#334: MedTech Funding and Preparing for Due Diligence

Devon Campbell: Find someone who's recently had a nice VC raise, you know, a nice raise. Figure out who their VCs were and just call them up. Like, in that case, cold calling. Like founder to founder. You're going to get good conversation, be honest and be humble in it, right? Humble, it's one of my favorite words. Meet for a beer, meet for a coffee, buy them lunch and just say, like, what was the experience like?

Etienne Nichols: Welcome to the Global Medical Device Podcast, where today's brightest minds in the medical device industry go to get their most useful and actionable insider knowledge direct from some of the world's leading medical device experts and companies.

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Devon Campbell: Hey everyone.

Product, a company founded in: 2018

Etienne Nichols: Hey, everyone. Welcome back to the Global Medical Device podcast today with me is Devin Campbell from Product, and I'll let you kind of introduce what Product is and what you guys do, but I'm excited to talk to you today. Devin, finally, too.

Devon Campbell: Right?

Etienne Nichols: I know. Yeah. I was talking to someone yesterday about how long Boston was. Was it two months ago? I don't like that's when we met in but yeah. So glad to have you on the podcast again. You've done several episodes, I know, with the previous host, John Spear, founder of Greenlight Guru. And so I feel exceptionally fortunate to get to talk to you today.

Devon Campbell: I think a dozen or so with John.

Etienne Nichols: Oh, my goodness.

Devon Campbell: You and I will get there too, at the end.

Etienne Nichols: All right, sounds good.

Devon Campbell: Okay, so a little bit about Product. We're a medical device advisory firm. We specialize in helping early stage companies think about what kind of infrastructure do they need to build now. So we're thinking for the future, what do we need to build now? And so we can take baby steps to be able to get to the point where it's a larger stage company. You have had successful raises and you've got the quality systems, the operations, the product development processes, and the risk management processes kind of established that are right sized for you where you are right now. Not like something really big that you need later, but help you grow toward it.

Etienne Nichols: That's what we do, and I'll let you fill in the gaps. But my understanding is you're uniquely suited to talk about maybe early stage or mid stage funding of medical device companies and maybe you could speak to some of your experience there as well so they don't have to go back and listen to the last dozen. This is for the next dozen. Okay, sure.

Devon Campbell: So in addition to supporting early stage companies that I do through Product, I also support VCs, pretty large VCs when they're doing the technical diligence on early stage companies. So they hire me to come in and take a good look at the team and the technology and the plans. And after the medical diligence and the business diligence has all happened, then I come in kind of last to help take a really good critical look at can we trust what they're doing and can they pull off what they say they're going to do? And the data, is it really as good as it looks and things like that? So I kind of go in to do that last step, and I do that for a lot of companies. In the past when I worked for larger medical device and pharma companies also served in a diligence role there too. When we would look at acquisition targets from an MNA perspective, I would help on that side to do the diligence. And then in my own personal history, I have had several exits in my background. So I've got one large acquisition, an IPO, and then another private acquisition in my background. And so kind of been on both sides of the M A and on the fundraising perspective, which I try to bring in an authentic and honest way to the clients that we have at product earlier stage startups to help them understand what's this going to really look like soon. And eventually you're going to be positioning yourself for an exit. Similarly. How do we get ready for that now so that we're not surprised?

Etienne Nichols: Okay, yeah. I love the idea of beginning with the end in mind. Depending on what a company is planning to do or how they plan to exit, what they're planning to do with that medical device company may change some of what they do. Now, I don't have the experience with the funding and that side that you do. I had a professor in college who was a genius. He always came in late. He came in 45 minutes late to our final exam. He came in, sat down, looked at everybody, and basically said, I'm not sticking around for this exam. You're on your own. You're adults if you think you can cheat. I have a PhD in mechanical engineering, I'll figure it out. But I'm not going to answer any questions. So if you need to make an assumption, make an assumption and then write it down and move on. So that was his advice, and I've taken that with me. I was like, wow, that was pretty heavy. And so I've thought about that ever since, day to day. So my assumption, I'll just state my assumption as a medical device company. A lot of those medical device companies, maybe they want to be acquired at some point, but a lot of them are acquired after commercialization, or the majority of them. That's what I've heard. And I don't know if that's your experience. I'm curious if that's something you can validate or not.

Devon Campbell: Well, I mean, acquisition is not going to happen until you have substantially derisked the product, right? So that doesn't necessarily mean it has to be commercialized. There are some cases where a medical device company will purposely pursue FDA, like a 510K, but not intend to actually bring that product to market.

Etienne Nichols: Okay.

Devon Campbell: They're just doing it to be able to get that orthogonal validation, to be able to say, yeah, the FDA says yes, that's a major value inflection point for a company. That might be just what you need to be able to get, like strategic, for example, to say, okay, we're going to swoop in and acquire this company while their valuation is low enough, we can scoop it up and it's a win win for everyone. Okay? So you don't necessarily have to have commercialized your product to be able to have that acquisition, but you do need to have which is universal across all of those different situations. You do need to have substantially derisked your product in a way that someone like me coming in, look at it and say, this isn't baloney, this is real.

