So what’s going on? The ones who went through and did this in steps. It’s not a calendar step. It’s sort of like a testing thing almost to say, I have insight. I have fit. Now I’m going to chase growth. And then you start hiring salespeople and evolving your messages, and you decide whether you’re going to use in-house people or whatever, and that lots of different things can go on. But that’s how I look at it. And you can see more often than not, that’s how companies get stuck, is they actually didn’t do the first two steps. The other interesting thing that you see with companies is you can look at the marketplace, crossing the chasm, that guy, this idea that you’ve got innovators and early adopters. And when you’re a new company, brand new product, and this idea that you have, these innovators and early adopters, and when you’re first starting a company, you have a brand new product. The tendency is to take the product out there and convince everybody how great it is. And if you did your insight right, what you really want to do is just look for all the people who are desperate to have it.

Ron Tarro (19:40):

There are certain people that a narrow range of people who will be fast adopters to this; it could be people with a huge problem and they don’t care about the wrong or risk it takes on a new company, somebody who’s the perfect fit for the product. So you’re looking for people with perfect fit, not trying to convince the rest of the world that you have the next big thing. You’ll see a lot of folks doing a lot of presenting, and what they haven’t done is they haven’t narrowed everything down into a nice tight message to a very tight group of people. And so they burn weeks and months, even a year or two, break their picking because they’re tackling the wrong folks. The other side of that is you want the risk takers, the people who have such a big problem that take a risk on you, right? And what you’re going to have is the big corporates. Everyone says, I want to sell this. I want so-and-so to buy it, big NASDAQ, New York stock exchange company. The reality is is those folks more often than not are managing risk of technology acquisition, along with innovation. You need somebody who needs the innovation because they’re desperate for it. So, I watch where people are on the cycle of early stage, and what you find is that some people rush it and fail late, after they’ve collected a lot of money by the way, from investors or worse yet, from their mom. So now you’re sitting there going, well, what happened here? Well, you weren’t quite defined in what your product was. It’s interesting, the story of our company really was similar to this, which was, we built a piece of software that was essentially a middleware, to use software terms. And we put that software into very select companies that were very innovative and had very sophisticated requirements that only we could do. And so we’ve found that one and then this one and picked our way individually through the group until we said, okay, this is a story that’s turning out to be repeatable with everybody else, and we refined it. So it happens that way in real life. If you try to circumvent that, you lose.

Richard Miles (21:26):

Let’s talk some about CEO’s as managers. You referred earlier to the life cycle of an early stage company, and you start out say with four or five people on your team, and it’s more like a family or a basketball team than it is a company, right? Because everyone knows each other. It’s very close. And then you get a little bit bigger. Maybe now you’re 25 or 30 employees. And then one day you’re 150 to 200 employees, and that obviously requires a different management structure, a different management style as you start growing the company in size and scope. How many CEOs are able to successfully make that transition from five people working for them to 200 people working for them? And how often is the case where somebody says, you know, “All I ever want to do is manage startups, I don’t want to manage a big company. It’s not fun. It’s too bureaucratic. Blah, blah, blah.” What is the range of outcomes that you’ve seen?

Ron Tarro (22:13):

Well, actually you described it. Let me just put it this way, maybe. Let’s just talk about growth of a CEO. So I started a company, it’s getting bigger. How do I have to change personally, right? Now I came into a small company from a large, so I had some visibility on what it’s like to manage a more complex environment, I suppose. You go as a founder and a CEO to, in effect, managing a product and customers, right, and building a product, if you will, to, in effect, building an organization. So it’s almost better to view what you’re building as a machine. It’s a machine where, if you actually step back from it, the machine keeps running, right? So you see a lot of CEOs who, and they’re right in the short term, they could probably do everybody’s job better than the person they hired. This becomes untrue as time goes on or less true, anyway. It’s probably even untrue. And so, they hold on to stuff too long. If you show me an overwhelmed manager, the first thing I look for is a delegation problem where they’re not viewing your organization as an organism that care and feeding, if you will, and they haven’t spread things out. And the real telling thing happens when you become a manager of managers, that’s the break point where it forces you down this road. So if you’re reaching into your managers or over your managers, then you’re just in the wrong head space. So to me, the growth thing is you have to then begin to say, okay, “how do I set up structures and communication so that everybody knows what I know believes, what I believe is seeking what I seek, KPIs to use fancy terms, Key Performance Indicators, to design the organization a little bit, so everybody’s a believer?”

Ron Tarro (23:38):

Listen, Elon Musk is great. He knows how to do this intuitively, which is our mission is to get to the moon, right? Who believes that we should be on the moon? So he’s got a whole organization, absolutely energized to this big idea and lining everything up to it. Here’s all the steps. And that’s the big thing is that basic transition away from being the best at everything and the person who’s best at moving the chess pieces around, if you want to think of it that way or best at designing ways that everybody can get stuff done faster. You don’t give up everything, you know, you choose. So for me, an example of how we sold early on; I sold, because we’re not venture backed, so I was selling the product, if you will. Ended up then having a sales group. In the sales group, they would in effect do some selling, but I would focus on various strategic things like this customer right over here has to be the one that we get next, Marriott or something. And so, I’m actively involved in that, because it had a material impact. But once we got Marriott corporate on board, getting every Marriott hotel to in effect use our product, an entire team that could drive that. So you begin to move yourself into something and then back out. You look at the messaging, all your positioning. So in our case, it was strategic impact sales, and then also the product roadmap. What are we making and why? One of the most telling things, cause I obsess on Musk probably too much is he’s not the CEO he was. But if you look at where he spent his time, he spent it as chief product officer, chief engineers. He’s very focused, because the product is what makes the business as a foundation and then its application and alignment to the marketplace the second. Those are the two things. If you have a CFO, the CFO makes sure that the mine is not running out the door wrong or something, but those are not the core things for a CEO. The CEO is what do we make and who are we making it for and why does it matter, et cetera. And that’s until you go public. And even then, still that.

Richard Miles (25:24):

Do you see that often where a founder, the idea person says, I just want to stick with product, developing products because that’s what I love? Is that fairly common?

Ron Tarro (25:33):

One of the reasons I came into our company was our CTO and COO were like, “we really don’t want to run this,” our CTO just really wanted to stay on the product side, it’s all he wanted to do. And by the way, that’s a very honest self-assessment, just to say this is not something I want to do. You can still own a huge percentage equity of a company and do profoundly well, but you just don’t want to go through the brain damage to that other job over there. And by the way, since you are a founder, is you get to pick your job. So why shouldn’t you? I actually have a lot of respect for that. The idea that, especially with technical co-founders is I say, “I want to be on the technical track. I don’t want to be a CEO. I don’t want to be dealing with every HR issue and financial and market, this and blah, blah, blah. I want to design and make products.” That’s hugely valid and maybe even desirable if I were to go back.

Richard Miles (26:17):

Ron, why don’t we conclude with something you said at the very beginning. You mentioned, if you could give yourself advice, young Ron Tarro advice from the older Ron Tarro, what would it be in terms of lessons learned? Let’s say you’ve got the young idealistic tech guy at 22, 23, or tech woman, and they’re going to go conquer the world, start the next Facebook, whatever. What do you think their older selves would be telling them in 20 years?

Ron Tarro (26:40):

At the end of the day, I end up getting rather tactical. I’ve been asked this before and I end up getting, “I would’ve made this decision differently,” but in general, if I were looking at all of it, I would have much more peripheral vision than I did. In some sense, we were pretty good at this, but not good enough. So the idea that we could have gone into other verticals faster, that we could have accelerated faster, that we were a little bit too conservative in what we were up to. Now, the reality is it turned out okay. But I would say that there’s an element of luck to that, that is significantly large, so we beat the odds. In some sense it was our success, but it was also probably a limiting factor of the company. So in a lot of ways, there’s a tendency to try to make what you’re doing today better, more efficient, more whatever. And sometimes there’s a breakout idea that you should be focused on to really grow the company. You could reasonably argue that we didn’t have enough peripheral vision to make a bunch of decisions or even see the decisions to be made. And so the advice to myself would be to get wider faster on what’s going on with mega trends, et cetera. I’m like 75% convinced of what I just told you. Now we pivoted different products in different markets. And the other was a strictly technical one and maybe more tactical too. It was really fundamental. There’s this thing called technical debt in software, and technical debt is this idea that you designed a product that has an architecture, but as you grow, your architecture is not so cool. It doesn’t support the growth or better yet, it sort of turns into a hair ball and you’d be adding this and adding that. Customer A wants this and customer B, and you lose control of the core product, and I would say that you suffered from a technical debt issue, because as an early company in our segment, we said yes to everybody. Sure, we’ll do that. Sure, we’ll do that. And we did not take a step back and abstract, what we’re doing, get back to peripheral vision, why are we doing this, right? What’s the larger context. And so we literally had to take a year pause on our product to say, it’s time to remodel the house. We should have been remodeling the hallway and then also abstracting. And so this is very much a software technology CEO problem, very specific to my world, but this idea that you sort of lost control of your code base. And so now every time you wanted to do an update, it took you 47 horses and a mule to get a new release out, when it should’ve just been a horse. You end up with a slower and slower product cycle. And so, one of the big lessons on the technical side was to really approach, I think, the software engineering story differently, but we survived.

Richard Miles (28:58):

I actually have one final question, both from your personal experience and what you’ve seen. What does being a CEO do to somebody’s personal life? Because everyone thinks like I want to be my own boss, that’s the best thing in the world. But then once you are, you realize that you’ve exchanged some freedom for responsibility, right? Part of being your own boss is you have to worry literally for a time, at least, about just about everything. You don’t really get to go home at 5:00 PM or 6:00 PM and check out and then show up at work the next day. You are the person. What was that like for you? And what has it been like for others that you’ve seen in that position?

Ron Tarro (29:28):

Well, I thought about my business every day of the week and pretty much all day. So let me give you the motivation. There’s a moral case for a CEO, especially startups, with deep respect to startups. What you have is you’re changing the world in a positive way. You’re creating something that will improve something for somebody somewhere. And so, if you have a passion for that, that’s pretty cool. And that is a motivation. I find that CEOs that care about money, it’s a crappy and soul-deadening way to approach life. Money’s a by-product of changing the world in a cool way. And so if you’re chasing money, then you’re just chasing money, and there’s no excitement. Then work is work, a slave to a dollar rather than a slave to change. I think one of the things I heard, I always sort of kept in the back of my mind is if you’re a CEO in these companies, what you’re trying to do is, it’s not about you making a product. It’s about you solving a problem in the world for somebody. And so, stay focused on the product or the problem. And with that focus, everything else takes care of itself. It’s its own joy. You made this industry better. You made this customer better. You made the world better. Something to that effect. That’s a huge personal motivation and something worth chasing. Back to, are you in the business of making profitable rockets or are we trying to get to Mars? And what’s the big calling here? And so I think as a CEO, if you have that, then everything else kind of gets easy, and you start blending work, play, and purpose all together in one thing. And that’s much better than being a slave to a dollar.

Richard Miles (30:47):

Ron, thank you very much for joining me today on CEO 101. Lots of good advice. I hope all of your clients and your companies are doing well and do well, and look forward to having you back on the show at some point.

Ron Tarro (30:58):

Cool. Hey, it was very nice meeting you.

Outro (31:01):

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. Richard Miles is the podcast host and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood, Soundstage, and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

Recalling his time in the radio business, guest Lew Dickey tells host James Di Virgilio that, as a CEO, it is important to recognize that you are often forced to take things as you go: “The landscape is changing—you might be able to see a little bit around the corner, but nobody has perfect vision into the future.” Currently, Dickey is the Co-Founder and Chairman of DM Luxury, America’s largest regional magazine company. However, this piece of advice rings especially true considering his background as the former CEO of Cumulus Media, the nation’s second largest radio company.

In this episode, Dickey remembers the quick and drastic shift into the digital realm, a time when somebody like Steve Jobs showed up to Stanford University with his latest Apple products and showed them to eager students, including Dickey, who took inspiration from those moments—as well his own father’s history in broadcasting—to create his own company.

TRANSCRIPT:

Intro: (00:01)Starting and running your own company. It’s not for everyone, but for those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. So we decided to go on and talk to some of those people and find out what they’ve learned, what they’d repeat and what they’ll never do again. We’ll hear stories from their first year, then from the period when they realized they’re going to survive and how they intend to position their companies for the future. We’ll find out what a CEO’s normal day is like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is it time to move on? Joining us for CEO 101, a limited series of deep looks at people who are their own boss, for better or for worse.

Intro: (00:40)Today’s guest CEO, Lew Dickey came to prominence as co-founder and CEO of Atlanta-based Cumulus Media, the nation’s second largest radio company. He is also the co-founder and chairman of DM Luxury, America’s largest regional magazine company.

James Di Virgilio: (00:56)Lew, take us back to your first year, starting your venture. How did it feel to take on such a role and how did that necessitate some changes in your life?  Lew Dickey: (01:05)It’s interesting because I had a market research business that I was running and had started that when I got out of school back in 1985, and that business I was working for all the major television groups and radio groups across the country doing market research and strategy consulting. My sort of purview was nationwide. I was operating in dozens and dozens of markets from the largest to the smallest providing consulting services and market research, consumer insights. So I understood the landscape and I knew a lot of the owners and managers across the country. And I was doing some work for early stage venture capitalists that own some stations in the Caribbean, and they were a mess and I was down there helping this person try to get them figured out. And I was talking about the telco act, which had just passed. This was in 1996, the telco act that had passed beginning of that year and it was revolutionary. And it’s actually still the statute that governs telecommunications today. And I felt that there was an anomaly in the rules that made for an arbitrage where the mid-size and smaller markets actually could benefit from greater concentration based on the rules than the largest markets that may have 50 signals in them. And I said, look, the capital is sort of chasing the largest markets, and that was Infinity back in the day and Evergreen and a few others. And I said, they’re chasing the largest markets or is it a little more uncontested in the midsize and smaller markets?

Lew Dickey: (02:24)So I was explaining this to the VC and his response was, I don’t know anything about radio, clearly based on what you’re seeing with this mess, we’ve got in the islands here, but I do have some connections and we could raise some capital, it sounds like an interesting idea. And so we had that discussion on a long flight back from Barbados. And at that stage, we put it into action and we went out and put together a business plan to do this, to be a consolidator and midsize and smaller markets. Obviously we didn’t have any radio stations. We started with zero at the time. Now my father had some stations in Toledo, Ohio, and then we had as a family, some stations in Atlanta, Georgia. And then I had purchased earlier in 96, a station in Nashville with my brothers. And so we had three markets going into this, but they were in Atlanta, Nashville or larger than the markets we were going to go after, but Toledo would definitely fit, which was my father’s stations that he had had since 1965. So we launched the business, raised about $60 million from some insurance companies and state pensions and a private equity group out of Nations Bank, which is now obviously B of A and got started. But you start, you don’t have any stations. So you have to buy radio stations. You can’t start them from scratch, they’re licensed. So we went out and because of my knowledge and relationships across the country, that’s what I was tasked to do. And so I was on the road nonstop in essence, meeting people and reacquainting myself with others and leveraging relationships with some capital to buy radio stations. And so we bought a number of markets and continued to roll this up. And also keep in mind that to take everybody back to those days, you had top line growing like crazy. You had consolidation happening, and there was no digital competition to speak of here. See, you had a business that was growing nicely on the top line, you had great operating leverage and multiples were increasing.

