This interview kicks off a new series on materials scientists who have gone on to start companies commercializing the technology from their lab.
Shape memory polymers, aside from being exciting materials science, can make for a sound base to develop a company, as we have learned talking to Christopher Yakacki, of the University of Colorado Denver. Chris is an assistant professor who doubles up as an entrepreneur, being a co-founder of biomedical devices manufacturer MedShape Inc. We chat with him to discover the secrets of his “double life” as academic scientist and entrepreneur.
Can you give me a brief pitch about what the main product of your company, MedShape, Inc., is, and what is its purpose?
First off, before I get into answering any questions, I need to thank everybody at MedShape for all of their hard work and determination. While I’m fortunate enough to be sharing my insights and experiences with the company, I have no illusions that I would be in this position without their help and tireless efforts.
Currently, MedShape’s main product would be the ExoShape® soft tissue fastener device (shown in the video). This is used to fix a soft tissue graft to the bone for anterior cruciate ligament (ACL) reconstruction. The advantage with respect to current practice (insertion of a screw alongside the graft to create fixation) is improved anatomical alignment and avoiding lacerations of the soft tissue by the screw. Although this is currently the main product, we do have additional products from our technology platform scheduled for launch that I’m equally excited about.
When did you figure out that there was a good opportunity for commercial exploitation of this discovery/device?
We always had a feeling that our shape-memory technology could impact the way biomedical devices were designed. In fact, researchers had been proposing shape-memory implants for several years by the time we started; however, finding the right application for the technology is where the challenge resides. We were fortunate enough to come across the orthopaedic fixation landscape. Doug Pacaccio DPM (Doctor of Podiatric Medicine) initially came to us with the idea to create a pseudoelastic intramedullary nail for ankle fusions. Shortly after that a team surgeon, Reed Bartz MD, from the university came to our lab wanting to do a study on the pullout strength of interference screws for soft-tissue fixation. Both seemed like a natural fit with our shape-memory research and ACL reconstructions became our flagship application. Even before we looked into the market numbers, we knew there was a good commercial opportunity because everyone knows someone who has experienced an ACL tear.
How long was the process from the “idea” to the creation of the company, then on to commercial launch? Can you give me a detailed breakdown (R&D, IP protection, setting up the company…)?
The initial research into the ExoShape® product began around January of 2005; however, we had been doing shape-memory polymer research for several years already by that point. We immediately filed provisional patent applications to protect the core of the technology. By June 2005, we had incorporated the company and by August of that year contributed $50,000 of our own money to help fund the operations of our company. At the beginning of 2006, we had recruited our CEO, Kurt Jacobus PhD, and by June 2006 he was hired on as our first employee and secured us our first company facility. We received our first of several SBIRs (small business innovation research grants) in the beginning of 2007 and closed our first round of Series A funding on May 30th, 2008. On December 17th, 2008 we submitted our first FDA application and our first device was cleared on March 24th, 2009. Our first product launch and surgical case was on August 31st, 2009. Essentially, we went from “concept” to “clearance” to “commercialization” in four and a half years.
In our field, we use a combination of both IP protection and trade secrets. We hold much of our material formulations and programming processes trade secret rather than filing for IP protection, which would make the information public and be difficult to prove infringement. Unfortunately, the material formulations and shape-memory programming conditions usually are of the most interest in the shape-memory polymer community. As a result, publishing and presenting can be difficult. I try to focus on broad structure-property relationships that apply across many shape-memory polymer systems to maintain scientific merit without divulging any proprietary information.
Where did you turn for funding? If you used venture capital, was it difficult to get funded outside the “traditional” geographical locations of venture capital firms?
I think we’ve taken the path less traveled in regards to funding, but I mean that in a good way. I know of a lot of entrepreneurs and start-ups that have gone the “traditional” route of VC funding; however, the results were not always positive and we felt that if we were going to succeed (or fail), we wanted to do it on our own terms. Like I said earlier, our first round of funding initially came from our own wallets. Our second round came from our friends and family, though we also leveraged university support and SBIR support in the early years. The challenge with any company wanting to raise capital is to push the technology as far forward as possible before seeking outside investment. We didn’t receive Series A funding until three years after founding, but by that time we already had our quality system in place and were close to filing for FDA approval. This allowed us to raise equity on better terms and for us to maintain a controlling interest in the company. I’ll share a story for comparison. In the spring of 2005, shortly before founding, we met with a major orthopaedic device manufacturer to discuss a licensing deal for the technology. At the time I think we were hoping to get rich quick. By the end of our meeting, they agreed we had a good idea and were willing to offer us $100,000 for the technology if we could get FDA approval. It costs way more than $100,000 to develop a product, initiate a quality system, and clear a device using the FDA 510(k) process, so needless to say we didn’t accept the offer; however, three years later when we were close to applying for FDA approval, we were in a much better position to raise capital. My advice to anyone starting a company is to try and leverage early support from the university, state programs, and federal programs (such as the SBIR/STTR mechanisms) as much as possible before seeking investor capital.