Etienne Nichols: Okay.

Devon Campbell: We can trust it.

Etienne Nichols: That makes sense. So I guess if I go back to the medical device company and as we're building that medical device company out, what are the different types of funding? Maybe we could talk about that first. Is that a good starting place?

Devon Campbell: Sure. So let's go into first of all, there's grant funding, right? I don't want to go into grant funding on today's call because that you apply for and you hope that you get and then you respond and you apply. You just keep going through the cycle. Let's presume you've got a grant and you've blown through your grant money. Now you're starting to look at like seed or really a round. There's kind of three sources that you're going to traditionally look at to support. You've got angel investors. You might be tempted to look at strategic investors. And the third one is like an institutional VC. And when you're talking to all three of them, it's important to understand, put yourself in their shoes and understand why do they exist, what are they trying to do with their money? What is their motivation to make sure that you know what you're getting into? Everything has strings attached. Right. And it's important to understand those strings thoroughly, especially for a startup, and to understand the motivations of those three different groups.

Etienne Nichols: Okay. And so I am curious about the strings that might be attached to each one. I can imagine a few strategic, they're probably looking for some things that are actually going to fit into their company later on. A VC may be looking for something that's going to do a return on their investment.

Devon Campbell: An angel not maybe 100%.

Etienne Nichols: And I'm going to stop assuming and I'm just going to yeah. What are some of the other strengths attached to each one of these?

Devon Campbell: Yeah. So a strategic is going to take likely an equity position, and they're always going to want something else. And though something else is the important thing to really kind of dive into and understand, in most cases, a strategic isn't just investing for the goodness out of the goodness of their hearts and to try to advance science. I mean, there are cases where that might be happening. Maybe a company might be investing in things that is completely outside their space and they're just trying to diversify. But for the most part, you're interested in a strategic. They're interested in you because you're thinking they could be who acquire us someday. Right. We're tiptoeing toward an M A type situation, or they might have a complementary product that they would be able to do better if your product was also on market. So let's say it was a therapeutic and you have a diagnostic and you're developing a really great diagnostic that helps support that therapeutic. So in that case, a pharma company as a strategic might be really interested in helping support you bring your product to market. But they wouldn't be interested, really in an acquisition deal because they're a pharma company. They're not a device company. Right. But they might be investing in you because they want you to bring your product to market. I worked for a big pharma company when I first came out here to the East Coast, and we made two acquisitions under my watch that were exactly that situation. We bought diagnostic companies because they could expose the biomarkers that we were particularly interested in. So the strategic, that's what they're looking for, right? An equity position. But definitely there's some strings attached and you have to be really careful what.

Etienne Nichols: Those are when you get into those situations like that where let's just say it's a pharma company investing in a diagnostic company. Combination products are that's one subsect I suppose it could become a combination product. I've seen that where it's an interesting marriage because they both come from different regulatory backgrounds, different expectations, different industries. Are there things that you've seen be kind of a bad marriage? We've heard the concept good money, bad money and neutral money. Are there different industries that meld? Well, better than others? Software as a medical device comes to mind. SaaS money, it's all unique, right?

Devon Campbell: It's all unique. And I would say, like combination products and companion diagnostics, those are like two spaces where you're kind of bringing those two worlds together. And in both cases, I wouldn't say there's like a rule of thumb there. You just have to really understand carefully the person who you're trying to bring on board to help fund your further development or support, even if it's in kind resources. I've seen that happen several times too.

Etienne Nichols: What do you mean in kind resources?

Devon Campbell: So they don't necessarily give you cash. They say, oh, well, we have a regulatory team. You can use our regulatory team. And it's as if we're giving you cash so you don't have to go and hire someone. You can use our team, but we value it at a certain rate. So you may get in kind resources as well from a strategic, which you wouldn't get from like, angel or a VC.

Etienne Nichols: Okay.

Devon Campbell: In most cases.

Etienne Nichols: So what are some additional benefits of the different I can see that being a benefit because you don't have to go through the process of hiring or vetting out a team. Potentially. There's probably pros and cons to that. What are some other things like that, that you've seen?

Devon Campbell: Conflict of interest you have to be really careful of in that situation.

Etienne Nichols: Okay.

Devon Campbell: You also need to think through looking forward the next time you need to do a raise or if there's other people that you might want to interact with or potential customers that you might want to be able to land later. Would they be disinterested in you because you have a deep relationship with a particular strategic. So strategics are a great route to go. You just have to be really in all cases, you have to be very careful and understand what are the motivations and how would my relationship be viewed in the future and might that have a deleterious effect on my ability to do further capital raise?

Etienne Nichols: Yeah, I can see that. Who are your friends in the future? Sometimes that's based on who your friends were in the past. Okay, well, that being said, are there any specifics about being a medical device company, that they're unique, the inkind resources and things along those lines? Are there any real unique things when it comes to a medical device company?