Lew Dickey: (04:08)And so we started this thing in May of 97 after the capital was raised, started doing transactions in 97, and obviously it was at a breakneck pace in 98-99. We took the business public regular way IPO in July of 98, and then did a follow on offering in 99. We were rolling assets up pretty quickly. And so we were scaling this business fast. And then by the end of 99, we had enough critical mass that we now had to shift from sort of purely acquiring mode, just a deal machine, to really an operating business. And so I then shifted my role and became the chairman CEO of the business in early 2000, January of 2000. And we didn’t think about the early years of this. So I was 39 and was a first time CEO, first time public CEO. And we had a ton of radio stations that posed a set of challenges in that we had acquired dozens and dozens and dozens of assets from disparate owners, disparate cultures, competing factions inside of a market. And so the challenges for integration enormous. I remember on the IPO going around and we were meeting with prospective investors and they would ask about integration challenges. And it was somewhat lost on me, obviously, having not been through that. And everybody was learning real time, by the way. There was no handbook on this because the flood gates just opened in 1996, before that you could own 1:00 AM on FM in a market. So there was no consolidation. And so everybody was learning real time and, and as they say, sort of drinking through a fire hose. And so the integration risks or challenges were enormous and could not be foreseen. At least we weren’t smart enough to understand that. And so that was really job once I took over, which was to in essence, create a homogenous operating culture and take all of these sometimes warring factions within a market.

Lew Dickey: (05:58)You might buy five radio stations in a market from five different owners, and everyone had a different idea of how they wanted to do things, how they kept their books, what they thought of the other people who was going to survive, who would the manager be. And so these were a lot of challenges; now magnify that by 30, 40 times because of the number of markets that we were in, and it was an enormous amount of work. So on top of that, you also had to run the public company. So I was told early on by one of my mentors, Lowry Mays, who was enormously successful and had Clear Channel back then, now called iHeart. He told me early on, he says, “you’ve really got two jobs here; you’ve got to run the company and you got to run the stock, and sometimes they’re two entirely different jobs and you’ve got to make sure that you’re focused on both of them at all times. And I thought that was good advice. And so I did my best to heed it. And we had to effectively write the rule book in terms of how to bring all of these back to the operation side, how to bring all of these disparate radio stations and cultures and management styles, as they say in systems, and try to homogenize them and try to create a best practices approach to create something that we could scale with as we were going to continue to grow. And oftentimes it was very unpopular and people don’t like change particularly in a mature industry. And so we had to navigate those challenges and a lot of people, in essence, like to design their own jobs and you can’t do something like that when you have to have a smart division of labor, if you’re going to really operate the business as efficiently as possible, which is what the street was looking for.

Lew Dickey: (07:27)The other side of the job, to make sure that you had the operating margins that they were looking for in the operating leverage, which is just a fancy way of saying, as you grow a dollar of revenue, you grow a greater percentage of that in cash flow or EBITDA, which is the principal metric that the business was valued on. And so that was the challenge. And that’s what we were very focused on doing in the early days. And again, this was in the very early days in terms of software and how the business was managed and then taking a step back for a second. Prior to my research company that I started after school, I had started a software company in school with my freshmen dorm mate, and we created software for traffic and billing and for music scheduling and callout music research. So my background, the first company I actually started was a company called OmniSoft, was a software company for radio stations. So with that background, I actually brought him in as CTO, and we worked to understanding that the software was sort of a cottage industry broadcast software. And none of it was really very good, and so we wanted to create a really an integrated technology platform, sort of ERP, that would help run the business and would do so and enable us to, as they say, systemize, the approach to running radio stations, particularly the back office and the SGNA function. And so that’s what we did. But again, same sort of thing. You meet with resistance because a program director who was used to their music scheduling system that they had used for a long time, just like viewer on word, perfect. And somebody said, you want to go to Microsoft Word, met with resistance there. And so these are the sort of the things that we had to navigate through. So there were a lot of challenges. The good news is the economy was chugging along and the broadcast business was doing very, very well. So that sort of brings us up to the spring of 2000 before the.com crash. And then that created a whole separate set of challenges that we had to navigate. I can take a pause there if you’d like to ask any other questions.

James Di Virgilio: (09:25)So describe the beginning, the feeling, what some of the experiences might have been. And in fact, it might even be instructive to start with your time at Stanford, with a very first company you started. What stands out to you, putting yourself back in that mindset, starting a new venture, looking around and saying, here’s what we’re going to do. Here’s why we’re doing it. What is fresh in your mind about that sort of experience as a leader or a founder of a new venture?

Lew Dickey: (09:52)Sanford was a pretty fertile ground for it and you’d see it all around you. So it was easy to get caught up in it. And I can remember being at the undergraduate library and when Apple brought in the early Macintoshes and there was a big table in Meyer library, and a number of us were there and we were asked to use this mouse. And you remember the original Macs and look at this. And Steve jobs was in there walking around, talking to all of us. “What do you think of this? How does this work?” And doing a little focus group with half a dozen of us sitting around a table doing this, and obviously he was already a very big deal and a celebrity in his own right. And enormously successful. And so those were sort of the formative years and you were around that. And so it was easy to embrace that and want to participate and want to do something like that. And I knew the broadcast business because of my father’s stations in Toledo, having grown up in them. I never actually worked there, but I certainly was around it and understood the business. And so they were doing everything manually from music scheduling and tracking and billing. And he was looking to automate that and had proposals. I was out schooling and he said, you’re out there. Tell me what you want, what I should look at, and that’s how it started. I took a look at all these brochures and grabbed my buddy Alford, who was a computer science wizard and said, what do you think of all this stuff? And cocky freshmen. He’s like, hell, I could write that much better. And so that’s when we looked at it and said, all right, well, this is a business. It’s a good industry. Let’s do it. And that’s how we started it. And that was it. You didn’t know what you didn’t know. And at that stage of life, there’s so much success coming out of the young, smart kids that are out there and all around the country now. It’s great because you don’t know what you don’t know. And sometimes you need that blissful ignorance and self-assuredness to just go forward and do it. And that’s what we had. And it didn’t work that well.

James Di Virgilio: (11:30)And you mentioned sort of a blissful ignorance, perhaps hubris, right? There’s a lot of benefit to that when starting a new venture. Was there a time in any of your early years at these various ventures that you started, that you were perhaps afraid of failing, or you had a fear that this won’t work or what happens if this doesn’t work?

Lew Dickey: (11:47)No, there really wasn’t, I’ve never been afraid of failing. And I’ve always sort of thought when I went into something that I was going to succeed, and I think that that never really entered my mind. I think, you know, later in life, when you have a lot of responsibility, it’s difficult to walk away from something. Then I think it’s just common sense. People are much more risk averse, and it’s very hard to do that. And you have to really think about failure and consequences. Particularly you have real responsibilities, which is why that’s the perfect time to do it when you don’t and you can sort of let it fly and throw caution to the wind and just go and you have a good idea, chase it. And I think it’s the greatest feeling in the world. And I would encourage anybody who’s in a position to do so to do it. And I think as we all go through life and you have more responsibilities as you get older, that’s why, if you think about it and you want to do it as a young person without all of the responsibilities that could potentially weigh you down, do it. But to answer your question, no, I never really thought about failure or what, I was just sure that it was going to work out and it just scoped full speed ahead.

James Di Virgilio: (12:41)And looking back now, obviously here you are, right? Lots of experience, all the things you’ve done in your life. Looking back now to any one of those early stage moments, what is some wisdom you would have given to yourself? You’re in a time machine, you go back and you say, “Hey, young Lew, here’s some things at this stage that now I know that you should either not worry about or focus more on.” What are some of those things?

Lew Dickey: (13:01)I always try to do this, but you never really do it in the moment – you think about it in retrospect. But I always told myself to pay attention to people that had gone before me and try to absorb as much knowledge as you can from people who have had that experience, lived through it, had the school of hard knocks, paid for it, and trying to benefit from their experience. And even though I told myself that, and I think to an extent I did, and I was very fortunate enough to have some key mentors in the industry who were very helpful to me, in addition to my father, who was my number one mentor and blessed with an enormous amount of common sense and was in his own right, very successful. I just think that I could have done more in that respect, but I think about mistakes that you make, maybe it’s inevitable, but I think if possible, really hone in on and go the extra mile in terms of trying to learn from people who have walked there before you, because it really can provide a shortcut. You don’t have to learn everything. You don’t hear yourself or relearn it. And if some people have trodden that ground before you don’t be a dummy and learn from them. So I think I probably could have done a better job there.

James Di Virgilio: (14:01)Wise words there for sure. All right. Let’s take a look at the, we’ll call these the middle years, but really this is going to be anything in your mindset that sits out as middle to you. So you finished the startup years. You finished your early seed years. Now, you’re obviously a CEO you’re established to some degree. How did your normal day change compared to the early years?

Lew Dickey: (14:22)It’s less frenetic. You’re more on top of it. You understand the game, if you will. That comes with experience and seasoning. And was, I said, you have two jobs, you have to run the stock and you have to run the company and you just get better at both. And we were very aggressive, you know, continued to push and continued to grow and innovate wherever we could, whether it be new structures, deal structures, or continued to work on the technology platform. So I would just say that you get more comfortable, you know your way around, you’re known to the other people in the industry and in the investment community and Wall Street. And so I just think that it’s pretty much common sense. I just think the longer you’ve been doing it, the better you get. You’re just more productive. You’re not putting out fires to that extent. And you’re building a good team and all that as a prerequisite to building a lasting enterprise.

James Di Virgilio: (15:09)You’ve got a foundation set, and now you’re beginning the optimization period, and you mentioned the team. Did your original team change just a little bit or significantly from the early years to more of the middle years?

Lew Dickey: (15:20)Yes it did, but that’s inevitable in business. So you think about the C-suite yes. We changed CFO, we changed some of the key operating people, and then obviously you’re constantly having change, which is just the nature of business within business units. And it’s a very distributed business, which is very different from a tech company or a large software company where everything tends to be in one area. Even though you’re doing business around the world. In the radio business, you don’t have a large corporate staff; at the Heights, we had 7,000 employees and we may have had 75 at corporate. And so you’re talking about 1-2% of your employees are at corporate and everybody else’s out in the field and you’ve got business units that run their own P and L’s and they report up. So that’s the way to think about it. James Di Virgilio: (16:01)So you have this obviously changing, as you’ve mentioned, responsibility landscape. Your roles become not more defined, but certainly you take the lessons that you’ve learned and you know some things you want to apply. What were some of the focus points that shifted from the early years to the middle years? What were some of the priorities that perhaps changed as the business grew and there were different challenges that needed to be addressed?

Lew Dickey: (16:22)Well, all businesses go through challenges. I think we had early on the need to, I called it professionalize the business from a lot of the mom and pops that sort of ran it out of their checkbook and didn’t have what normal industry practices would be away from the broadcast industry. Something like CRM or an ERP system, the various checks and balances that you would need for timely reporting sales training. These are things that were really done ad hoc. Some of them didn’t do it at all. And so in essence, to professionalize and try to create standards and best practices and drive those through the organization. So you could effectively scale it and leverage your management structure and create something where you could have upward mobility within the company, which I thought was an extremely important part. And if you had a very small market, if you were in Macon, Georgia, or Albany, Georgia, and you wanted somebody to be in a position to be able to run Atlanta, the skillset required to do it is essentially the same. It’s the same business. It’s this question of, if you have the right standardization and processes that are consistent or homogenous throughout the organization, you can really create upward mobility. And there really wasn’t a lot of that, I think in the industry. The people who ascended to roles in markets were generally people who came up in those markets rather than people who came from a smaller market or a hub market and moved up. And so there wasn’t a lot of that in the industry. So I wanted to create something that would give people the opportunity to do that and move if they so desire, it wouldn’t just have to be running the market. Could be a sales manager, could be a key account manager, program, director, music, director, chief engineer, whatever role you would think of within a radio station, marketing promotions director. So those are the things that we wanted to create.

Lew Dickey: (17:59)And as I mentioned, it caused an awful lot of consternation to get folks to buy into that. And just simply because people are very, very, very resistant to change. And so that was the bane of my existence in trying to do that. But over time, people self-selected. And we actually went outside the business because we were systematized to that extent, we were able to then hire outside of the business and bring some people in from other industries, from hospitality, from other business services industries, into the broadcast business, which also I think was helpful in growing the talent base. So I think that all of that was very necessary and it was just a lot of hard knocks and scars to get it there, but that started to change over time. And then a lot of industries, particularly as we see now, more prevalent than ever, particularly through the pandemic, the broadcasting business, as well as traditional media, beginning with the newspaper industry, started to experience serious disruption by digital technology. And it happened to them first and they obviously missed the boat by allowing their content to be shared for free. And so in doing so, they devalued their content and consumers really began to believe that information was free. And I talked about this in my book, only a couple of newspapers really, successfully, have survived this; the New York times, Wall Street Journal, Financial Times, and others are working hard to do it. Most did not, and the reason is they let their information out for free, very early on and consumers came to expect it and didn’t value it. And then when they tried to erect a paywall consumers just moved on and there were plenty of others places they can find free information.

Lew Dickey: (19:43)So in my judgment, had the newspaper industry adopted the paywall approach early on…they never handed out New York times or Atlanta Constitution Journals free on the street corner. You had to buy them. And now that the information was available digitally on your personal computer, (which was back in the day, now obviously everything’s mobile) they were able to access that for free. And so I think they should have been much more careful about that early on. And clearly I think the motion picture industry was, and to a great extent television and the sports leagues, they understood the value of their content. Newspaper people didn’t. So as a result, newsrooms have been gutted, they’re off 70% in terms of staffing and hundreds of papers have closed and stopped printing, and others will do the same going forward. So it’s a very challenged industry simply because they didn’t get on it early enough. And on the broadcast side, it was really the competition for digital advertising. It wasn’t so much which that they were getting our product for free because in broadcasting, you already got the product for free. Our model was obviously distribute free to consumers and the advertisers pay for it. And there really was no digital competition for local radio per se. You had music services, but you always had record players and cassette players and CDs in the cars. So your music collection already had a separate outlet anyway that competed with broadcast. The difference was it was local advertisers, and national, but local advertisers which always represented about 85% of the business weighted average. They now had another choice and that was search and obviously social, which is why those behemoths now between the two of them, Google and Facebook, now have multiples probably 10 times, if not more, it could be as much as 15 times, the entire size of the radio industry, just in those two companies. So that dollar started moving in that direction. And obviously in a fixed inventory business, I started putting real pressure on rates because these businesses were growing at 20, 30% a year.

Lew Dickey: (21:23)And ad dollars tend to grow with nominal GDP, which we know is low single. And so as a result that you were seeing a real share shift away, and that’s why it crushed newspapers. It really began with Craigslist and the classifieds, which represented half of the newspapers’ profits and for a service, it was essentially free that started to decimate them. And then as people wouldn’t pay for their news, that sort of was the nail in the coffin then. And so you saw dollars go there, that business was gutted. And then it started to pick up steam, the shift in dollars away from local media into digital. And that’s what’s caused a great deal of problems today. So the radio industry was, I think at its height, 21-22 billion, and now it’s probably honing in on half that post pandemic. And we’ll see whether or not there is a rebound. I’m highly doubtful that there will be a significant rebound from here. X political, which was sort of supercharged in 2020, but I’m highly skeptical that in broadcast radio there’ll be a significant rebound and in television reruns, which they refer to as their subscription revenue, which obviously is coming from the MVPD now represents between that and political represents half the business. And obviously that never used to be the case. So they’re straight local ad dollars spot advertising is off dramatically as well.

James Di Virgilio: (22:34)This is a nice segue from what you just talked about, but now looking as a mature CEO facing a lot of the challenges you just mentioned, you’re in this stage, you’re no longer a disruptive startup force. You’re obviously steering a much larger ship. It’s harder to be as nimble as the college kids who are taking one idea and trying to improve upon it. So how do you handle the pressure as a CEO with all of these different changes that occur in your industry? How do you handle the pressure of the media of public opinion, your own employees when making these decisions?

