Tips from an Expert on Building a Start-Up

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An MD&DI June 1998 Column

SNAPSHOT

To successfully attract investors for a new product or company, says Frank Fischer, "The most important thing is to have a strategy that makes sense."

After 20 years as an executive in the medical device industry, Fischer has certainly demonstrated an ability to identify sensible strategies as well as to find investment capital. He has also developed a unique perspective on this industry from a career path that brought him to medical manufacturing after he had already attained management status.

While a manager in the locomotive industry, Fischer (pictured left) was introduced to medical manufacturing when he was recruited by Cordis Corp. (Miami), which produced pacemakers, angiographic catheters, and neurosurgical products. "Once I was exposed to the devices that Cordis made," says Fischer, "I saw the benefits that such devices would have on society, and it became easy for me to make that transition."

The regulatory process for medical devices proved to be the biggest change that Fischer encountered when he began working at Cordis. "After being associated with an industry that quickly moved from the development phase to the commercialization phase," he explains, "it meant having to learn a new way to do business." Fischer had to get used to higher development costs and longer development cycles than he had worked with before.

Although his background didn't involve dealing with stringent regulations, Fischer regards the current relationship between FDA and industry as healthy, especially during the past two years or so. After "efforts both inside and outside the agency toward what people refer to as FDA reform or modernization," he says, "I think the agency is sincerely interested in getting good products approved as quickly as they can."

It wasn't always this good. Looking back at his 10-year stint as CEO of Ventritex, Inc. (Sunnyvale, CA), a start-up manufacturer of implantable defibrillators, Fischer saw FDA change dramatically. "It seemed to take forever to get our first products approved," says Fischer, "but at the end, the approvals were coming at least as fast as we could handle them. In some cases, they were coming faster."

Fischer directed Ventritex from early product development through its initial public offering, profitability, and eventual sale to a large firm. During this effort, Fischer had to contend with the inherent difficulties of not only developing a complex medical system but also of building every facet of a company infrastructure.

Today he is again guiding a company through its development cycle. This year Fischer was appointed chairman of the board of TherOx (Costa Mesa, CA), a company just starting product development of a targeted oxygen delivery system intended for the management of cardiovascular and neurovascular disease as well as a variety of nonmedical applications, such as water treatment and fuel enhancement. He is also CEO in residence of Kleiner, Perkins, Caufield, and Byers (Menlo Park, CA), a venture capital firm that invests in health care as well as information technology.

To ensure the success of TherOx, Fischer plans to put to good use some of the lessons that he has learned about developing companies and about getting funding for new manufacturing ventures. According to Fischer, there are some important guidelines for judging which ventures are likely to be successful and consequently also attract the most investment capital.

"The more significant the idea and opportunity," Fischer explains, "the higher the likelihood that you will attract investors." A device that promises to reach a large market is better than one that will serve only a small market share. Also, the product must be high in quality and meet clinical needs in a way that is superior to its current and anticipated competitors. "Obviously, the job that you are able to do from a product development vantage point is critical," he says.

The product or concept must be cost-effective and reimbursable, Fischer adds. "You can have the greatest idea in the world, but if it's not economical and can't be sold to someone, it's not going to do anyone any good." Finally, investors judge the quality of the management team by measuring its "relevant experience and the ability to articulate what it's trying to accomplish."

Before beginning to plan ways in which to make profits, says Fischer, "entrepreneurs need to have a mission relative to their company and think about why the company should be formed and what it is they are trying to accomplish."

Leslie Laine is a freelance writer based in Los Angeles and a former senior editor of MD&DI.

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