Devon Campbell: We have a unique world in the medical device space that if you're working with a strategic that is outside of this space, for example, let's just say it's like a pure pharma versus a pure medical device company. Their quality systems and their regulatory understanding of the world is different than your reality, and that can create some consternation. So it's a good thing to iron that out in the terms and the conditions and the really very clear understanding of you're going to give me in kind resources. But your regulatory team may not necessarily actually understand my regulatory landscape because the pharma landscape isn't exactly the same as the diagnostic landscape, whereas the medical device landscape. So you just have to be careful in that space. But remember, strategic is not the only source of money. You can also go to angels. Likely you're going to start with angels early and then you also have the VCs. Okay, let's dive into one of those.

Etienne Nichols: Absolutely. Yeah, let's go ahead and do angels first.

Devon Campbell: Okay, so angels, they're usually high worth individuals or collections of high worth individuals, and they have money that they want to reinvest. They are looking for a return on an investment. They don't just invest out of the goodness of their hearts, but very often there is a situation where they invest kind of into passion. They're like, I really feel strongly about this one thing and I can make some money on it. But the angels, unlike a VC who has funds and has certain returns on investments and expectations that they have to hit so they can be very aggressive, angels aren't necessarily always the case. So they can take their time when it comes to diligence. They can take a very long, very long window to say, yeah, I'll stick with you for many years until you can finally bring that product to market. I understand that's the game I'm getting into because I'm investing really early in a project, right. So they are more tolerant in that way. They generally want to avoid being what's called dumb money, where they're just giving you cash and then not really knowing what they're putting their money into. A lot of times, angels are pretty savvy. They come from the field. They have done well in their environment, and the angel invest into smaller projects. I've done some of that myself. They like to add value where they can maybe not necessarily taking a board seat, but they add value to the company, maybe an advisory seat, something like that, to help you build what they're doing. And it's fun for them. They're a little bit less aggressive on your valuations, but they will be more sensitive to being diluted. So as you raise more and more capital in the future, there's a risk for the early investors that their stake in the company has a dilution problem. And so if you have an angel on your board, think about their personal motivations. They're there. Even if they're just advising you, they're there. They want the company to succeed, but they are looking for a return on investment. If they just keep seeing that investment opportunity kind of dwindle dwindle dwindle, they're going to push back a little bit. It's in their self interest to do that. And it's not unnatural. I'm not blaming them. They might say, no, let's take a little bit longer and let's keep doing this work so we can get to that value inflection point, so we can drive a higher valuation without having to bring in more money, right? Whereas you might be like, yeah, but I'm cash starved. I need to bring in more money right now. And I'm like, oh, well, let's try to do this and let's try to do that so that we can kind of preserve that dilution factor that they're at. EC, on the other hand, is very different. Did you have a question about EC?

Etienne Nichols: Well, I'm curious about there's a specific role that an angel can maybe play and that'd be maybe an advisory role. And I'm curious how that works. Have you seen that relationship, an advisory role, be given equity and still looking at this from the medical device company, how do I interact with these different strategics at some point, or not strategics, but these different ways of funding? And at some point we'll flip the script and we'll look at it from their perspective. Looking at a medical device company, but the advisory role that the angel plays, how, as a medical device company, should I manage that relationship? What's the advice you might have there?

Devon Campbell: Don't find angels that just say yes to everything that you're doing because you're passionate, right? You have a lot of energy and a lot of passion for what you're doing. And they're just like, yeah, love it, keep doing it. Etienne you don't want that. You want them to be critical of you. You want them to help you be a better version of yourself every day. And you can't do that if it's just always cheerleading.

Etienne Nichols: Someone sent me a text this morning. I have a group of it's what I call my board of directors. He sent me a text that you made me think of. He said, most of us would rather be ruined by praise than saved by criticism. I don't know, that made me think of what yeah, that's a good point.

Devon Campbell: Yeah, they're buying their way in. I mean, they're angel. So they've bought the equity. You're not giving them equity, right? They've bought the equity through their investment. But I would say when you manage them, they're great mentors. Use them as mentors, confide in them, be honest and be authentic with them. Say, like, hey, you got in really early because you want to see this grow. And you believe in this vision and this dream just as much as we do. And our team help me. But if you're blowing smoke the whole time, and you're holding up this giant facade of like, everything is perfect, and everything is great, and I know what I'm doing. They're not going to be terribly helpful, and you're kind of keeping them in the dark. But if you are really honest with yourself and with your mentors and your advisors and angels that might be investing in you, they've gotten to where they've gotten for a reason, right, in most cases. So they've got good networks, they've got good scars that they can share with you. They can help you understand if you're real and if you don't pretend to be super positive on everything, but you allow some vulnerability within that safe space, you're going to make a much better use of your angels.

Etienne Nichols: I was going to say that network is probably really valuable as well to actually utilize. I don't know if we're very good at I don't know.