Lew Dickey: (23:04)Well, it’s a good question and there’s no real single answer, I think, that can encapsulate that. You have to look at each of the constituents independently and you have a plan and then obviously you’re going to make mistakes and you’ve got to course correct, and you’ve got to do so as quickly as you possibly can. Some of these things, you have to take them as they come. The landscape is changing. You might be able to see a little bit around the corner, but nobody has perfect vision into the future. I certainly did not at the time predict the speed with which the shift would go to digital, the acceleration and the rate of it, that it would go. And I think that they would inform everybody in terms of balance sheet management, if anybody had that idea, you know, nobody’s downside cases had, I think, much of a shift or this rapid over shift taking place. And anybody who says they did would be fooling you because if that was the case, if anybody knew, then everybody would have put their companies up for sale five years earlier and been on top of it. So you don’t know at the time. And sometimes it’s hard when you’re in the forest to actually see the proverbial trees and understand that because you’re a cheerleader for your own book and what you’re doing, and sometimes it’s hard to have perfect objective information on this. And again, when there’s no precedent for it, it makes it even that much more difficult. So I think we worked very hard to innovate and saw some things coming to our credit. And we looked very hard at commerce and we had a commerce initiative, which was to in essence, look for a different revenue model from the reach. Radio always had great reach and still does have great reach. It’s just got a very challenged ad-based business model because it doesn’t have pricing power. And so you have to look for incremental ways to monetize an audience, which as I mentioned earlier, and as everybody knows, gets it for free.

Lew Dickey: (24:42)And so you have to look for smart ways to monetize. And commerce is a very interesting way to do that. We sell our ad units to help other people make money with their businesses. And is there a way to participate in that and have a revenue stream other than just selling commercial announcements? And so we had a commerce initiative. I definitely saw the need for, or the shift with digital, and that everybody sort of gets into everybody’s business because it’s all bits. And so the need for more of a multi-platform brand or approach to entertainment and media. And so we were looking at that. We had a good presence in country, so we created our Nash brand to do just that. Obviously at radio, we had a record label that we put together with Scott Porshanna. We bought country weekly magazine and converted that to Nash magazine that we bought from American media. And we’re looking for a cable channel TV outlet, to create this virtuous circle of content distribution monetization under a brand that could in essence attract a large and loyal audience. And so we were doing that, had a streaming proposal that we were doing with Yannis Frieze, who started Skype and sold it. And so we had some interesting things that we were doing. This is back in 20 13, 14, 15, so long time ago, I think a tad ahead of our time, these things would all be necessary today to evolve immediate business, but broadcast radio company into a modern media business.

James Di Virgilio: (26:03)Looking at the various stages that you were in: early, middle, mature, now. You always had to make decisions strategically with how you were going to run the business or compete. What informed those decisions, what was the playbook or the rubric, like how do you go about deciding how you’re going to compete or solve a problem, or basically move the industry forward?

Lew Dickey: (26:26)You’ve always got the constraint of your balance sheet, your capital structure. And so you have to weigh everything. So it’s easier to see what needs to be done. At least I always felt this way. It’s easier to understand what needs to be done and where you need to go than it is to actually go and do it based on the constraints that you have with your existing capital structure. So I don’t know if that answers your question, but I think you constantly have to understand sort of leverage liquidity and risk in anything that you do. And I always try to size up problems through that prism. And then in terms of moving the industry, like that was the other part of your question, it’s very difficult to do that. And because you have a lot of headstrong people that run their own businesses and more power to them, and they’re going to run their business as they see fit. And ultimately you compete against them. And if you can show a better way, perhaps they move and adopt your vision, or just try to copy you or emulate you. And so it’s very difficult to try to lead an industry. And I think that a lot of my colleagues, if they were trying to create a consortium to do something, and even if it was an incredibly noble effort and well thought out, my experience was that it was always really difficult to succeed there. And so sort of observing that, I always thought that there’s a better use of time than trying to get a bunch of people who have their own balance sheets and worries and concerns to try to do what you want them to do. And sometimes reflexively people are stubborn just because it’s coming from a competitor. And so those are the kinds of things that industry leadership in that respect, I always looked at as the best way to do that is to just chart your own course and lead by example. And if you’re successful, what you’re doing makes sense from an industrial logic perspective and the results are there, then people will follow. That’s sort of the best way to do it is you just have to lead by example, if you’re really trying to move an industry, there isn’t time for the brain damage that it takes to try and herd cats and get a bunch of disparate folks with disparate agendas to try to coalesce. Very, very, very difficult to do and in my judgment, not necessarily the best use of time.

James Di Virgilio: (28:29)Lew, wonderful stuff. Thank you for being with us here on the Radio Cade podcast, for spending a considerable amount of time with us today. And for Radio Cade, I’m James di Virgilio.

Outro: (28:36)Radio Cade is produced by the Cade Museum for Creativity and Invention, located in Gainesville, Florida. This podcast episode’s host was James di Virgilio and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

When Rick Carlson founded SharpSpring in 2012, he didn’t think of himself as a CEO.  “My co-founder and I were doing whatever it took to survive,” Carlson says, and they were responsible for everything from software development to buying office supplies. In the early days of the automated marketing software company, “there were so many failures it was hard to name them all,” according to Carlson.  “There was an immense amount of wasted effort in figuring out what customers wanted. Over the years we think we’ve gotten smarter about how we make those decisions.”  The company went public in 2014, after being acquired by SMTP, and is currently listed on the NASDAQ.  

TRANSCRIPT:

Intro (00:01):

Inventors and their inventions. Welcome to Radio Cade, a podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. The museum is named after James Robert Cade, who invented Gatorade in 1965. My name is Richard Miles. We’ll introduce you to inventors and the things that motivate them, we’ll learn about their personal stories, how their inventions work, and how their ideas get from the laboratory to the marketplace. Starting and running your own company: it’s not for everyone, but for those who have done it, it can be exhilarating, exhausting, and easily the hardest thing they’ve ever done. So we decided to go out and talk to some of those people and find out what they’ve learned, what they’d repeat, and what they’ll never do again. We’ll hear stories from their first year, then from the period when they realized they’re going to survive, and how they intend to position their companies for the future. We’ll find out what a CEO’s normal day’s like, how they build and manage their teams, what it’s done to their personal lives. And finally, when is the time to move on? Join us for CEO 101, a limited series of deep looks at people who are their own boss for better or for worse. This episode’s guest is Rick Carlson, CEO of SharpSpring, a comprehensive sales and marketing automation platform.

Richard Miles (01:25):

Rick, welcome to the show. Glad to have you on to get your experiences as CEO of SharpSpring. We’re going to start by talking about the very beginning. So if you could take us back literally to your first year, really your first few days as CEO, and let’s get a snapshot for people who’ve never done this before, what that is like. And obviously, you put in work before you probably became a CEO into the company, the idea, but let’s start with the first 30 days. You’ve got your company, it started, maybe it’s just you, maybe you have a handful of employees. What was that experience like?

Rick Carlson (01:56):

First off, thanks so much for having me, appreciate the opportunity and I’m glad to be here. So when I heard you pose the question, your first day as CEO, actually what immediately came to mind is during that first year or even two years, or maybe three years, I certainly did not think of myself as a CEO. CEO is what I am now managing a very large team with managers and a couple of hundred people. When I think about that first year, I think about struggling with a fledgling team where I am just another team member, and that’s exactly what it was like. I was a founder of a business, much more than a CEO, what somebody thinks of as a CEO today, and that means everything that you think it means. My co-founder and I, Travis, who was really the technical side (he remains our CTO today), we’re doing anything and everything that it took to survive, from raising money to making the coffee, to go buying the office supplies fortuitously. Just a week ago, Travis celebrated his ninth year with us and dug up one of his first emails to me about buying office supplies as he moved over from his previous company to start things. So very literally in that first year, it’s about being a team member and forming a team and doing whatever it takes to survive.

Richard Miles (03:17):

So at this stage, you can afford to tell great anecdotes about the early days, including maybe some early failures or things that didn’t work out, right? Do you have any stories–again, go back, limit yourself to maybe the first month or first few weeks–of something that you look back and smile now, but at the time you considered it a disaster or failure, or just a really bad day?

Rick Carlson (03:37):

Depending on which lens you think about SharpSpring, my business, in some senses, it feels like we had a straight line to success. Like we did not have to pivot our business model. Once we got to market, we started selling and I think it’s even more common that a business pivots once or twice before it really finds its footing. Through that lens, SharpSpring was pretty straightforward, but being more on track to the question that you asked, there are so many failures that it’s too hard to name one in every sort of micro way. There are more failures than you can count. It’s a winding road. So I have put our development teams and the early days through so many useless development features projects that never took off and meant anything to any one of our customers. And over the years, we think we’ve gotten a little bit smarter about how we make those decisions, but an immense amount of wasted effort on this sort of winding road to figure out what customers want and how our business is supposed to work. Again, though, if you backed up, it would look like a straight line for us. So I hope that paradox makes sense to your listeners.

Richard Miles (04:51):

So all the management books, or most of them, focus on one of the most important things you do as a founder, CEO, is who you hire. So again, going back to this first few weeks, did you have sort of a template in mind already of like, this is the person that my co-founder and I want to work at this company? Did you have, literally, a list of qualifications, or did you just sort of figure it out as you went along? What constituted a good employee for SharpSpring and a bad employee for SharpSpring?

Rick Carlson (05:18):

Yeah, great question. Like everything in a startup, my vision of what I wanted was almost immediately thrown out the window, and we were left with reality. But the specific story there is that I left a great job in internet security to start SharpSpring and intended to found it with somebody different than the person I ended up founding it with. So I quit the job. I moved back to Gainesville, I’m in it, up to my neck, and I get a call from the original co-founder who said, “Guess what? I can’t do this. My wife is having twins and I just can’t take the risk with you. I’m so sorry, Rick.” So yeah, I had exactly the right guy in mind and before we could even really get started, the best laid plans as they were, right? I think that there’s a lesson there though, which is press forward, and I found a lot of luck involved in this. So pressing forward is not always enough to be very clear, but it is required. And so I press forward and was lucky enough to find Travis Whitten, who founded the company with me ultimately. And we found a third person in the early days. And between the three of us, we had a super complimentary skillset. Travis backend architecture, fantastic developer, could really build anything we imagined. I sort of brought the business model and product vision to the company. And then we had another gentleman, Joe Kelly, who came from Grooveshark. Some of your listeners probably are very familiar with Grooveshark. Between the three of us, we were able to build a product and get to market. And so it was a super powerful team. And I’ve read a lot about this, a lot of companies are founded with three. That’s, sort of a magic number. It feels rare that two people can cover all the ground to make things work out of the gates, and four starts to become a crowd if you will, and in essence, three doesn’t appear to be a crowd when it comes to starting a business.

Richard Miles (07:16):

Good answer. Okay, final question on the early days: I’m sure you’re at the stage in your career, having succeeded as you are, that you’re probably asked for advice a lot by people wanting to do something similar. What sort of advice do you give to people who say, “Okay, I’m ready to jump out the window. I’m quitting my good job, and I’m going to go out on my own, start my company.” Or what wisdom would you have given yourself now, looking back, talking about everything from the completely mundane to the inspirational. So like, “hey, make sure you buy a fire extinguisher” or “believe in yourself,” whatever. What are a key piece of advice you would give to somebody, let’s say tomorrow, that was about to start their own company?

Rick Carlson (07:52):

Yeah, so, I think that answer depends on the experience of the person who’s wanting to start the business. So yes, you’re right. I do get people, different experience levels, asking, “Hey, I’m thinking about doing this.” In my mind, there’s a magic window, and that window is bigger for some people than others. That the magic window I’m talking about is where you have enough experience. You have enough knowledge of the market that you’re trying to get into, or problem that you’re trying to solve for your customers, that’s a whole other conversation. Incidentally, being able to solve a customer’s problem is not enough to start a business. But, anyway, you’ve got enough experience, and yet at the same time, you haven’t gotten bogged down with life, family, children, mortgages, all the things that mean you’ve got to find security and so forth. And so there’s a window there that it feels like gives you the best chance to succeed with the experience, and yet allows you to take the risks that you need to take. And sometimes, people wait too long and they realize it’s just impractical to start a business. I mentioned my original co-founder all of a sudden having twins. It’s a perfect example of that. And then I see people who are maybe starting a business a little bit too early, before they’ve gotten into the market that they’re trying to attack and participate in. It’s not to say that they can’t succeed. People succeed all the time, but we’re talking about giving yourself the best chance and having that experience to put to bare, I think is a really important thing. So that’s the framework I like to think about these things. Also, you should have a fire extinguisher.

Richard Miles (09:26):

No, it was good advice, right? So Rick, I’m literally going to go off script here. I’m going to ask you a question we hadn’t thought about, but something you said triggered it when you decided, okay, I’m going to do this. I’m going to go try to start my own company. What was the most common reaction from friends and family? Did they go, “All right, Rick, go get them!” Or were they like, “Whoa, uh, what are you doing?” What sort of reactions did you get from those who knew you best?

Rick Carlson (09:50):

For most people, it wasn’t a surprise at all. For me, and anybody who is listening to this that knows me, knows this to be true, very difficult for me to work underneath somebody else. It was almost a requirement that I go and start my own thing, because working for 40 years for somebody else, with my personality, probably not going to work.

Richard Miles (10:10):

So this sounds like it was part of a plea deal, right?

Rick Carlson (10:14):

[Laughter] Well put, well put, exactly right. I think it was just a foregone conclusion. But even before I figured that out, when I was a teen, I knew that I had no idea what business–I mean, it could have been a restaurant at the time, but I just knew I wanted to start my own business. And so, I don’t think it surprised anybody. I still think people, parents and so forth, it’s not to say they weren’t worried. They weren’t surprised, but not to say they weren’t worried at the same time.

Richard Miles (10:43):

I’m sure you did no complaining whatsoever, so they probably didn’t even know if you’d had a bad day, right?

Rick Carlson (10:48):

Yeah, that’s right. Well, just in terms of generational changes, my father was somebody who worked for an electric company for his entire career. And what you sought at the time was security and a pension. And so even before I started a business, what’s commonplace today, switching jobs every couple years and trying different things was just foreign to them. And so, yeah, there was a complete lack of understanding. And it’s only just in the last few years where people go, “okay, you knew what you were doing,” so.

Richard Miles (11:20):

Let’s talk a little bit about the middle years, and I know that’s a relative term, depending on what company we’re talking about, but let’s start as a discussion point. Let’s say a year or two. So you’ve been doing this for a year, and presumably at that point you had more than three employees, your personal priorities in terms of how you spent your day as the founder slash CEO were probably starting to change. Maybe the original team was starting to change. You’re beyond the, “okay, we may fail tomorrow stage,” but you haven’t quite hit the big time yet either. Was it a surprise in terms of the new challenges or did it just seem like this is day 366, it’s not really any different than day five?

Rick Carlson (11:54):

There are absolutely stages to the thing, where everything felt different. For me, again, I was the guy that the first year and a half, two years, pretty fantastic for me. I raised some money. I knew how to do that–again, I had some experience–and so I was able to raise some money, and a lot of the burden was on Travis and the dev team to actually build the product. And I remember distinctly, it took us a couple of years, even though we were building an MVP product and trying to get to market quickly, because our product category in many ways had already been defined by the market, took us a while to build our version of it and the layering on the new things. And I remember distinctly, after two years of hard work from my teammates, not to say that I wasn’t working hard during that time doing my thing, but the burden shifted over to me. I promised these guys we can sell, I promised these guys we could market, and all of a sudden we had to go and do that. And I remember the first month we went to market, we sold exactly nothing, and that was because we had unrealistic expectations of the sales cycle. And thankfully in the second month we started to do some things, but I definitely remember a stressful period during that time. Then I remember a third phase, in what I would call those middle or teenage years, where all of a sudden we had enough customers and gosh, it became even harder. So first it was like raising money, which is actually sort of the easy part, then it’s your initial sales, and then you’ve got this customer base. Now you’ve got to keep selling, you probably have to keep raising money, and now you’ve got to support customers. So it just layers on these incremental obligations and complexities and difficulties as time goes on, which doesn’t paint a very beautiful picture. But I think running a business can be pretty messy. It’s not to say it’s also not fun and rewarding and that you learn things, but that’s how I remember the years, two and three and those earlier years.

Richard Miles (13:55):

It’s almost more of a challenge to grow and succeed, right, than to decline and fail because decline and fail, your world keeps getting smaller, but the growing and succeeding you’re now, like you said, adding layers of complexity that somebody’s got to manage, and somebody’s got to think about it.