How influential was the environment you were in? Are many startups created around Georgia Tech (which is located in Atlanta) where you were an Adjunct Professor and where MedShape is based? Were there any key facilities/procedures/initiatives at your university that substantially simplified the process of creating a company?
I know of a lot of start up companies in the area; however, I couldn’t speak to how many exist compared to other areas. As for the environment, we definitely need to thank Greg Dane, Venture Labs, and the Georgia Research Alliance for the help early on in securing facilities, financing, and putting us in contact with the right people. Creating the company, or incorporating, isn’t necessarily the hard part; the hard part is making sure you’re headed in the right direction and receiving good advice. They helped with both.
What is the main change in mindset that this venture brought to you?
Being involved in a start up really tests your ability to consistently perform at a high level. It is a real trial by fire because you don’t have the luxury to make a lot of mistakes or waste time; otherwise you’ll quickly be out of business. I was fortunate enough to have some great mentors help me step up my performance, but the biggest change in mindset was developing a team mentality. As a researcher, I was very prone to working independently; however, in a company you have to work as a team. It is amazing what you can accomplish when you have a talented team working together, sharing the same vision, and performing at a high level. For instance, as a company of 25 employees, we cleared more devices through the FDA 510(k) process than many of our major competitors. I really can’t say enough about our team.
Before starting this venture, did you want to become an entrepreneur?
(laughs) I’ve always wanted to become a professor, but this company thing got in the way! I finished my PhD in 2007, about the time when many universities were suspending their searches for new faculty. I was fortunate enough to receive a few SBIR grants and decided to focus on building the company for a while. I just recently took an academic position at the University of Colorado Denver and am excited to look into new technologies and eventually start the process all over again.
Why did you decide to become a full-time academic now, as opposed to staying full-time at MedShape?
My professional growth and importance to the company was starting to diminish. Not to say that I stopped learning or was no longer important, but after 7 years with the company I was ready for new experiences and new challenges. For example, you don’t gain as much experience and insight clearing your 5th device through the FDA as you did your 1st device. Also, I feel I had established a position at the company in which other scientists could take over and better benefit from the experience. We hired a few postdoctoral researchers to help fill my role before I left and I parted employment with MedShape on good terms. I’m looking forward to starting my own research group to develop new active polymer systems. My time at MedShape was invaluable and I plan to leverage my experiences towards the application of my research in the future.
How has this changed your interaction with other scientists?
It has definitely increased my visibility within the scientific community. I think scientists and engineers inherently like to see the application of research in a useful and meaningful way.
How important do you think being an entrepreneur is in today’s academic world? Do you think departments are more likely to “like” a candidate if s/he has an entrepreneurial background?
I believe it’s becoming more important, or at least more common, to become an academic-entrepreneur. There seem to be more and more professors involved with start up companies; however, it creates a unique challenge for departments to measure entrepreneurial involvement. Building a company takes a lot of time and effort, but unfortunately these efforts aren’t included in typical assessment for performance. For example, I’m expected to spend my time at 40% research, 40% teaching, and 20% service, which leaves no room for a company. If you are interested in going this route, you need to have a clear agreement with your department on how your time will be spent and how it will count towards your review. As for departments being attracted to entrepreneurial backgrounds, it definitely helped me. The places I interviewed at specifically stated they wanted candidates with experience developing new technologies or were in the process of building a program. In either case, my background made me more attractive for these positions.
In times of funding crunch, do you think this experience gives you an edge?
Absolutely. The SBIR and STTR (small business technology transfer) mechanisms are supported by the NSF, NIH, and defense agencies. I don’t see a downside to applying to more solicitations. I am part of a recently awarded STTR proposal to develop a new kind of polymeric heart valve from NIH/NHLBI. As a new professor, any kind of funding is extremely helpful.
What advice would you give to someone with a good idea who wants to commercialize it and are there things you would have done differently?
I think I already touched on some points of advice: try to leverage university, state, and federal support mechanisms as much as possible and develop a good team. The only other point of advice I would give is to be adaptable. If you look at our initial product concepts and compare them to the final device, they might not be recognizable. Sometimes the idea you have in your head, no matter how carefully conceived, just won’t work, and you have to put it aside and move on. That can be a hard process. From product development to corporate strategy, be adaptable. As for things I would have done differently, that’s a hard question to answer since I believe the company is in a good position. We’ve made mistakes on the way, but again I believe our adaptability has helped us to keep moving forward in the right direction.