Devon Campbell: Yes, in all three cases, I mean in all three cases, they all bring networks at different levels in different ways. So yeah, in any investor, you don't want to just take their money. You're also getting them as advisors and as mentors and you're getting their network along the lines too. So if you had equal money offered to you from two different angels, one who had very little network and I don't know how they made their money, but let's just say they did, and another one who made their money and has a huge network of people that understands them and knows them. If it's the same money for money, I would go for the person who has a larger network.

Etienne Nichols: Okay.

Devon Campbell: They become champions and advocates for you.

Etienne Nichols: VCs, venture capitalists, what are your thoughts?

Devon Campbell: So VCs are professional investors, right? So they do a very thorough job. The diligence level, the depth that I go into when I'm working with VCs, specifically medical device VCs, or I say VCs that are very medical device friendly and not afraid to invest in that space. And many VCs won't, a lot of VCs don't quite understand the medical device, specifically the medical device space and there's durable equipment involved into it. There's a lot. So sometimes people are like, I'm going to go make better money on a software only solution, or something else. So it takes a savvy investor to do medical devices. But VCs are professionals. They have very professional teams that look very hard at you and then you get in and you end up getting the money and you get substantial amounts of money. They expect a return on their investment and they expect it within a relatively quick time horizon. I don't mean months. Right. But they're not going to like an angel, necessarily. There's always exceptions, but they're not necessarily going to say, you guys take your time, work on it. We'll make our money in six, seven years, don't worry about it. That's not going to work because they are really a collection of other people that have given them the money and they have to return an investment back to them. Right. So you have to do something with that cash that you've raised. You have to invest it and you expect a return on those investments. So they are very aggressive.

're recording this in July of: 2023

Devon Campbell: It's tough. I mean, we can't sit here or stand here and pretend that it's, you know, it's roses and rainbows everywhere. It's definitely a difficult landscape, especially for very early stage companies to do fundraising right now. They shouldn't be discouraged by that. There is money being invested. Several of our teams at Product just did really substantial raises, so money is happening or is showing up. But a lot of the diligence work that I would do on for VCs, where they're looking at lots of early stage companies, there's less of that now. And they're instead looking more critically back at things that they've already invested in. And they say, okay, let's double down our bets. We've already put money into company XYZ. Let's put more into that instead of more into something brand new that we also don't know because they have to spread the risk around. Now the risk tolerance is a little bit different, so let's put the money more into things that we know. So if you've already had your A or B, you have a higher likelihood of being able to raise more money as opposed to you're coming in from scratch and you need to raise an A. Not saying it can't be done, I'm just saying it's a little harder than it was like a year ago. Right.

Etienne Nichols: Do you have input on what the difference is in a company that might not they might be refused versus one that might actually get it? Whether you've had your Series A and Series B already, what about those two that haven't received any funding yet?

Devon Campbell: It comes back to the earlier conversation. It's a matter of the outside person looking at you. It's their risk tolerance and their ability to trust what you have done and feel confident that if they put money into it, it's going to have an ROI for them.

Etienne Nichols: Okay, well, you mentioned the level of scrutiny that a VC will go through with a medical device company and that you do this kind of due diligence. What are some things you look for when you're looking for those red flags?

Devon Campbell: Sure. When I go in to look, I'm looking very specifically at I look at it holistically at a whole bunch of things. But the very first thing right off the top of a diligence experience, and that might be a couple of days of reviewing documentation, then a couple of days in person, then a couple more days reviewing documentation. If a company does not have a very clear go to market strategy, if they think they know how they're going to bring it to market. But it's not well articulated and it's not well thought through. Right. Someone from the industry can tell. We can look at it and say, wait a second, that regulatory strategy is garbage. You are not going to do that if you put crazy things in your timeline, like, we're going to develop our product and we're going to file for five, ten K, and then we're going to get five, ten K two weeks later, and then we're going to move forward. We'd be like, you don't know what you're doing. Right. If I call any part of your plan into question, it makes me call your entire plan into question. What else have you not thought through? So a very clear, realistic go to market strategy that also is informed with an IP strategy and a regulatory strategy. So that's like one big red flag. If you don't have one that stands up, and if it's not realistic, I'm going to call foul on that one. That's a big red flag. The next one is the team. Maybe the next three are all team. So if you don't have the team or a group of advisors that help the team because you can't do everything right, especially for startups, you have to wear a lot of hats. If the team and the expanded team that's there to help bring this company forward doesn't have experience in the space that you're trying to do, doesn't have the expertise, and doesn't go out to find it in the areas where they don't know what they're doing, that's also a huge red flag. So if I see a team that is putting the product development requirements on someone who's never done product development, maybe they come from the medical device space, maybe they come from the sales and marketing side of the world, or from pure regulatory space, and we all have to wear a lot of hats. And so we know Etienne here is in charge of product development. And I'm like, Well, Etienne doesn't know what he's doing in product. Development. I'm not saying you don't. Clearly you do. But if there was a company that had a netian that didn't, that would be a red flag for me too, right?

Etienne Nichols: Yeah.