Rick Carlson (14:10):

That’s a fantastic way to put it. I think that’s exactly right. Mentally, clearly the opposite is true when you’re not succeeding. And sometimes even when you are and when you’re marginally successful, it can take a real mental toll on you. It’s really tough to work that hard and not succeed, which is the case with a lot of businesses. And if you’re in that situation, you have to remember that that’s okay, and that’s part of the thing and that most businesses don’t succeed. But I think that’s exactly right on the operational side of things; you get to the next level, and there’s a whole new set of complexity that you’ve got to figure out how to manage. And I could keep going into stage four and five. I think I described three of them so far, but I’ll stop there.

Richard Miles (14:48):

That’s a perfect segue into the next topic. Now, we’re bringing you up to the present day. So if this were a movie, the flashback would be over, the characters back in the present day. So I can only imagine that your duties may be significantly different than they were when you first started. Maybe you’re further detached from the actual production of the product, so to speak and even sales. So what are you spending most of your time on now in the company? And then, describe some of those additional challenges that you have to take on at this level. I imagine dealing with the media, dealing with public opinion, dealing with a lot more employees is a bit more of a challenge. So what is that like today?

Rick Carlson (15:27):

I think I left off where we’re all of a sudden, we were selling and then we had all these customers to manage and so forth. Along the way you hire a bunch of people, and there’s a phase when we first started our conversation today, I said, I didn’t feel like a CEO. I felt like a member of a team, a founder, a part of a team. Somewhere along the line, you become a CEO, and there’s a difference, and what was striking to me was when people started to treat me–when we had enough employees–where people started to treat me as a CEO, and I struggled with it, actually. There were things that I could say to a teammate in even an abrasive way, because that person knew that we were on the same team and they knew what I meant, and they knew we were all going in the same direction. And it was no big deal because, you know, we’re just onto the next thing, and we’re all pressured. But as a CEO, saying exactly the same thing to somebody who doesn’t know you as well, who thinks of you as a, not a teammate or a founder, but as a CEO, even the smallest things you say could really ruin someone’s day. So there’s this transition that takes place. I can’t pinpoint it, but it’s part of the detachment that you mentioned. You’re right. Like I used to know everybody on the team, and I used to be able to spot talent personally and see somebody who’s making a mark. And now, you are separated by a layer or sometimes even two layers of management, and you’re not intimately involved in really any process. You try to dabble in everything, but you’re not as deep in any process. And I think you know this, but we’re actually public, and so there’s a strange story to how we became public, but we’re a public company. So a lot of my time now is dealing with analysts and banks in New York and everywhere, and key investors, and new potential investors, and our public company board. And that carves out a big chunk of time that would, in the early days, be a hundred percent focused on the business. So it’s a pyramid with your customers sort of at the bottom of the pyramid, and the bigger the organization gets, the taller the pyramid, the further you are away from those customers and what’s happening sort of at the ground level, if you will. I think I just described a multilevel marketing company. I hope, I hope I didn’t do that.

Richard Miles (17:47):

That’s what, that’s how I will describe in the show notes, exactly [laughter]. I think the transition comes when everyone starts laughing at all your jokes and you win all your golf games, then you know, you’re really the CEO, right?

Rick Carlson (17:57):

That is required from day one, Richard, that was day one where we just, everybody knew that about me. You got to laugh at the jokes. It’s the uncomfortable laugh.

Richard Miles (18:06):

And they laugh when you know the joke wasn’t funny. But it’s interesting what you say, just the limited experience I’ve had with running the Cade Museum and starting it, is in a way, you have to keep reinventing yourself, right? Because you keep having to redefine, how do I add value? And it’s not the same way as you did in week one or year one, when, as you said, you may be down there with the floor level programmers and workers and you no longer really add value to the company doing that anymore. You’ve got to do, like you said, talk to the Wall Street analysts and talk to the media and that’s how you add value. But in a sense, it’s a shifting target, right? As a company gets bigger and bigger, and as you said, you have other layers of management, even those things, eventually, maybe somebody else will do, right?

Rick Carlson (18:46):

Yeah, you are a hundred percent spot on, that you have to reinvent yourself. You can cause more harm than good actually by, by not doing that, not evolving, which isn’t to say as I sit here and proudly declare that I’ve figured that out. It’s not to say. I know it to be true, and yet it’s a work in progress for me, constantly trying to evolve and figure out how I can be the least disruptive and add the most value, right? I would actually go further since we’re on the topic, that is true of every person in the company and every process, every process in the company. So one of the things that I’ve talked about with the nucleus of people that have worked together 5, 6, 7 years now, and we have constantly built up processes, they’ve worked and then somehow 12 or 18 months later, because of the size of the company, because of other changes in the company, they no longer work. So there’s a process of tearing down the processes that worked yesterday and rebuilding them. The obvious examples, when you’re 20 employees and you need to communicate something, you yell it out because you’re all in the same room, right? There’s that sort of thing. When all of a sudden you’ve got departments, it’s a totally different communication style. When you’ve got enough departments of enough size where the interaction between departments and coordinating two, three departments, almost like they’re people. Each department has a personality, it has their own needs and goals and ambitions, and trying to coordinate that, it requires different processes. And so going back to the original question you posed, it’s absolutely, as a CEO, tearing down my idea of the value that I create and rebuilding it, but it’s also true of, I think every process in the business, by my estimation.

Richard Miles (20:44):

I like the way you put it. It almost gives you a sneaking sympathy for large bureaucracies, right? Because you can understand how bureaucratic processes get put in place to coordinate ever larger and larger companies or government agencies and so on. But then of course, you’ve got to be careful because that also tends to sort of throttle creativity and make people risk averse and all those things. So it’s a real challenge, right? How to get bigger, stay coordinated yet without killing the dream with all your employees, so to speak.

Rick Carlson (21:09):

Yeah, that’s exactly right. I could talk about that one point for a while, frankly. I remember with a certain amount of hubris and this is true today, by the way we, this is part of our corporate culture. We’re extremely proud of how nimble we are versus our competition. But I remember almost laughing about it and thinking about these much larger companies and how slow and cumbersome they were. In reality, we’ve taken a couple steps closer to those companies out of necessity. And guess what? Turns out when you’ve got 10,000 businesses using your software, you darn sure better have better QA than you had in the early days, right? And so there are definitely things that necessitate slowing down and communication and so many things. So it’s just one of the many things that, that changes over time with a business

Richard Miles (21:57):

Yeah, and when you’re publicly traded, best not to talk to the press after three martinis, right?

Rick Carlson (22:01):

Ah, a lesson, I’m still trying to learn [laughter]. No, that’s not true.

Richard Miles (22:04):

So let’s talk about, a little bit philosophical here, and I understand since you’re publicly traded, you can’t give me any secrets, and we don’t want any of our listeners to be indicted for insider trading here. But tell us a little bit about the model and strategy that maybe you had from day one or maybe you developed it. What was your strategic true north? Did you know, from the very beginning, okay, this model, this strategy we think is going to position us so that we beat our competitors. And if so, has that model and strategy changed or you just had to maybe tweak it? Is it still essentially, the model and business strategy that you have, is essentially the same as when you began with modifications?

Rick Carlson (22:41):

So, what I would say is the mission has been consistent, and the strategy has shifted once. And now we’re at an interesting stage forth with our business where the strategy isn’t shifting, but we’re layering on other concepts. So let me bring some of that to life. For our business, we’ve always had a mission of bringing what we call today, a revenue growth platform. Our product is traditionally known as marketing automation, but has grown well beyond that set of functionality now to basically being anything in, an SMB needs to manage their sales and marketing processes, s,o CRM and social media management and marketing automation and email. So that was always our mission to bring an affordable, easy to use solution to SMBs, of which there are millions of them. And as we spent all that time building our first version of the product, when we started the business, we saw it as greenfields because everything was up at the enterprise. Large businesses were using this and maybe medium-sized businesses, but SMBs were not. And over those years that we were feverously building, we saw other competition enter that space, and they were better brands with at the time better products and more well-funded, and by the way, really sophisticated marketers. So one of the strategic decisions we made and it’s less important to think about the decision itself and more about the impetus for the decision we had to figure out a way not to compete. And so often you hear people talk about figuring out ways to compete. Well, the thing to do is to figure out how not to compete. If you can find a place not to compete, it’s a much easier path to go down. And so early on, we decided to work with digital marketing agencies because we found that they were the path to get to these SMB businesses. And when we looked around, nobody was focused on them, and so that has been something we’ve done since we launched the business six years ago. Now we’ve got a brand that is becoming nationally known, that people are aware of. And we can potentially, in addition to working with agencies, approach businesses directly and so forth as we move forward. But I think for the listeners, for us, it was staying true to our mission of going after SMBs while figuring out that space in which we could avoid competition for as long as possible. That’s what I think we did successfully.

Richard Miles (25:14):

I read or heard, or maybe I just made it up, this idea of embrace your weaknesses in so far as the earlier, you understand what you’re not good at–and I’m not saying that your company wasn’t good at theirs–but it allows you to focus on their strengths and reach out and find somebody else to help you do this stuff that maybe you’re not as good at or interested in or whatnot. And I’ve always thought that’s pretty good advice, that the people or the companies that decide they’re going to be everything a to Z soup to nuts. Usually they’re just a can’t be, right. There are going to be certain aspects that they do better than others. And sometimes it just makes sense to think, like you said, choose not to compete in a certain area.

Rick Carlson (25:47):

Yeah, no, I think that’s right. Look, at least metaphorically, companies are a lot like people, and they’re going to have their strengths and weaknesses in their products and their people. I’m never going to be a weightlifter.

Richard Miles (25:58):

That was my next question, Rick.

Rick Carlson (26:01):

Yeah [laughter]. Anyway, there are things I’m not going to do. And there are things that our business is not going to do and being realistic about those things and working with what you have, applying your skills efficiently, is the key to everything.

Richard Miles (26:14):

So Rick, one final question, and I know you may have to plead the fifth amendment on this one, but coming back to you as a CEO, Rick Carlson, do you have an internal endpoint where you think, or, you know, you’ve accomplished pretty much everything you set out to do with this company and you know, it’s time to move on or have you not even thought about that?

Rick Carlson (26:31):

Well, the question is a multi-part question. First off, when you’re starting a business, like I was, which is hard to believe, but nine years ago now, we’ve been in the market roughly seven, but nine years ago, we chose to start the business. I’ve far surpassed what I set out to do back then. We thought we’d build something with a few million dollars of revenue and sell. It was the idea, and that would be the end of it. Maybe we go to another startup, that sort of thing. So by that measure, I have far surpassed it, but what I would say is still a lot of fun, still a lot of challenges. We’re lucky to be in a market that there’s no ticking time bomb in terms of we’re missing a wave or something where the market’s going to disappear. And it’s constantly, there’s new things that are coming out of the product to make it even more valuable to customers. And there’s new lessons to learn with how to manage an ever growing business. And so our folks know I’m prone to say, I’m always going to keep it interesting. Being in SharpSpring is always interesting. Sometimes it’s fun. Sometimes it’s not fun. Sometimes it’s challenging, but always interesting. And that I think has got me amped up for the next couple of years, for sure.

Richard Miles (27:39):

Isn’t that what Don Corleone said in the Godfather too, right? The mafia is always interesting, right?

Rick Carlson (27:44):

I actually don’t remember that quote. I think it keeps sucking me back in, right, or something like that. That’s exactly right,

Richard Miles (27:51):

Rick, that was great. I really appreciate having you on the show. You’re doing tremendous work, keep doing it. It’s inspirational on all sorts of different levels and wish you the best.

Rick Carlson (27:59):

Thanks so much for having me.

Outro (28:00):

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. Richard Miles is the podcast host and Ellie Thom coordinates inventor interviews. Podcasts are recorded at Heartwood, soundstage and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.

Medicine that talks to you. Eric Buffkin of eTectRx developed an “edible radio” powered by the chemicals in your stomach that tracks when you take every dose of your medication.  Eric’s colleague, pharmacist Susan Baumgartner, says about 50% of people that are prescribed medication do not take it when they are supposed to. Over the last decade, the company has extensively tested the ID-Cap System and In December 2019 received FDA approval. The company has had several “near-death” experiences, but Buffkin said the real problem of tracking medication usage wasn’t going away, and therefore the opportunity for the company wouldn’t go away either. Susan said at each pivot point or setback  the team and investors said: “let’s go forward.”  *This episode is a re-release.*

TRANSCRIPT:

Intro (00:01): 

Inventors and their inventions Radio Cade, and podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida, the museum is named after James Robert Cade, who invented Gatorade in 1965. My name is Richard Miles. We’ll introduce you to inventors and the things that motivate them, we’ll learn about their personal stories, how their inventions work, and how their ideas get from the laboratory to the marketplace. 

James Di Virgilio (00:40): 

Medicine that talks to you, or at least talks to your smartphone. That’s no longer the stuff of science fiction. It will soon be available for patients everywhere. Welcome to another episode of Radio Cade, I’m your host, James Di Virgilio. And today my guests are Eric Buffkin and Susan Baumgartner the developers of a system called ID Cap and the co-founder of a company called eTectRx. Welcome to the show, Eric and Susan. 

Eric Buffkin (01:03): 

Thanks very much. 

James Di Virgilio (01:04): 

So let’s dive right into your story. I spent a lot of time pre-show talking with you, Eric, about what you developed. It’s very fascinating. I’m sitting here looking at it right now, in its simplest form you developed a medical breakthrough, this something that doesn’t exist in its form. Tell us about what you’ve done, what you’ve created. 

Eric Buffkin (01:19): 

Probably the most important thing we invented James, is a way to communicate in an edible radio. And when you get right down to it, it’s a tiny little radio that’s small enough that you can swallow it and it can take power off of the chemicals in your stomach. And so you don’t need a battery. You don’t need much of anything. You can see it there it’s really tiny. And once you swallow it, it essentially starts transmitting. There are a lot of folks that have tried to do different things like this. You can get ingestible cameras for doing endoscopy’s and different things, but they’re typically fairly large, fairly expensive and not something you want to use to track when somebody takes every dose of their medication, which is what we’re trying to do. 

James Di Virgilio (01:56): 

Now, Susan, as a pharmacist, I have friends who are pharmacists, I know that one of the most important things is for patients to actually take their drugs. How often is it that patients are not taking their drugs on time or even taking them at all during a course of drug therapy? 

Susan Baumgartner (02:11): 

In terms of long term therapy, the numbers about 50%. So 50% of medicine is not taken as it’s prescribed or as it’s needed in patients. So that’s pretty big number and that’s the one that we’re trying to help solve for. 

James Di Virgilio (02:24): 

And that’s what creates a significant need, is if I’m the physician and I prescribe the medication, it’s not taken, my patient may not get better. And I can’t for sure say why I might prescribe another medication, which may be the wrong course of therapy. So in comes this solution, we understood and learned, you know, really recently that you’ve gotten FDA approval. Tell us about the process of getting FDA approval, because it’s not simple and for what you’re doing, it was essential. 

Eric Buffkin (02:47): 

So that would be Susan’s core area of expertise. She is the one responsible for wrestling the FDA to the ground and making them cry uncle. And in that regard. 

Susan Baumgartner (02:56): 

So we have extensively tested the product. So after Eric and his team developed an incredible product with amazing technology, we had to put it into a usable form so that patients could use it on a day to day basis. And physicians could take that and other healthcare professionals could take that information and really use that to improve health outcomes. And so the process for getting clearance takes several years. It actually was a period of about four to five years that we did the required testing for the product and that included putting it into humans and seeing how long it took for the battery to send a signal and how long it took for the reader that’s worn to detect that signal. And also how the communication flowed from the body to the patient, to the healthcare provider who might be using that information. So we did clinical testing. We did a series of making sure that what was swallowed was actually very safe and it moved through the system the way it was supposed to move through and did a number of bench tests that also made sure that it worked the way it needed to, and it produced the results that it needed to. 

James Di Virgilio (04:04): 

So I’m looking at the pill here in front of me, it’s a normal capsule size. The drug manufacturer would be able to put their drug into this, along with the ID cap. Right? I take that. And then within 30 minutes, a signal is sent to a reader which is going to collect the data of the medication that I’ve taken. So therefore the physician, myself, maybe even the drug company, potentially I can know that I’ve taken this drug. Now that’s the base level thought of what’s going on. Right? 