Devon Campbell: And it's okay for the team not to have the subject matter expertise in house. You don't want to have a whole bunch of VPs of all the different things, but you at least need to have the humility to say, you know what we don't have of our core group of founders, we don't have anyone who's an experienced medical device developer, but they use a company like product. They might use me as one of their advisors on the advisory board to be able to help them understand, here's what the world's going to look like, and then they can take it forward. I would look at that and say, okay, good. You know what you're good at and what you're not, and you've gone out to get the right help in the right place. The third big red flag that I would find as I start to dig through your data, remember, in a VC situation, I'm digging really deep. We're talking about a lot of money, so we're going to go really deep. I look at your data and I start asking questions about your data, right? You're trying to demonstrate to anyone that's interested in investing in you or acquiring or partnering with you, and you show this gorgeous data. Look at our sensitivity. Look at our specificity, look at our effectivity rates. Look at how much customers love our product. When we've done formative studies, great. Is that cherry picked data? Are you telling me the whole story? Can you repeat it? So I look at it and say, is the data, like, really old? Are you showing me data that you generated four years ago? Is this data you generated during your PhD? Now we're talking about product that you're trying to bring to market, but this is data that you created in a lab when you were still in school, right? Maybe too old. Is the data look too good? Is the story too good? Then I'm going to say, well, what data is missing? How do I know that data is not missing? And if you can't prove to me that we have processes in place to create an indelible record of all data that's generated, and now we're plotting that, and it's good. I'm going to question, do you have protocols that you follow to generate that data? If I wanted you to reproduce that study right there that generated that gorgeous data, what configuration of your system or of your product did you use when you generated that data, and what protocol did you follow? And can you do that again right now? For me?

Etienne Nichols: That's a great point. It's interesting. We sometimes think a great story is really what will sell it. You make me think of a project review where I was in charge of a project, and there was one section we were struggling with, and they were saying, well, we'll just do this. My project team wanted to present a certain way. I said, no, the guy's name was Tom. I said, Tom, I want you to fall on the sword. I want you to go out there and you're going to just tell him you're really struggling. It's a certain area. He didn't want to do it, but he finally did. There were two teams presenting to our review team, and we presented that, and we all just sort of like sheepishly sat there while he fell on the sword. And they're like, oh, okay. Well, yeah. And that was it. It was a lesson learned early, but that's a really good point. I'm curious, do you see that happen very often? And I'm just thinking, as a company, you want to put your best foot forward. What are the best companies? How do they present that in an equitable way, I suppose, to the data?

Devon Campbell: So I can't say that I've not uncovered, in my experience, a situation where the team purposefully is hiding things from me. Right. It's not in a malicious or in a nefarious way. It's an honest way, like, hey, we got really good data. Let's plot. That cool. I want to see all the other data that you generated so I can understand it. And they're like, oh, you want to see that too? It doesn't mean that it's a bad story. Right. It just helps me understand that you understand you have variability in your product, and what are you planning on doing to drive the variability out? You're an earlier stage company. Of course you're going to have variability. You've not gone through optimization processes. You've not done, like, true system integration yet and done surface profile maps and does to figure out what's the best corner of this value and this value and this value that's okay, but at least be honest with me and with yourselves.

Etienne Nichols: And these are things that you're eventually going to be you'll have to prove out anyway, or show, let's say, the FDA, for example, they'll be asking those questions. So it's good to have somebody prove that out early. Okay, that's number three.

Devon Campbell: I see it, but I've not had anyone purposely trying to hide the data, at least not yet. All right, the next one that will throw a red flag for me if you show me a product that looks really good, it's a really good looking device that looks awesome, right? I see it and I look at your product plan and you say, yeah, and we're ready to transfer to manufacturing. In four months, we're going to start transferring to manufacturing. Awesome. There have been diligence trips that I've gone to where I don't have it with. I had one right behind me where I bring screwdrivers in with me, and I disassemble their product in the conference room where they're showing me the demos, and I want to look on the inside. Is this actually really just a 3D printed shell that you've sanded and polished and made look really good? Is this actually injection molded? Because you haven't even when you go to market, your plan shows you're going to do injection molding, and yet you don't have any injection molding in this yet, or is there any design for Manufacturability built into the product yet? And I'd be like, you're not ready for transfer to manufacturing. These boards have cuts and jumps on them, right? This isn't a mature board. This is not something that I'm ready to move forward to. So when I get into those situations where the company is naively believes that they are ready for launch and no one has told them you're not, no one has questioned, well, have you done any reliability studies yet? Do you understand the performance of your product over time? If the answer is no, then.

Etienne Nichols: That'S.

Devon Campbell: A red flag for me.

Etienne Nichols: Yeah. I'm curious. How did they react like when you pulled out the tools?

Devon Campbell: They got scared. Yeah, they got scared, for sure. They didn't say no to me because I'm standing between them and a larger investment. But I will take the thing apart. And it's okay for it to be a relatively immature product on the inside. I'm not saying that's bad.

Etienne Nichols: Just have to understand the back and forth between a tool manufacturer and so forth time.