Eric Buffkin (04:29): 

Right. Exactly. It’s really a measuring stick so that you can measure how often and how frequently and how regularly somebody takes their medicine. And the big difference between this approach. You didn’t notice a confirmed ingestion. There are hundreds of other products out on the market. You can go on to the app store for iOS and probably find 20 different medication reminder apps. All of those will allow you to separate minders to remind you to take your medicine, but not one of those or confirm anything, same thing with little pill bottles or other organizers, you can get reminded, but there’s no way for the physician to know other than the report by the patient saying, doc, I took my medicine and there’s many cases where that’s simply not sufficient for the care or for the patient’s wellbeing. 

James Di Virgilio (05:11): 

Now, as you mentioned, Eric, this problem has been around for a long time. We’ve talked about this, right? 50% of patients are not taking their drugs or taking them correctly. This idea that you had was not a brand new one, it’s been attempted to have been solved before we understood. There’s a competitor that exists, that does something similar and you yourself and this company has been around for more than 10 years. It’s obviously been a journey. Oh yes. And with any entrepreneurial story, there’s some conflict points where we would call it. Maybe some drama points in a movie. Tell us about a few of those experiences that got you to where you were today, but were maybe unknown as you walk through them. 

Eric Buffkin (05:44): 

Oh jeepers, how long we have? 

James Di Virgilio (05:46): 

Hours. 

Eric Buffkin (05:47): 

Okay. We’ll try and narrow it down. So first of all, I was one of the co-founders of the company. I had Dr. Neil Yoliana a local PhD, brilliant man who was actually the aha guy, the guy who originally thought of the, hey why don’t we put a radio on a pill and be able to detect when somebody takes their medicine. And he and I met several years ago, I had some chip and radio background and he has a lot of biomedical engineering background. And so we started exploring this. He had actually had some funding from the NSF to work with some UF professors to do some early development. And so we took that development, started the company we’re moving down the path a couple of years into it. We were getting interesting experimental results thing. Wasn’t quite behave in the way we wanted it to behave. And we ended up hiring a new engineer out of St. Pete named Judd Sheets. Brilliant guy. Also, one of the things I have discovered is make sure all the guys you hire are a lot smarter than you are. That’s certainly the case in our company. And one of the first days Judd came in and he started looking at this system and say, wow, this is really cool stuff, but you know, it’ll never work the way you’ve got it designed. And that was kind of one of those aha moments of are you serious? And to his credit, he was absolutely right. And to his further credit, he allowed us to fix it, which is a big part of it. So that was a big drama point, especially for being about three years into the company. At that time, James, enough of your background in the investment community, you’ve dealt with a lot of folks that are entrepreneurs and startups. They say, you can tell you’re a pioneer by the arrows in your back. We had a few of those three or four years ago. We actually had to shut the company down for a period of time. The short story is we weren’t able to raise the investment we needed. We had to shut it down, tell everybody go home. And we were fortunate in that. We around it up a new set of investors who basically said, okay, everybody come back and recapitalize and we got restarted and we’ve been better capitalized and resourced since that time. And that’s, what’s really allowed us to get over the hump of this FDA clearance. So that near death experience will give you a few gray hairs. 

James Di Virgilio (07:38): 

You’ve mentioned so much in your story that resonates with so many other success stories, which wouldn’t feel like a success. If you stop that a lot of points along the way, what kept you believing in your vision of this idea, becoming a reality, despite financial issues, a decade of time going through having to deal with FDA approval, you had a lot of hurdles. What kept you going? Why didn’t you just pull the plug and say, you know what? This isn’t worth it. 

Eric Buffkin (08:02): 

And we still thought it was the right thing to do. I want to play off one thing Susan said, and also want Susan to share one of the other interesting conflict points, but drama points, maybe. The problem’s not going away. 50% of people are still not taking the medicine for all you hear and in the press about how high drug prices are pharmaceuticals are still one of the least expensive ways to treat somebody, compare it, to go into emergency room or go into the hospital. Still much less expensive. And 50% of people that don’t take their medicine results in hundreds of billions of dollars of completely avoidable costs to the healthcare system here in the U.S. that’s money that our taxes have to pay and that we have to pay and drives our insurance premiums and drives a lot of stuff. So the problem was still there. The need was still there. We felt like the opportunity was still there. So we kept kicking the can down the road, kept trying to move ahead. 

James Di Virgilio (08:47): 

Now, Susan, tell us about this drama points that Eric’s mentioning. 

Susan Baumgartner (08:50): 

I was just in a play off one thing that you said in terms of the adherence side of things, the current way that adherence is measured is through a self report by the patient. The patient tells their provider how they’ve been taking the medicine, and that’s not as objective as it needs to be when you’re looking at high cost therapy or you’re looking at the outcomes that you’re really trying to drive in a patient and in a care situation. And so our device ends up giving real time, look at medication use that has not been seen before. It gives the time that they’ve taken the medication. It gives medication patterns, really essential information when someone’s being discharged from a hospital or when they’re starting on a new therapy or they have a complex regimen or a very expensive regimen that is designed to produce a certain outcome in that patient. And so it helps to inform that and provide evidence to be able to make the best decisions for that patient and their care. 

James Di Virgilio (09:46): 

Yeah, you’re hitting the nail on the head. I follow nutrition very closely, and it’s almost impossible to do a really good academic study in nutrition because it’s all self-reported and you get all sorts of weird results because people say why this many calories this week, or this much protein, and certainly in medicine, it’s the same thing. Only. It’s a lot more serious when it comes to drug therapy. And so when you were telling your story about it, because it’s important because it needed to be done. I think that’s the neatest thing. I think in our modern times, there’s oftentimes a misconception about why entrepreneurs start businesses, why creativity maybe even occurs in almost every time it’s to solve a real problem that exists. And that’s what I’m hearing in your stories. There’s a real problem that patients are not taking their drugs correctly, which is leading to a lower result for their own health. And this is an elegant solution that can hopefully improve the outcomes for patients. 

Susan Baumgartner (10:34): 

Yes. You asked about the persistence of this idea and the company over time. And as Eric said, we were fortunate to have an infusion of funding and people who trusted that this was the right solution. And there was a large market opportunity. And fortunately at each of those critical pivot points where we could have said, it’s not going to work, or it’s going to be too long of a road, or the regulatory hurdles are just too much for a small company like ours, the team that developed it, the group that was working on implementing it, and the investors all stood behind and said, we’ve got to bring this to the market to improve care and to improve adherence monitoring. And that’s one of the points that I think Eric was bringing up was when we stood at the end of a very long, very expensive clinical trial and had results that didn’t look quite what we expected them to be. And it took a large and laborious investigation from all of our technical folks and the entire team to dissect that and try to figure out why is it that we know this product can deliver at this high level? And why did we not achieve that in this study? And fortunately through the hard work of the engineers and the development team, we were able to pinpoint exactly what it was correct it very quickly and move forward with additional clinical studies, to be able to demonstrate that we were performing at that high level. Just one of many examples of the incredible persistence of a team and the investment group to make things happen. 

James Di Virgilio (12:01): 

And today we’re sitting here and there’s a bottle of champagne on the table in front of the three of us. And Eric You were the first to do the living adventure series at the Cade Museum, and you are now the first recipient of the Cade’s gift to you and to your company for receiving FDA approval. So we go through these dramatic points in your story, you survive some tumultuous points. Now you have FDA approval. What’s next. 

Eric Buffkin (12:23): 

Boy, that’s a good question. Sell like crazy. The FDA clearance is essentially the permission by the regulatory authority to go take money for this thing. We’ve been developing for a long time and it is now of something we are going to do with great enthusiasm. We’re working on building collaborations with a lot of people in the ecosystem around how pharmaceuticals are delivered to patients. There’s a lot of important partnerships delivery for development, data flow reimbursement. So one thing that was another kind of, one of these ahas, I come out of the chip business, primary building microchips for consumer electronics and, and that business, once you get at work, you go sell it. And the person who buys it is the person who uses it. The healthcare market’s not quite so simple because the person who uses it, it’s not the person who’s paying for it. And the person who’s prescribing it. It’s a lot of intertwined things that have to be sorted out. And the whole machine has to be running before the business starts to ramp up. So, um, we’re hopefully going to be taking advantage of this clearance to help get that ramp going. 

James Di Virgilio (13:22): 

And so taking what you said into consideration, how long do you think it will be before I could take a capsule like this one and have data transmitted to it? Are we months away, years away, maybe? Hard to say? 

Eric Buffkin (13:33): 

I’m going to give you two answers. The first one I’m gonna give you the second one. I’m give Susan to answer. If you’re willing to sign up for one of the clinical studies, we have run in with multiple people around the country, you can do it tomorrow. It’s a matter of fact, I may have some informed consent forms in that truck, James, so we can walk you out there and sign you up. But on the commercial side, do you want to talk about the commercial a little bit better as to what the companies have to go through to actually introduce a commercial product? 

Susan Baumgartner (13:54): 

Yes, the product will actually be available by prescription only. So as Eric said, there are clinical studies right now in place where the product is being used and you could get access to it. If you are eligible for those studies in terms of bringing a product to market within our capsule and with the ingestible sensor in it, there is a pathway that is allowed for that through the FDA. And so we can provide a combination drug device product very soon, but more than likely in partnership with other companies and other payers and pharmaceutical companies will be able to take approved products, combine them with that sensor that’s available and have those available for clinical applications and clinical use very soon. 

Eric Buffkin (14:36): 

One thing probably should clarify, James is that eTectRx does not handle drugs. We don’t make drugs. We don’t distribute drugs. We’re not a pharmacy. We created this device to help feed into that chain of pharmaceutical manufacturers, our pharmacies, to do exactly what described there. So we’re providing an enabling component to make that happen. 

James Di Virgilio (14:55): 

Well, Eric and Susan, this has been wonderful. We definitely need to bring you back for a second session so we can dive further into there’s so much more we can talk about including your own backgrounds, which I know oftentimes play into our stories as entrepreneurs. I know Eric, you like the beach. I know there’s other things you’d like to fishing, boating, right? I see that you have, in fact, a fishing shirt, I feel like it’s Friday. Maybe you’re going to head out and hit the open water this weekend, but regardless, there’s so much to cover. This is so exciting. I think it’s really neat whenever you get to look at a solution that doesn’t exist, there’s nothing right now that exists like what you have. And it’s been great to talk about it. We should dive further into it. And for James Di Virgilio and Radio Cade, thanks for joining us. 

Eric Buffkin (15:33): 

Thanks very much for having us James. 

Outro (15:35): 

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. This podcast episodes host was James Di Virgilio and Ellie Thom coordinates, inventor interviews, podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist, Jacob Lawson. 

Diabetes sometimes leads to loss of vision. What if there were a simple screening device to find out who is at risk? Dr. Lloyd Hildebrand, a Canadian ophthalmologist and founder of two start-up companies, invented a hand-held device that in minutes measures the eye’s electrical waves to detect patients who may be suffering from diabetic retinopathy. Hildebrand talks about the challenges in moving from academia to the start-up world. “It was hard to get somebody that understood what we were doing to fund the company and run it,” Hildebrand said, “so I drew the short straw.” *This episode is a re-release.*

TRANSCRIPT:

Intro (00:01): 

Inventors and their inventions. Welcome to Radio Cade the podcast from the Cade Museum for Creativity and Invention in Gainesville, Florida. The museum is named after James Robert Cade, who invented Gatorade in 1965. My name is Richard Miles. We’ll introduce you to inventors and the things that motivate them, we’ll learn about their personal stories, how their inventions work and how their ideas get from the laboratory to the marketplace. 

Richard Miles (00:40): 

An EKG for the eye is helping people with diabetes to keep their eyesight. Welcome to radio Cade, I’m your host, Richard Miles. And today I’m talking to Dr. Lloyd Hildebrand and ophthalmologist and founder of two startup companies. Welcome to Radio Cade, Lloyd. 

Dr. Lloyd Hildebrand (00:53): 

Thank you very much. It’s good to be here. 

Richard Miles (00:55): 

So Lloyd, I got to say you’re the second Canadian I’ve interviewed in the last three days. And our listeners may begin to think I’ve fled to Manitoba, Saskatchewan or somewhere, but I promise from the beginning, no hockey jokes, no references to Molson or any of that nonsense. 

Dr. Lloyd Hildebrand (01:08): 

Okay. At least it’s not February and 40 below zero. 

Richard Miles (01:12): 

Exactly. But I did want to comment on that. Actually, you were born in Canada and you grew up in Brazil. You came back to Canada for medical school, you practice in Iowa for a few years as a physician, then some training in Oklahoma, you worked in Portland, Oregon for a while. And now you’re either in New York or Las Vegas. I can’t remember where you are at the moment. 

Dr. Lloyd Hildebrand (01:30): 

I’m in Las Vegas now. 

Richard Miles (01:31): 

So the obvious question is, are you on the run from the law or sort of what explains your trajectory, give us a snapshot of Lloyd Hildebrand and why it is you in so many different places? 

Dr. Lloyd Hildebrand (01:39): 

Sure. I was born in Canada and at age four, my family moved to Brazil, Southern Brazil. All my parents were missionaries there. And I lived there till I was age 16. I came back to Canada and finished high school and went to do my undergraduate work in my medical school in Winnipeg at the University of Manitoba. I then went into primary care and was a primary care physician for almost a decade one year in Canada, and then move to council Bluffs, Iowa, where I joined two of the Canadian physicians there in a primary care setting, doing family medicine there, obstetrics. I then went back to training in ophthalmology at the University of Oklahoma in Oklahoma city at the Dean McGee eye Institute, which is a large regional well known academic center and did a fellowship at a family plastic and reconstructive surgery in Portland, Oregon. That was a one year program. And I was recruited back to the University of Oklahoma at that time. And I spent 22 years there on faculty and went through the full academic career there. I retired in 2016 to go to New York and work on an artificial intelligence project. I worked a couple of companies that were working with IBM Watson at the time. And after that project is completed, now I’ve decided to come to Las Vegas, Nevada and I start work on Monday, two days from now. 

Richard Miles (02:55): 

You’re quite the traveler. I did note that you’ve actually hit both coasts and the dead center of the United States, Canada and Brazil. So you’ve got the hemisphere pretty well covered. Lloyd, let’s talk about your core idea that you’ve been working on for a while, but I think is fascinating. I think that what we’d like to spend most of our time today talking about, and then later the company or the companies that you have founded to spread those ideas. So let’s start talking about diabetes, which isn’t obviously connected to eyesight for a lot of people, but tell us what is the connection to vision? And then what is the problem that you are trying to solve? 

Dr. Lloyd Hildebrand (03:29): 

Sure, well, diabetes is the largest growing problem and growing very rapidly at epidemic proportions, diabetes really does a lot of its damage in terms of damaging the end organs, The eye being one of them, the kidney, the heart, and the brain are also organs that can be damaged. It’s usually damaged to the small blood vessel of the eye and that’s called diabetic retinopathy and diabetic retinopathy is actually the leading cause of preventable blindness in working aged Americans. So it’s a major cause of vision loss. The real challenge in diabetic retinopathy is that it’s easily treated. They’re very effective treatments and there’s very, very good research, probably one of the best research diseases in our scientific literature. And yet at the same time, it’s best treated when patients are asymptomatic. So therefore patients with diabetes, there’s a guideline recommendations for them to have an annual examination or evaluation of their retina to see if they have treatable disease. And if you treat the disease, you can prevent the blindness. If they start having symptoms, you can prevent the progression, but it’s very difficult to reverse the vision that they’ve already lost. So therefore the real challenge becomes how do you treat people in a timely way? And the way to do that is to evaluate them regularly and have a reliable test for doing that. The result of the healthcare system though is that only about 40 to 50% of people have that test done on a regular basis. And as a result, a lot of disease go detected until it becomes symptomatic. And they’re behind the eight ball in terms of treatment at that point in time. 