Devon Campbell: Exactly. And be honest with yourself and think through. Have you gone out? Is anyone on your advisory team or have you talked to anyone who understands design for Manufacturability, what transfer into manufacturing might look like? Have you had any discussions on that so you have a realistic appreciation for it's not an easy task, right. To transfer something into manufacturing. That's the fourth one then the last one. I think that would be valuable for us to talk to, talk about quality management systems.

Etienne Nichols: Absolutely.

Devon Campbell: If you don't have one, that's not the end of the world. But you need to be it depends on how early the stage of the company is. If they're a little bit later stage, then they definitely should have had one by now. But if I say, okay, well, tell me what you're doing for your QMS, and they say, oh, yeah, we're doing a paper based system, or something like that, and we've got it all over here in this file. Okay, great. Let's go take a look at it. Let's see how well you're documenting it. And do we fully appreciate how unsustainable this is and how you're not going to be able to scale it. But if they tell me something like, oh, yeah, we've got a QS, we've got a drive folder or something like that, that we drop everything in, that's better than having nothing. I would rather them have that than not be working towards something that even loosely looks like smells like a QMS. It doesn't have to be dead on, but discoursely. Because if you don't have that deep appreciation for writing down what you're doing and then doing it and just kind of having some traceability and leaving breadcrumbs for yourself, it's going to make me, as the person doing the diligence question, a lot of what you're doing. Like, could you reproduce this test? Going back to the data question, could you reproduce this test? Do you have a protocol? Was it written down somewhere? What configuration of the system did you use? Even if it was 3D printed parts, fine. What version of that 3D printed part did you use? And if you don't have that traced down, I'm going to be like, I don't know if they can reproduce this data.

Etienne Nichols: That's a really good point, and that was actually what I'm glad you brought that point up, because that's what I was going to ask about when we were talking about the product. So it was a great segue into this QMS section, because when I was a manufacturing engineer, one of the quality engineers kind of took me aside and said, there's two things we make. We make products and we make paperwork. Now, whether you agree with that statement or not, they go hand in hand.

Devon Campbell: I don't say again, don't agree. I don't agree.

Etienne Nichols: Talk to me about it. Tell me.

Devon Campbell: We make products, we build products, and we build confidence. The paperwork is confidence.

Etienne Nichols: Okay, I'm with you on that.

Devon Campbell: Okay, so then I'll pick up from where you're going.

Etienne Nichols: If we go back with that logic, I'm going to push back on the other side. If the paperwork builds the confidence, the product could build the solution or the patient impact. But I don't know.

Devon Campbell: I say the paperwork gives you confidence that your product gives you confidence in your product. Right. Paperwork isn't paperwork for a paperwork's purpose. I mean, why do we do that? We do that so we can feel confident that we're delivering and we're developing and we're launching safe, secure, effective products. That's obviously what the FDA cares about when they're going to come look at you later anyway, right?

Etienne Nichols: I think you've talked me into it because the paperwork really helps you have a safe and effective product.

Devon Campbell: Ultimately.

Etienne Nichols: That's a really good point.

Devon Campbell: But when you think about creating a culture of quality, which is a podcast I did with you guys a long time ago, when you think about creating a culture of quality, when you focus the culture on, we're building confidence, as opposed to, oh, we have all this bureaucratic paperwork we have to do. I can hate paperwork, but I can't hate confidence. Right. I want the product to be successful. I want everyone to look at our product and feel like, yeah, I'm going to use that. That's going to help me. I'm confident in it because they've got the data and the paperwork to support it.

Etienne Nichols: Yeah, the right paperwork. And so when I think about that you're talking about that product that maybe they're not ready to go to market with it yet. It's really the exact same thing you're talking about with the QMS. Are you ready to go to market with this?

Devon Campbell: Yeah. If you think you're that close to going to market, your QMS better be **** know matured by and if if your product is close but your about let's let's abstract it a little bit. I know we're talking as a green light guru podcast but it doesn't have to be just QMS. Let's abstract it just a little bit more. If your infrastructure isn't appropriate to be able to support which includes QMS, but do you have the purchasing procedures in place? Do you have all of the stuff that it takes to actually manufacture, consistently manufacture a product, even if it's at low volumes, you need to have all of that in place right? And if you don't like the infrastructure and the tools that drive the infrastructure like an EQMS solution, you don't have those in place and running smoothly, you're fooling yourself. But a professional VC that's going to come in and do like really deep diligence, we will sniff it out.

Etienne Nichols: So how beneficial is a fully baked QMS for I mean obviously we talked about like I don't know from a product perspective because it's easy for me to put my head around that. I think of this product that has rough edges. Like you said, it's got skips and jumps. You can tell it's 3D printed, you're not fully injected molded yet. I guess the same thing would be with your certain amount of paperwork, whether you don't have your DMRs put together, you don't have your device master record and so forth. Is it the same situation where okay well with the right timeline where you are is fine or with a fully baked QMS, you have again built a little bit more confidence in you the reviewer potentially the VC.

Devon Campbell: So I'd say no. I actually might look at it slightly as a bit of a negative. If you were an early stage company and you had a fully baked everything you need QMS system already, I'd be like, but you're not there yet. That's a lot of time and energy and effort. You're building into things that you're not even on market yet. Why do you have post market surveillance SOPs in place got you so I would much rather and it's our practice at product we build you just what you need right now and we try to stay just a little bit ahead of you. So we build what you need now at the maturity for what you need it now and what you're going to need very soon. We have it ready for you just before you need it so that when you move into it, it's there. So you don't need your validation planning stuff like super early but as you're going through the product development process, we're like, okay, we need to start rethinking through. How are we going to actually go about the business of documenting these plans? We all understand that we have to do validation at some point, but maybe we don't have the SOPs quite in place yet. At least during early, early phases of research. That's just too much, too soon. And for little tiny companies who have very little capital to invest in things. Spend your money where you need it right now and just almost in the future, there is a really decent lightning storm happening outside, so we might lose signal. Just warning you.

Etienne Nichols: Okay, well, I'm sure it'll be a mic drop moment. I had a rooster outside my window, one of the last podcasts I did. So let's compete, we'll see which one.

Devon Campbell: I love it.

Etienne Nichols: So the small companies, the thing that I think about in any role that you're in, because really, ultimately we're in a certain role, we're doing certain amount of things. I like to think about the Pareto principle, the 20% of activities that yield 80% of the results. Is there something that comes to mind when you think about these different companies and what they should be doing that could really yield the big results?

Devon Campbell: Sure. Let me give you a big sentence.

Etienne Nichols: Okay, I'm ready.

Devon Campbell: It's like five different elements. Okay. And it all kind of ties things that we've talked about together. The 20% of that effort that you do that leads to 80% of your return. Within that 20%, I want to see companies creating realistic product realization plans using the ISO version of the term, but realistic product development or product realization plans and have wow and have the team to pull it off. On top of that, I want that to be based on a strong and well informed regulatory and IP strategy so we can make sure that we can bring this product to market in a way that's going to meet. The needs of the in a protected way and a way that's going to meet the needs of regulators in the geographies that you intend to bring it into. And doing all of that from a foundation, from a center of truth that is humble and vulnerable. I would much rather see humble and vulnerable than cocky and overconfident. I will trust the humble and more vulnerable person because I know they are striving to be better. As opposed to saying, I can do this, I know what I'm doing, I don't need help. On top of all of that, you're doing it with a demonstrable commitment to the safety, the efficacy of your device, and to the users of your medical device. Users and or patients. In some cases it's both. Some cases they're separate. In all cases, a patient eventually benefits.

Etienne Nichols: So, demonstrable.

Devon Campbell: Oh, go ahead, demonstrable. And what's foundational to all of it? Unquestionable, indelible data that I can trust confidence.

Etienne Nichols: I love it. I wondered if you have an example of a company showing that demonstrable commitment to the safety and efficacy that will eventually impact the patient.

Devon Campbell: I mean, I can give examples of getting into a product development process that someone has been through and they feeling like we're pretty far down the line. We've been developing it. We have several prototypes. Have you ever once put it in the hands of a user? Have you done any formative human factor studies at all? And I've said this before, and I'll continue to say it as an engineer, scientists and engineers, we are absolutely the wrong person to be making those decisions to say this product is, I'm going to design this in this way because for the user, this is what the user cares about. Baloney we think about things in a very specific way. Users aren't that you got to be humble and you got to go and talk to users. It's not hard to even if you talk to just friends and family and you got some feedback, I'm going to like that better than not seeing any commitment anywhere. If you've gone through and done several studies and you've created mocked up prototypes and you've sent them out to people and you've got feedback on things, maybe it's a surgical piece of a medical device and have you had surgeons hold it and have you gotten any feedback? That's all great. And I've seen plenty of product development processes, projects where they're deep into their process and they have yet to have actually put it in the hands of a user or given the information to a patient and asked them what they thought, then. On the same side of the coin, I have similarly gotten into, dug in deeply into projects where they have not yet started their risk management file. And we haven't even talked about risk yet today, and we're 51 minutes in.

Etienne Nichols: That was actually one of the yeah, go ahead.

Devon Campbell: If they haven't started their RMF yet, right. If they haven't gone through at least like a PHA, a preliminary hazard analysis, if they haven't thought through a fundamental URA, like a use related or user related risk analyses, if you haven't done those things yet, you clearly have not demonstrated to me a clear and passionate commitment to users and to safety. Yeah, if you think of risk management as a checkbox, you do at the end of development, we just developed the product, now we're going to create our hazard analysis, or they say, yeah, we did a risk study, we have an FMEA. FMEA by itself is not adequate, then I would look at that and say, no, you guys are clearly not demonstrating that. But if it's early in your product development process and you purposely sought out some feedback from customers and you continuously do that and you have a nice PHA in place and you have a real simple URA, and you keep making it better. And it's at version seven or version 15 now because as you've gone through product development, you found more and more things. I'm going to love that. And that's a great way to show a demonstrable commitment to users safety and quality.