Richard Miles (05:05): 

Can you give us a sense of the magnitude of the problem and do you know, what is the percentage say of people who are going to develop diabetic retinopathy? If they’re not checked? I mean, reminds me a little bit of skin cancer or certain forms of skin cancer, right? Where if you detected easy to treat, if you don’t detect it, it’s highly lethal. What are we talking about in terms of those folks who don’t get checked? Are they in big, big trouble? 

Dr. Lloyd Hildebrand (05:27): 

80% of people will develop diabetic retinopathy at some point in their lifetime of the disease. And there are certain risk factors that are associated with it. How long you’ve had diabetes, how poorly controlled it is. So the hemoglobin a one C level or the level of blood sugar that you have also it’s associated with a higher risk of patients with high blood pressure and high cholesterol and triglyceride levels. So high lipid levels. So all three of those states combined to increase the risk of the patient in doing this. So the relative risk of people developing vision from this, there were about 40,000 people a year that go blind from diabetic retinopathy. So it’s significant and there’s a much larger group of people that then have what we call moderate vision loss and moderate vision loss. Wouldn’t be so moderate to you and I. It’s the loss of the ability to read newsprint and loss of the ability to drive. So they’re very, very significant impacts in terms of people’s lifestyle and activities of daily living. 

Richard Miles (06:24): 

It sounds like if you have diabetes or if one has diabetes, you should at least be aware of the problem. But if I understand it correctly, from what I’ve read, the key is you may get this recommendation from your primary care physician and then you get a referral to a specialist and it’s in that scene, right? That a lot of people just don’t get around to doing it, or they don’t want to do it or whatnot. And so a lot of people who are actually told are aware that this may be a problem, don’t do the critical follow-up and there for, they go largely undiagnosed. Do I have that right? 

Dr. Lloyd Hildebrand (06:53): 

That’s correct. So the big challenge in the healthcare system is what I call people falling off the wagon. And you fall off the wagon from the primary care setting to the eye care environment where the eye exam needs to be done. Part of that is because it’s asymptomatic people, don’t perceive the importance of it. Part of it is it takes time. It costs money to do that. Part of it is that there’s some resistance on the eyecare environment in terms of getting appointments in a timely way. So there’s some inconvenience factor in that as well. And some of it is just that people aren’t even referred for it because again, it’s the asymptomatic disease. 

Richard Miles (07:27): 

So tell me then about the technology that you’ve developed to make this more efficient. I assume a primary care physician can do this in his or her office or pretty rapidly, so you no longer have to refer them to a specialist. 

Dr. Lloyd Hildebrand (07:40): 

Yes. So again, drawing back from my experience as a primary care physician, diabetes has exploded since I last practiced as a primary care physician, but nonetheless, it was an important part of our treatment as well. And so one of the things that primary care physicians do very well is tests people find out when they hit a threshold of disease that needs a specialist and then send them onto a specialist. So our idea is if we could provide a test for a primary care physician to do that was reliable and accurate and convenient for them to do. And generally you have to consider also the economic aspects of it so that they can actually make some revenue from doing this. But that would be something that could help us address this issue because it would avoid patients having to move from the primary care setting to the eye care setting until they had what we call threshold disease or disease severe enough to need treatment. So the initial application that we did is we use the photographic technique to do this. There was a photographic technique developed by the national institutes of health that was used for all clinical trials that were done for the FDA, for the new treatments, for new therapies and for epidemiologic studies. And that technique was developed on film, very similar to the view master film reels of cartoons that we used to watch as kids, little view masters. And it used that ability to create stereo by creating these two different views, our initial solution for doing that in the first company, I started took photographs and converted that process from a film based process to a digital process, created a reading center. So the photographs could be done in the primary care setting sent to the reading center and a report sent back to the primary care physician with a red and green label on it, a lot more detail if they wanted to, but they knew that if it was ramped, they needed to send the patient onto the ophthalmologist for treatments. So what we’re using now instead of imaging technology is we’re using a different form of imaging electrophysiologic imaging, where we actually measure the electrical activity of the eye to determine whether or not there is disease present there. And so that’s where the EKG of the eye analogy comes from. So it’s simpler to do doesn’t require the challenges of imaging, particularly in patients with cataract, because it doesn’t require us to image through the eye to get the data and it can be done much quicker and the reimbursement model is better. So there are several different advantages to the techniques of doing that currently. So part of that then was developing the service in such a way so that it could be delivered in the primary care setting. The workflow would not interfere with how the primary care physician does his or her work, and then setting up a reading center to be able to interpret the data and then report it back and doing this all through a cloud based architecture for doing it, and then important to the primary care physicians that we be able to integrate this into their existing healthcare infrastructure, their EMR systems, and that isn’t such a trivial thing to do either. So once we got all of that established, we were actually rolling out our pilot site and then our pilot site was very successful. And once we were successful with that, we were really working on commercial deployment and that’s when COVID hit. So we have to shut down for awhile. And now we’re reopening at this point and time. 

Richard Miles (10:42): 

So that makes it sound like this idea should spread like wildfire, right? Because it sounds like a quite superior way of handling it. And probably it’s going to save if not lives, at least people’s vision. Let’s talk now about the companies that you founded, not just the origin story, sort of like the day, but also a little bit about the experience of doing so, because you’re not the first one that we’ve had on the show. They come from primarily an academic background. They hit upon a great idea through their research, or they are collaborators on somebody else’s original insight. And most of them find it a very challenging transition to go from the academic world in which you do research and you publish and you then move on to the next research and you don’t have to worry about who’s paying for the little lights over your head or air conditioning or any of that. When they go into this world, in which your idea doesn’t sell itself, it has to be developed it has to be tested. It has to be marketed, it has to be distributed. How did you get, first of all, the idea that you wanted to do this to be involved yourself, right? Cause there’s another path and simply you could license the technology. And a lot of people do that and you move on to whatever else you want to do in life, but you decided to take the hard road and actually get involved in not one but two companies. So tell us what was the impetus for doing that? And describe for us maybe your first, I dunno, six months, what was it like and what did you learn in those early days? 

Dr. Lloyd Hildebrand (12:01): 

A little bit of this is the story of necessity is the mother of invention. So a lot of this was stimulated by a need. I had to do something to do that, to keep the idea alive. We developed the technology in our labs and we had actually continued to grow and develop the idea. We’re validating the idea through research grants and doing it through the traditional academic settings. We had a very large national trial that was going to be done, which is going to be the largest clinical trial ever done through the VA system. It was funded. We got the highest scores ever granted the program. And then for some unknown reason, it was rescinded. Again, I’m still not clear on why that happened. It was an almost $10 million grant, which at the time was the largest grant ever granted the University of Oklahoma health sciences center. So when that happened, the university said, look, either you have to abandon the idea or what you need to do is commercialize this idea and license it out. So we said, fine, we’ll do that. And we had obtained a patent for it at the time. So we thought we had some very tangible intellectual property license it out, but again, those things are a little bit challenging to do. And it was hard to get somebody that understood what we were doing to fund the company and then to run the company as well. There were two other co-inventors with me and they asked one of us to step out. And so I actually took the short straw and stepped out of the academic environment on a leave of absence from the university, just as I was about to hit tenure, my tenure promotion. It was a bit of a challenge and it was something that I hadn’t done before. And I remember the driving force behind my initial business plan was the Ernst & Young book, How to Write a Business Plan. And I literally followed that line by line chapter by chapter and develop a business plan for doing that. And I started marketing the business plan locally in Oklahoma, at the time it was hard to do that because a lot of people didn’t really understand what we were doing and the.com was booming at the time. So I packed everything up and I went to California and I started cold calling people on Sandhill Road. 

Richard Miles (13:59): 

Did you have any mentors at all that you turned to, or that offered you advice or was it just the Ernst & Young book and trial and error? You know, their whole bunch of small steps when you start a company that you don’t even think about filing for registration and finding an office and getting office furniture, all those sort of things that in other circumstances just appear out of nowhere as you do your work, did you have a roadmap or did you just day by day figure out, well, I guess I’ve got to do this and I guess I got to do that. 

Dr. Lloyd Hildebrand (14:25): 

So it’s not that there weren’t mentors, but at that point in time, especially in our academic environment, we were fairly immature at this concept of commercializing technology. So I was a little bit of a pioneer in all of that. And I think I suffered a lot of the arrows that pioneers have in their backs as a result of that as well, but still I did have good mentorship from some business people in the community, some people inside the university and then some of foundations that supported research at the university and these people were early investors in the idea, if nothing else, they provided me with encouragement. But much of what I had to do is really learn on the job OJT for sure, on the job training for the largest part of it. And the most frustrating part about it was that we really had an investor community in the Southwest in Oklahoma and in the region that really didn’t understand the digital world and the digital technology. And that changed dramatically when I went to California, didn’t move there. But when I went there to visit with investors there. 

Richard Miles (15:23): 

Primary care physicians are your principle market. I take it right. I mean, they’re the ones who you really expect this, or at least their hospitals will buy it for them. Once you had the product up and going or something to offer, was it a struggle at all? Or was it difficult to sell them on this idea? I mean, having been one yourself, you knew the language, at least that wasn’t a hurdle, but were there cost considerations or ease of use consideration? Did they said like, yeah. Okay. It looks great, but you know, we’re just going to stick with what we do and that’s fine with us. What did you encounter that at all? Or was it an easy sell? 

Dr. Lloyd Hildebrand (15:52): 

It was not an easy sell, as you can imagine. Medical systems are very resistant to change. First of all. So innovation is difficult to get implemented in medical systems. And there’s plenty of doors in terms of how long that takes somewhere between 7 to 14 years to really get that kind of adopted change. That was one of the points of resistance. So one of the main concerns that they had is the reimbursement issues and the reimbursement issues were complex because of the regulatory events around reimbursement. So Medicare and CMS had certain regulations that we had to follow. There were anti kickback rules that had to be followed as well because of self referral issues. And there were some telemedicine laws that were also pretty antiquated at that point of time, particularly anything that was done out of state. And when that happened, then we also have to follow other new rules in terms of licensure to be able to do this in other States. So there were significant complications to doing that. And then there was the natural resistance of the medical system to changing anything that they’re doing. There was some resistance from organized ophthalmology as well, which seemed to think that this was a threat because the ophthalmologist perspective of the problem is I see every diabetic that comes in and I examine them. What they don’t realize is that 60% of them aren’t making it in. Right? And so that was also one of the burdens that we had to overcome in order to do this. 

Richard Miles (17:13): 

I think you pointed out an under-appreciated problem or problems in the medical device or healthcare industry, and that this is classic third payer problem, right? Where even if the physicians themselves love the product or love the technology very often, they’re not the ones paying for it, nor do they have to deal with the regulatory hurdles necessarily in getting to use it. So did you find yourself having to spend a lot of time at Medicare offices in Washington or with regulators and insurance companies convincing them, this was a good thing for the field? Or how did you negotiate those hurdles? 

Dr. Lloyd Hildebrand (17:48): 

So we actually had to develop a strategy who we call coverage and reimbursement. So first of all, we had to change the policies and make this acceptable in order to do that, we went to the accreditation body. First of all, MCQA that this would meet the quality regulations that were part of the heat it’s report card, which is the report card, measuring the quality of a health plan performance on all of this. So that’s the first thing we had to do. Then we had to go to individual payers in each marketplace in order to get them to provide coverage and the reimbursement for this. So part of that is that we did a technical assessment. There are these organizations that the Hayes group does technical assessments of new technologies that come out, get that done. They review the literature and then provide a judgment on whether or not this is a qualified test to be done. We then went into individual marketplaces and we, first of all, tried to get Medicare coverage for that region. And we did that by visiting with people at CMS central office in Baltimore first, and then with the local carriers and the local carriers each made their own decisions. There’s an interesting story about our initial visit to CMS. It was actually on 9/11 and it was at nine o’clock on 9/11. So you can imagine what that was like. As I was walking into the building, the building was streaming out and we were meeting with the director of CMS at the time Dr. Sean Tunis. And he asked us and said, do you want to stay for the meeting or not? And we said, well, if you’re willing to meet, we’ll still meet, but we understand if you don’t want to do that. And we met and then lights were all grounded by them. And so we rented the last car at the airport and drove 24 hours, back to Oklahoma city. So it’s a very memorable day when we got that, but it was also a very good meeting with Dr. Tunis. 

Richard Miles (19:29): 

Wow. You probably carried out one of the only previously scheduled meetings and actually finished it on 9/11. I was in Washington at the state department and it was quite chaotic and, um, yeah. 

Dr. Lloyd Hildebrand (19:38): 

It was very, very tense and we had just driven from DC to Baltimore. So during that time, it was a very interesting time and very chaotic time. 

Richard Miles (19:47): 

Let’s go back a bit now about the company. So you have two companies, right? The current one is Trinoveon did I pronounce that correctly or how you did, but then the first one was called Inoveon, right? Correct. Okay. What’s the meaning behind those words? And what’s the difference between the two companies? 

Dr. Lloyd Hildebrand (20:02): 

Well, Inoveon was the initial company that we did and really the name was an aggregation of the word innovation and eon, the age of innovation. And so that was really the concept behind it. And our mission really was the prevention of diabetic blindness, because that was our whole mission in doing that. And so we set that up and we developed the technology. We developed all of the protocols with the protocols, the workflow, the business model, the regulatory model, and then the competency reimbursement and coverage decisions with all the health plans. We went through some ups and downs. We had several investors cycles and all of that. And ultimately, we sold that company to a German company that was a health IT company based in Germany, focused in, on the ophthalmology space and the largest provider of EMR systems for ophthalmology in the world. That company was then acquired in the sharks and minnows game by Topcon, which is a large Japanese ophthalmic company. And they were very interested because they were developing the devices that we were using to do the imaging. And so this was a natural fit for what they wanted to do. However, they also had an internal team that was working on their own solution for this. And so when they acquired the company, they basically mothballed the company. But the residual of all of that was that we had one of the largest datasets for annotated data that had very high quality data and evaluations in it that were commensurate with the research quality data that the NIH trials had done. So we had about 3 million images in that dataset. So as a result that became valuable to some of the artificial intelligence groups that were out there, the Googles of the world, and some of the large pharmaceutical companies that were developing and some of them are device companies. And so that data set has become the core of some of the big data analytics that has gone into some of the automated image reading systems that are out there. The challenge with imaging system and reading is that there are some significant operational challenges doing that. Diabetics have a large incidence of cataract. So when you have a cataract, it’s difficult to get a good image. And when you don’t get a good image, you can’t get a good test result. There are other workflow issues and the cost of the equipment and the operation of the equipment is also complex. So we thought that might be a better way to do this. So after that company was sold and spun out and was doing all of those things, we continued to work on other new innovative technologies to solve the same problem. And that’s the origin of trying to Trinoveon. 

Richard Miles (22:26): 

So the difference in, let me see if I have this straight part of what the challenge was. You’ve got all this data, but the ability to interpret the data and is that where the AI comes in, it just makes it more efficient and more accurate. Is that correct? 

Dr. Lloyd Hildebrand (22:37): 

That’s part of it. We still haven’t validated that it’s more accurate. We had human readers doing it. We had a very, very high quality system doing it. In fact, in daily routine operations, we actually matched or out performed research, trial quality data in our reading centers. So that was still difficult to do. The second part of it is that what’s happened in the retinal imaging. It’s become more of a screening technology rather than a diagnostic technology. And so what they’ve done is dummy down some of the questions that they have, and trying to just basically find people that have some disease and just get those people over. And so they can eliminate about 50% of the population that way. 

Richard Miles (23:15): 

I see. I hadn’t thought about that key difference between screening and diagnostic. One is just kind of bare minimum to do with a triage sort. Right. And then the other one is to really try to understand the disease Lloyd, tell me, how do you spend your days now in terms of the life cycle of the company? Are you still primarily on the research and development end or strategic management or.. 

Dr. Lloyd Hildebrand (23:36): 

So the answer is yes, to all of those as you do at small companies, there is a difference with Trinoveon, so first of all, the technology is different instead of technology we’re using electrophysiologic imaging. 