Etienne Nichols: I'm glad you brought up the RMF because when you're talking about the user feedback, which, man, that's a great point. How else can you demonstrate that commitment? But some people get that feedback and then just want to justify it. Say, okay, well, it was this situation, that situation. Don't actually implement it, but when it goes into your risk management file and that actually informs your design, now you're actually implementing that feedback. So it's a really good point. Any last pieces of advice? I know we're coming up to the top of the hour and maybe the top of your storm companies out there.

Devon Campbell: It's getting strong out there. I think that for anyone that's looking like, say you're listening to this podcast. Hello, listener. You're listening to this podcast because you are thinking of, you know, you're approaching your next round. You're like, how do I think about getting information? I've got a couple of different tips, like suggestions of how people can kind of maybe atypically inform themselves. You can go online, but online there's a glut of information. There's just so much, and it's not bespoke it's not special to you. So just a couple of ways to kind of explore the space. If you're interested in angels getting an angel investment, there are a lot of resources. I just said don't go online. And now I'm going to say go online. There's a lot of resources online that help early angel investors learn how to be good angel investors. Okay, so pretend you're an angel investor or you have cash and you want to become an angel investor and you want to go learn. Go read about things on the online. Go read about things online from the other side of the equation so you can understand how are they going to look at you, how are they going to interpret you. Look at it from that perspective instead of like all the other things that say, here's the pitch decks that you create for angel. Pretend you're angel. Early in my engineering career, I was designing a lot of plastic, injection molded medical device parts. And I was like, this is silly. I'm doing this from the foundation of a mechanical engineer. So I went and I went to school, and I learned tool and mold design. So I learned, how does the molder look at the engineering product that I, as the engineer, create that I can do a better job creating my engineering design for the molder.

Etienne Nichols: Nice.

Devon Campbell: So I looked at it from the molder's perspective. Same thing for angels. That's a good way to kind of understand what they want to look at for strategics in a strategic situation, a good resource that people might want to look at or explore is talk to the legal firms that are involved on the M A side at the end of that strategic relationship. Now, how are you going to go get a lawyer's attention or attorney's attention at one of these big giant firms? They're not just going to accept your call. They likely won't just accept your call when you call in, but if you're in an accelerator program or have been in an accelerator program. I'm a global mentor for Mass Challenge, for example. Mass Challenge, there's a whole bunch of really great mentors that are also like FDA lawyers, M A lawyers, like folks in attorneys, folks that are involved on that deal who will give you the time because they're already involved in accelerators. They like to support the startup. Go talk to them and help them understand what have you seen gone really well and what have you seen gone poorly at that M A time. Again, starting with the end in mind, what have you guys seen that we can start doing now as we enter into a relationship or we're trying to attract a strategic to get involved? It's a great way for you to kind of like, look at the problem from a completely different perspective. Look at the person who has to untangle it legally and get their feedback.

Etienne Nichols: I suppose the VC investor would be similar advice as the angel investor for the VC investor.

Devon Campbell: There's so much VC investment, and there's so many founders. And I've founded companies. Founders talk to founders. We support each other. We've all got each other's backs. So my best advice there is find someone in a similar or adjacent sphere of yours, of your technology and your product. Don't just talk to something that's completely off the map. Find someone who's recently had a nice VC raise or a nice raise. Figure out who their VCs were and just call them up. In that case, cold calling. Like founder to founder, you're going to get good conversation. Be honest and be humble in it. Right? Humble. It's one of my favorite words. Meet for a beer, meet for a coffee, buy them lunch and just say, what was the experience like? What would you have done differently now that you guys just raised 73 million? What would you have done differently at the very beginning of that? To make it go faster or make it go whatever, they're going to give you the feedback because founders support founders. So it's a different resource to use.

Etienne Nichols: Okay?

Devon Campbell: Of course they can use everything in the Greenlight Guru Academy. Go learn more about the market in the space and all of the different podcasts that we have available. And of course they can come talk to us at Product, and we're happy to point them in the right direction.

Etienne Nichols: Absolutely. And we'll put links to all of those things in the show notes so you can check those out. Devin, it's been great to have you on the podcast finally, and I look forward to more conversations in the future. I'll let you get back to it, but looking forward to the next time. Take care.

Devon Campbell: Take care.

Etienne Nichols: Thank you so much for listening. If you enjoyed this episode, reach out and let us know either on LinkedIn or I'd personally love to hear from you via email. Check us out if you're interested in learning about our software built for Medtech. Whether it's our document management system, our Kappa management system, the design controls risk management system, or our electronic data capture for clinical investigations, this is software built by medtech professionals for Medtech professionals. You can check it out at WW greenlight guru or check the show notes for a link. Thanks so much for stopping in. Lastly, please consider leaving us a review on itunes. It helps others find us. It lets us know how we're doing. We appreciate any comments that you may have. Thank you so much.

Etienne Nichols: Take care.