Richard Miles (23:49): 

So it’s the electrical activity, not actual photos that makes this so much simpler or relatively less complicated than the systems that are in place now. 

Dr. Lloyd Hildebrand (23:58): 

Yeah. So the technology of the device is actually quite complex, but what we’re trying to do is we’re trying to simplify all of the workflow for the primary care physician. So it can be done simply by a medical technician and can be done in less than five minutes. That was really the goal of what we were trying to do. So we’ve systematically operationalized all of those aspects with a device that used to be a desktop device that you put your head into now its a handheld device, much like an ice cream scooper has a little cup on it like that, that you put over the eye and the electrode that goes onto the lower eyelid and attaches to the device. And then a series of flashing lights that trigger the electrical activity in the eye and auto correct any errors in it, getting a valid test. And once a valid test is done, it notifies the user of that. And they put it into a little holster and that holster sends it over the internet to our reading center. And then we send the report back to them. 

Richard Miles (24:52): 

Is something that if you went to your doctor, it would only be done if you were diabetic or is this potentially something you would do as a normal battery things that physician’s assistant will do before you see your primary care physician or is that over kill? 

Dr. Lloyd Hildebrand (25:05): 

So one of the critical elements of everything that we do is we try and make sure that there’s a very solid, scientific and clinical foundation behind it. So what we’ve done is we’ve only validated this approach for diabetic retinopathy at this point, electrophysiology of the eye is done for other conditions, such as glaucoma. Hypertension can also make some changes in the eye, but we haven’t validated that clinically, but those are some future applications that we had anticipated will happen. 

Richard Miles (25:31): 

Wow that sounds exciting. So usually what I’d like to do is give everyone on the show, a chance to dispense the many nuggets of wisdom that they’ve accumulated in their scientific and entrepreneurial journeys. And so I’m guessing that from time to time, you were asked for advice maybe from other startups or even other physicians who might be thinking of something similar, have you accumulated a short list of things that you wouldn’t do again, knowing what you know now or pitfalls you definitely stay away from if you were say, asked to serve as a consultant to somebody else’s business. 

Dr. Lloyd Hildebrand (26:00): 

Yeah. I think one of the real lessons that I’ve learned is that perseverance is probably as important as brilliance or intelligence in this game. Is that really persevering with the idea believing in it? And then when the naysayers come, it’s much easier to say no to something than to say, Oh yes, that’s wonderful. That was work. So I think you have to have perseverance and you have to be a little bit immune to some of the critique and criticism that are out there. Even from environments like the academic environment. Some of the harshest critique we took was actually from our research and development group at the university that was supposed to be supporting us for doing this. We had to work through constitutional amendment to the state constitution, which prohibited faculty from participating in equity positions in company. And so we have to work through a lot of these different issues in order to be able to even achieve it. Now, fortunately, we paved the path for other people to do it, and it’s a leisure to doing it, but they’re facing other challenges as a result. But I think perseverance is one of the key things. And I think the other one is really having a solid foundation for what you’re doing. That’s based in scientific merit, particularly in medical applications that has the validation to it always gives you the high road. And so when you face those challenges, knowing that you have that behind you, I think it’s a very, very powerful tool. Ultimately, sometimes it’s harder to sell people on that because they don’t believe you can do it, but once you can prove that you can do it, then I think it becomes a real selling point. 

Richard Miles (27:29): 

Right, because there’s nothing like confidence in your product. If you know it works, then it’s that much easier to go out and tell other people, I guess in many cases it’s a chicken and egg thing, right. You know that a certain trial probably will confirm or make confirm, but you need money to do that trial. And so how do you split the difference? Like, you know, I’m very, very confident, but I’m not certain and get somebody to fund that. 

Dr. Lloyd Hildebrand (27:49): 

The other lesson that you learn is that leadership in a company like this is lonely, it’s lonely at the top because ultimately somebody has to make the call. What’s your priority and spending, are you doing it on marketing? Are you doing it on research? Research people are pulling for more data, the marketing people just want more money, so they can go out and tell the message, right? And so you have to make all of these decisions, how much to invest in technology. And so when you’re making that final decision, I think you really have to think about what are the basic principles that you’re going for. What are the metrics that you’re using to assure that your decision is a good decision, then how do you implement that decision and not lose your organization. 

Richard Miles (28:25): 

The other comment I was going to make Lloyd is when you said that you didn’t get the support, maybe you’re expecting from the academic community. I was gonna say, I’m shocked, shocked to hear that that would take place pettiness in academia. And it reminds me of that famous. I think it’s a Henry Kitchener quote in which he said the fights in academia are so vicious because the stakes are so small. 

Dr. Lloyd Hildebrand (28:43): 

Well, that’s right in academics. And in a lot of ways is a very individual sport too, right? It’s a lot about how do I develop my own career and how do I prosper in that career? And so each individual achievement has to be allocated to somebody. And so that is one of the challenges. The second one is that entrepreneurship wasn’t typically viewed as part of the academic journey. And now I think a lot of those things have changed in some of the academic settings and entrepreneurship actually does count for some of that. So I think those are good changes. 

Richard Miles (29:13): 

Yes. And you’ve made a very impressive and rare transition, most academics. In fact, most academic adventures at some point say, you know, this is just not worth it. And I’m going to either get bought or let this go to somebody else. Although I guess you had the best of both worlds you got bought and you kept going, so that’s even better, but I commend you for sticking with it Because it is a tough road, lots of very bright, energetic, committed people who don’t ultimately succeed through a combination of circumstances. So congratulate you on doing it. Not once, but twice. 

Dr. Lloyd Hildebrand (29:40): 

I tell my children find something you do in life that makes it easy to get up in the morning. And usually that means that you find something significant. And when you experience a blind person and particularly somebody that’s blinded from something that was avoidable preventable or treatable, then you really realize the pain and suffering that you can prevent by doing something significant is really relevant to the world. And it’s meaningful. And I think that’s the main thing that drives me. I work in other blindness prevention programs internationally as well, cataract blindness that’s for example, and all of these activities I think are centered on this focus that I’ve tried to put into my career, which is how do we leverage information technology to give us better clinical tool. We have a lot of administrative tools in medicine that really encumber us more than they help us. So I’m really focused much more on the clinical side. It’s how do we get good tool to help us do this? And that was part of the work in AI that I’m very interested in continuing to foster as well. 

Richard Miles (30:35): 

Lloyd, thank you very much. These have been very inspiring, encouraging words. My takeaway from this is I need to start booking more Canadians clearly. 

Dr. Lloyd Hildebrand (30:43): 

That’s probably a good thing to do.

Richard Miles (30:46): 

Right, thanks very much for being on Radio Cade and hope to have you back at some point. 

Dr. Lloyd Hildebrand (30:49): 

Absolutely. Thank you very much for the opportunity. It was a pleasure. 

Outro (30:53): 

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. Richard Miles is the podcast host and Ellie Thom coordinates inventor interviews, podcasts are recorded at Heartwood Soundstage and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinists, Jacob Lawson. 

A big problem for most prosthetics is they don’t send sensory information back to the brain. Until now. Dr. Ranu Jung and her team at Florida International University (FIU) have developed a device that restores the sense of touch and hand grasp when someone is using their prosthetic hands. This technology could eventually be applied to other non-functioning parts of the body. A finalist for the 2020 Cade Prize for Innovation, Dr. Jung is head of the Biomedical Engineering Department at FIU, and the holder of multiple patents. Dr. Jung, who immigrated to the U.S. from India in 1983, credits the “can-do” spirit of her parents for her persistence and sense of discovery.  *This episode is a re-release.*

TRANSCRIPT:

Intro (00:01): 

Inventors and their inventions. Welcome to Radio Cade the podcast from The Cade Museum for Creativity and Invention in Gainesville, Florida. The museum is named after James Robert Cade, who invented Gatorade in 1965. My name is Richard Miles. We’ll introduce you to inventors and the things that motivate them. We’ll learn about their personal stories, how their inventions work and how their ideas get from the laboratory to the marketplace. 

Richard Miles (00:40): 

A neural enabled prosthesis. That is a hand that actually feels like a hand for people who have lost them. Welcome to Radio Cade, I’m your host Richard Miles. Today I’ll be talking to Dr. Ranu Jung professor and chair of the biomedical engineering department at Florida International University. The holder of multiple patents and a finalist for this year’s Cade Prize for Innovation. Congratulations and welcome to Radio Cade, Dr. Jung. 

Dr. Ranu Jung (01:04): 

Thank you, Richard, for giving me this opportunity to be on Radio Cade. I’m excited about talking to you. 

Richard Miles (01:10): 

So Ranu, if it’s okay. If I call you Ranu, you’ve been at Florida International University for about 10 years now, but you’ve also spent time at Arizona State University, University of Kentucky and Case Western University in Cleveland. But you started life in New Delhi, India and came to the United States in 1983. So the first thing I’d like to ask, you’ve had a very illustrious career in academia, but I’m very curious about what was your first impression of the United States? What did you think when you stepped off the plane, were you excited to, do you think you’d made a really big mistake? 

Dr. Ranu Jung (01:42): 

That’s a long time ago, but I was excited because I was going to be able to follow a dream and I had come specifically to follow biomedical engineering. So I came into New York and I actually drove with a family friend from New York to Cleveland. And so what a way to get welcomed to the United States going across the whole of the East coast to the Midwest. It was just absolutely, absolutely fantastic. The whole, the whole beginning, as, as I recollect, it’s been a long time ago now. And the other thing in Cleveland was the welcoming nature of us Americans, because another graduate student who was starting in the program had already reached out to me and sent a letter to me saying, would you be interested in being my roommate? So I was really looking forward to meet Ruth tan Bracey who was going to be this new roommate for me. So it was a very, very exciting trip. 

Richard Miles (02:35): 

That’s a great experience. And you probably know this by now, but that is exact route. A lot of early settlers took as we sort of open up the frontier is going from New York through Ohio and further. And that was the frontier at the time. So what a great way to get introduced to the United States? 

Dr. Ranu Jung (02:50): 

Absolutely. 

Richard Miles (02:51): 

Let’s talk about your current work and this is what you are in the finalist for the Cade Prize for Innovation, but it’s obviously you’ve been doing this for awhile and I understand it correctly. You and your team at FIU, Florida International University have developed a prosthetic hand that can actually transmit neural signals to the brain so that a person without a hand can actually feel and control the prosthetic far better than a normal one. That sounds really complicated to me. I don’t know if I described it correctly, but tell us how it works and how did you come up with the idea? 

Dr. Ranu Jung (03:20): 

Yeah. So think about when you touch something, right? You’re, you’re what you feel, or you’ve touched somebody’s face. How do you feel about it? Or you grasp something you don’t really think about it much, right? You just pick up and you automatically know it’s hard, it’s soft, you don’t crush it. And if you touch somebody, you have all the sensations associated with it. Now, if somebody loses their hand for many reasons, often it’s because of trauma. Then what are their choices? The choices for them are to get a prosthetic hand. And currently there are prosthetic hands that are available, to, what we call upper limb amputees. Who have lost their hand, that the person can already control. So the way it works is that when we use our own hand, the muscles in our forearms contract and relax, and when they contract and relax, your hand opens or closes, or your fingers will open and close into the whole mechanism that happens. When you have an amputation, the muscles that are above the level of the amputation, that person can still control them. So if you can record the activity of those muscles and that is done with electrodes that are placed on the skin, one of the examples that’s the most common is like an EKG system, right? So putting the sensor is on there, those signals are picked up and they can be used to drive motors in the prosthetic hand. This is commercially available and there are different levels of prosthetic hands that are available that are simple to close, or there may be now new better prosthetic hands. So there are many that are available like that, but what is missing is how do you get sensation back. So there has been some attempt of saying, let’s take some information back and put a vibratory signal on this pin. So there’s approaches like that, that have been done. But what we went about saying is how could we give a better sensorial experience that would interface this information when somebody is touching something or grasping? So basically what our system is, it’s not designing the prosthetic hand. It is designing this whole interface with the nervous system to restore, hopefully this whole sensory experience. So in this case, what we have done is we have said, all right, let’s look at the prosthetic hand. If the prosthetic hand had sensors in it, can we tap into the sensory information? We process this sensor information to make sense of what is coming out from different parts of the sensors. And then we take that information and pass it on as commands through a wireless link, to a small neurostimulator that is implanted under the skin in the upper arm of the amputee. So what do I mean by a wireless link? You know, when you listen to the radio, there is somewhere a radio station that is sending out radio waves. So there’s a transmitting and an antenna and in your radio, and you’re now in your phone, there is some kind of receiving antenna. So these radio waves are going back, taking the information and passing it from the transmitting system, long distance into this antenna embedded inside some radio or a device, and it’s picking it up and it’s being coded. And you do hear the sound now, step into our system. You’re not sending radio waves all along very far distance, but we have a transmitting antenna that’s connected to the outside of the skin. And that’s what is connected to a little box that is inside the prosthetic, where all the processing has happened. And the receiving antenna is right underneath the skin below. There are no wires going back and forth. So it’s a wireless connection. Now this receiving antenna is connected to a neurostimulator. What’s a neurostimulator is like a pacemaker, but now your similator is connected to very, very fine wires like human hair. And these fine wires are threaded through the nerves in the upper arm. So again, reminding you, it’s an amputee who has a forearm that is gone, the hand is gone. They can control their muscles in the leftover arm, open and close the prosthesis as they close, the prosthesis back and forth. Signals are going to come back in. We are going to process them. We you’re going to communicate those through this wireless link to the implanted antenna. And that implanted antenna connected to a stimulator connected to fine wires inside nerves. So we give little charges of electrical pulses. When these pulses are delivered, the nerves get activated more precisely the nerve fibers that are inside the nerves get activated. And these nerve fibers would have originally carried sensor information from your hand or some of the nerve fibers are going the other way and are controlling the muscles. So when these nerve fibers get activated, then now this biological neural signal goes into the spinal cord and from the spinal cord to the brain and right there in the brain, there is where a person perceives. So the whole point here is, as we do a task, as you reach out, as you touched something with your prosthetic hand, you hold it, you squeeze something, but you’re not looking at it and your eyes are closed. Or maybe you can’t even hear it. You get a sense of touch or you understand what you’re grasping and how strong you are grasping it. So with this ability, we can do this. It might even embody that prosthetic hand into the person’s body. And if that happens, then perhaps this will become really much more a part of the person with the sensory loop factor. They may improve their control and that’s one aspect, but the richer sensorial experience may also embody the prosthetic hand better. And that might make people use the prosthetic hands more. And that has many other benefits. For example, they may be compensating with their other hand to do things, but now they may use this prosthetic hand, for example, or a plastic bottle with water in it. If you don’t know how much you’re squeezing out the water. So usually you would not use that prosthetic hand to do it. You’ll use your other hand. You would use compensatory methods. So our system is to restore the sensation through this neural interface. 

Richard Miles (09:23): 

That’s a great explanation. And this happens to me every year when we run the Cade Prize. I read the application. I think I understand the technology, but it’s not until talking to the inventor that I finally understand what the real breakthrough is, because it sounds like, as you said, the current state of the art is essentially one way communication only, right? You’re sending to the hand, the hand can open, close and so on, but it’s that feedback loop that is missing. And because there’s no feedback loop, you have somebody who doesn’t really feel like this is a part of them and not really delivering what they want it to and they end up not using it. 

Dr. Ranu Jung (09:56): 

Yeah. So we are really closing the loop. There is some feedback, obviously, if you have models in the system and people are very adapt, we are very, very good at doing things and they learn how much I open and close my hand. So they have learned a lot of that aspect they have learned. So it’s not like there is zero feedback and vision is a huge feedback. So if you’re looking at things that you can do a lot of stuff just by looking at it and seeing how much repetitive training you can do that, but it’s paying attention, not having to second guess yourself. It is having the confidence to reach out to things. All of those things are not there when the loop is not closed. 

Richard Miles (10:34): 

So a couple of questions come to mind, would this, in theory, at least as you develop the technology and improve, it, would it enable people who’ve lost a hand for instance, to engage in finer motor skills because they have the feedback or does that not really make a difference? 

Dr. Ranu Jung (10:47): 

Well, we hope that that is going to make a difference to be able to do finer motor skills. There’ll be many things to take into account how dextrous is the prosthetic camp. That will be one of the things, but that’s the technology that then, and that’s part of the scientific question. What is that information? That one can process when it’s coming from this effectively, to some extent an artificial sensor system, right? Do we really need a lot, or do we only need a few things about the cochlear system for hearing, right? They’re not people who have lost hearing. It’s not like every single sound and every single nerve is being stimulated, but they are interpreting sound. They are reading music. It is become part of the life. When you read, you don’t read each letter, you read words, you fill the gap, you put the whole thing together. We don’t know how many gaps you could effectively have in the sensor information and the person we are fantastic brains. So what we will do to put all of that together, but yes, it might help us with finer motor control. It might also help with things like picking up lighter weight objects. If it’s a heavy thing, something heavy, you are picking up, you know, rest of your arm is going to feel heavy and you will get information back. But what if people are picking up small things, like a towel at home, and you are pulling it, folding that light towel and pulling it. Yeah. The person would contract their muscles really hard and squeeze it really hard and pull it. But if they have the courage, they will know I already touched it. I already have it. I don’t have to squeeze. My muscles really had to clamp system. So over time fatigue, short term to make a difference. Long term use will impact the muscles. So all of these will be questions to ask. So you need the system first, you need the technology first. And then you can start to ask these questions and start to ask just pure science questions. How does our brain interpret information? What happens when you have, for a long time use of compensatory strategies, things have changed in the brain, perhaps. How do you pull all of this stuff together? So it opens up Pandora’s box. 

Richard Miles (12:48): 

I imagine, as soon as you solve one question, it just raises probably five more questions. In theory, could this also be applied to feet into legs? Or is there something about this technology that lends itself only to doing hands 

Dr. Ranu Jung (13:00): 

You are absolutely right. This can be extended to many different levels. So right now our indication is for somebody who has lost their forearm and their hand, but you wouldn’t think of it first portions of the upper arm, right? Then you can think about it as people who have lost their lower limbs. Actually what we have, what our technology is, is really think. We can take a signal and based on the signals, we can do targeted, focused stimulation inside the nerves. That’s what the technology is. This application is sensor information to go to our nerves that are going to communicate with the brain to give some information for prosthetic hand, but that’s not necessarily the only application. So in the very long run, you could think about saying, Oh, I’m going to stimulate another nerve. That’s a control system, right? And now are based on a signal that I’m going to get that says, there’s a problem with the stomach or the spleen. For example, in the diabetes situation, I will use that signal to stimulate those nerves because we are inside the nerve. We can do very focused stimulation. And so maybe that would be the application that is going to be the killer application. So to speak that you can do a very targeted stimulation of nerves going to organs within the body that would move us into the bioelectronic medicine, right? So pure thinking comes up at the bigger expanse in which the system could work. There are many pathways could be there, but our first application, our focus right now is to restore sensation to people who have lost their hands. 

Richard Miles (14:36): 

That’s really exciting. That would be huge. If that could be developed for other areas of the body. This targeted neurostimulation. Tell us where you are in terms of testing. I know that in the case of the hand, the prosthetic, you want to test this sort of in as much of a real world environment as possible. Tell how that’s going. And then what sort of path to market does it look like for you? Are we talking about years away from something that could be widely available for amputees? Or is this something that we’re going to see fairly soon? 

Dr. Ranu Jung (15:03): 

So this is what is called a class, it would fall under, what’s called a class three medical device. It’s because of the implanted neurostimulator that that is there. So the first step that we had to do was to go to the FDA to get approval for what is called an investigational device exemption in order to be able to run a clinical trial. So we did that. Not many academic labs will take technology such as this all the way through the pathway, to the FDA while companies often do it. And of course, large companies are doing the Medtronic and Boston Scientific is doing this all the time, but it’s not usual for an academic lab to have taken it from the scratch, something to the FDA. So we got the investigational device exemption. And so now we are in the process of running a feasibility clinical trial. And what that means is that we will be doing a small sample size of people who have a translatable amputation at first. And putting them through use of the system the way we have it. This is a longterm take home study. So you would do things for about three months in the lab. So after you get the implant, you would come into the lab, it’s a person I speak to you. So we would make sure you’re fit. And of course we want to collect additional data about how you are doing control of things. You will find some for a large, bigger control. Can you close your eyes and say it’s soft or hard or big or small things like that? What do you feel like when you open zip things up or squeeze water bottles? So we do that in the lab and then after three months, the person will take it home and then they will come back for the next three months, a little more often. And then they’ll come back for some data collection in the lab for up to two years. So we want to collect the data, but the system is then there’s to keep. You know, the implant is hopefully the way we have designed it, it’s for life. So the internal part doesn’t change. There’s no battery inside. So you don’t have to undergo another surgery to replace depleted batteries, all the powers with both from outside. And as we’re coming up with new algorithms outside, we have smarter prosthetic hands that may come in place. Then the outside can all be upgrade. So that’s also a throught through modular design aspect of it. So we are currently in this clinical trial. One person has completed 28 months of use more than 24 at home. And we are currently recruiting people. Once we recruit these people for one site, we also have received funding from the Army to move it to a second site, which would be the Walter Reed National Military Medical Center. We have to go back to their VA and we’ll back to the IRB to get approvals for increasing the number of people in the disability file and for the second site. And in case we will also try to see approvals for somebody who has amputations on both sides of bilateral amputee. We believe that this sensory feedback step is going to be really much more important for people who have lost both hands, even more so than somebody who has lost one of them. So once that happens, then we can go to the next step. We have just been accepted, absolutely delighted that we have just been accepted by the NIH in a program, which is called clinic to commercialization CPI program. And that program, our team was just accepted into that part. And that will take us for about 24 months to put a whole business framework in place. So we are expecting that by next year, we will have transcends, we have ideas of how we are thinking about our business framework, but we would start to strengthen that and we’ll start putting that in place. And while the feasibility trial is going on, and of course the feasibility trial has to go well for all of that to put it together. And so probably the first place we would have people in the Army, that’s where we would probably look to think the first deployment, but the clinical trial is funded by the National Institutes of Health and then new, additional monies from the US Army. So it would be open to all the civilians and it will be opened later to also people through the world to reach. So in a few years, we hope that this is going to be getting ready to be real commercialized. 

Richard Miles (19:17): 

So Ranu, I have to ask you, how do you spend your average day? Cause what you just listed in terms of your, to do list, I think would require about five or six people. So I’m guessing you’re not the one that’s doing all of this. You have people around you helping you, giving you advice. What do you focus on? Are you continuing to do a line share of the actual research? Or are you thinking about how do we actually get this into the hands of the people that need it? 

Dr. Ranu Jung (19:40): 

This is a partnership, as you said, this is not a one person job. This is a partnership. It’s an epidemic in this preclinical partnership. A lot of it has been so far in academia. I have the best team I can talk about. It is a long term partnership. It’s not two years. One year, three years. It’s about 10 years or more. I was talking to James Abbas at Arizona State who has been from the initial concept is research scientists who came same time. I came here, who used to be here. He was my doctoral student, but decided to become an engineer. And then now he’s actually going back to do his PhD another one, my old, old grad students have come back as well. I recently graduated grad student who works on the project is spending doing a post doc and is actually taking this commercialization pathway for what it’s a team. So what do I do in this team? Because we have cross-training so it’s not one person for one thing, but we do the regulatory work in high school. The implant was done right here in Miami, by doctor Aaron Burglar from the Nicholas Children’s Hospital. And obviously we have industry partners to make the implants. If we can make them think of like the computer manufacturers who have to buy things from different places, right. We can tell them the design, but it has to be somebody who can make medical products to be able to put an implant in there. And bof course we partnered with prosthetic manufacturers for making the prosthetic hand. So what do I do? I am like the orchestra manager for all of it, but I am officially the sponsor of the trial and the principal investigator of the trial. So I take the responsibility for all of that, all of the negotiations, the legal negotiations and all of that part. I discuss those, all the FDA submissions. I will read them and I will update them and I will review them, but I’m not writing from scratch. And it’s over years that has happened. I’m also not writing the program level details. The research scientists are doing, we will discuss, this is what we need to do. This is what we need support, but they are the ones writing the framework and putting all of that code in there. So to speak, what algorithms, what should they capture? So you can think of it as I’m putting the book in place, the chapter organization in place. But the exact words of how you are going to put in that paragraph are written by the engineers and scientists and graduate students that are involved and undergraduate students are involved, 

Richard Miles (22:03): 

Ranu, one of the questions we asked normally if inventors and entrepreneurs and we’re fascinated by it at the Cade Museum is well, what was the inspiration behind their story? And you’ve said that you were inspired by your parents and their can do spirit. Your father was a metallurgical engineer. Your mother was a school teacher taught English in India. How did they influence your decision to go into engineering? 

Dr. Ranu Jung (22:23): 

Not in a direct manner to say you should go into engineering because they themselves were doing what they wanted to do. They were pursuing new things. So right from early childhood, it was, you can do whatever you want to do. So it wasn’t that, Oh, you should do this or you should do that. So I think them taking that risk, and as I mentioned earlier to you, this was post India independence and a new industrialization happening to be coming in place. So my father who is going to be close to 19 and one of the first engineers and they were all doing this every day and you watch them do it. So you saw him come back and say, we broke this record of the blast furnaces. We melted this much iron ore today. So you saw that kind of atmosphere, you know, this allowed you to think and say, Oh yeah, what could I do? What would I want to do? And so that was the inspiration. And it was an interesting time to be in India. At that time in Indira Gandhi was the prime minister. I still remember going to a rally and listening to this woman, giving a speech. And I think that whole ecosystem was encouraging the children to dream and no boundaries that you need to stay here. You need to stay with the family. So they left their parents and their families to go to this new city and build that up. And for their children, they said, you have the world. You can go wherever you want to go to a very special time in history and a special city be raised in with a group of young entrepreneurial parents we were like a cohort, but then that’s what it was. You know, 

Richard Miles (23:52): 

What I find fascinating too is I know is that you actually consider going into medicine instead of engineering, and then you chose engineering, but now sort of the peak of your career, you’re in bioengineering, right? And ultimately you’ve got to have both things you wanted. 

Dr. Ranu Jung (24:04): 

And I have to say, undergraduate students going into research lab, they really should explore. And that’s how I found out about that. There is a potential possibility. There was a professor who had a lab called problem oriented research lab. And he had actually just spent maybe a semester in the US I don’t know exactly how long and come back. And he started this lab where they would bring medical instrumentation for an electronic blood pressure cuff. Oh, I could have a combination of all this electronic stuff. My major was electronics and communications and things. I could have been doing radar. And instead I said, Oh, there’s a place I could combine it. But there was nothing in biomedical engineering in India. I even interviewed to sell x-ray machines for a company, so I could get into the medical field, but then getting this opportunity to do grad school at Case Western it really, really a fantastic graduate program. That was the opportunity that helped me solidify my passion and this, I found a place that would be good. 

Richard Miles (25:03): 

I asked you earlier about what would your advice be to other researchers and entrepreneurs? And you wrote that one piece of advice would be don’t cross out ideas too fast because ideas are too early. So why don’t we explore that a little bit? How do you keep a good idea alive? Let’s say as a researcher, for which there may not be funding right away, or there may not be a commercial application right away, but you know, it’s a good idea. How do you keep those going? 

Dr. Ranu Jung (25:28): 

So let me tell you this idea of interfacing with the nervous system and think of it as out what we call a bio hybrid system, a bionic system, and this together, this idea of pulling this together and interfacing was way back when I was just graduated from my postdoc. And I worked with a professor named Davis Cohain and we were studying lamprey eels. They are like eels. And we looked at the spinal cord and how the spinal cord works and what helps to do the movement and was like, what if we could do a combination of a electronic circuit that mimics part of the spinal cord and interface it with this, I could do the simulations. I could do the experimental prep. I could not make the actual chip hardware, because that was not my background. I went to a summer course. I learned about it. And I came back and said, I gotta find it. Electrical engineering friend who is faculty member who will be willing to put this into hardware, found one practice with her for a few years. She went and did the course came back and we actually then put it into a physical thing. And we interfaced it with this grant. We’ve got a grant from NIH, which was called the a21. A futuristic grant to say, we can take an electronic chip and you’re hearing the word neuro morphic. Now this is now in there talking about in early 1990s, pick up the spinal cord from the lamprey. You can put it into a fluid bag and you can maintain it. And the spinal cord will be activated. We then connected it to this chip and close the loop. And we could show that the electronic chip and the spinal cord activity can go next to each other. I had a very tough time position that who would ever interface these pains, but the living system, what a crazy idea. Okay. So we got into a journal. I was thinking, this should go into science. It never did, but we did get there 10, 15 years later, somebody in the Army saw this paper. This was in the Iraq war. So I founded a small company because who needed a company for this. And we got funding where we basically said, if you’re focused injured, you will be stabilized in a false boot underneath it. We will put a small fall spot this spot would we be controlled with a circuit? Hey, what was that stuff like? The spinal cord circuits that we had done way back there. And this spinal cord circuit will be driven by sensors that pick up when the person starts to move. So if your upper leg is okay, as you start to move, there is make movement that will drive that file for circuit, that electronics that moves the food, that is the boot. And so the person can stick their foot into the stabilized park, the false foot, and you can wear this boot and you could walk out of there. And we actually demonstrated that on a person in the lab. So what forward even further, a few years, and this happened around the same time as I got funding for this neural interface thing to me. So I’m thinking all of this and saying, how are we combining electronic interfaces? So it has changed pace, but I idea has moved that you can link artificial systems with living systems and close the loop so that you’ve got, this merger, this bio hybrid system, where one is impacting the other, where will we go. Will we have adaptive engineered systems because our engineered systems that’s feeling not adapted enough. Where will it go? I think they will. Now you’d hear about neuromorphic word. Major companies are doing it, everybody’s doing it. So who knows where this is going to go? Where will this organic inorganic link happen? I’m talking about early 1990s. And we were the first people to show that you can interface an electronic circuit in a living spinal cord. It isn’t a bat. It’s not in the person walking or animal walking per se, but it was a living system. And today we are looking at saying, how can we interface? What are we doing with interfacing in electronic system with a real person and putting them into this room and hoping that this is going to actually improve their whole self, their ability to do different tasks. But most importantly to have is some [inaudible]. 

Richard Miles (29:35): 

I’m pretty sure I never heard the term neuromorphic until probably 2012, 2013, right around there. And I’d never heard of the term before. I thought it was brand new. I had no idea. It had been around since early nineties. 

Dr. Ranu Jung (29:47): 

Our paper is published with saying your morphic army grant is neuromorphic something. So it was way in the infancy of when that stuff was being talked about. Carver Mead from Caltech had been talking about it. I was very, very fortunate to have is Cohen and worked with her. I met her at the summer course at Woods Hole, Massachusetts on competition neuroscience. You never know where it can get you. So my PhD advisor, Peter Catona who I call him my academic father, who always gave me this type of saying, explore, explore. There was no idea, too crazy to be taken up. There was not this whole, we don’t do this, or you can’t do this. 

Richard Miles (30:25): 

Ranu, clearly our judges have done a great job in advancing you to our finals this year. I’m very excited to learn about what you’re doing. I hope it succeeds. I hope we can have you back at some point on the show to talk about updates. Again, want to congratulate you on making finals, but also just more broadly on the work that you have done currently at Florida International University, really enjoyed talking to you. So thank you for coming on the show today. 

Dr. Ranu Jung (30:46): 

Thank you Richard look forward to returning. 

Outro (30:49): 

Radio Cade is produced by the Cade Museum for Creativity and Invention located in Gainesville, Florida. Richard Miles is the podcast host and Ellie Thom coordinates, inventor interviews, podcasts are recorded at Heartwood Soundstage, and edited and mixed by Bob McPeak. The Radio Cade theme song was produced and performed by Tracy Collins and features violinist Jacob Lawson.