Steve Blank has faced the challenge of healthcare startups and found a solution. First he taught the Lean LaunchPad class to the National Science Foundation Innovation Corps for two and a half years. As he has immersed himself in healthcare and its challenges, he has pinpointed the problem with most tech transfer offices.
“Life science needs a structure for commercialization that it never had,” he said.
This fall he has been working with 28 teams of 110 healthcare entrepreneurs in a new class at University of California, San Francisco. Watch the video at the start of this post to see what one device team has learned so far.
His 10-week class has included four Bay Area venture capitalists that he “talked into teaching the class with him.”
“I made a bet that I could teach 4 VCs how to teach this technique simultaneously with the class,” he said.
The investor/teachers are:
- Todd Morrill
- – managing director at Venture Management Group and diagnostics specialist
- Abhas Gupta, MD – Mohr Davidow partner and digital health expert
- Allan May – chairman of Life Science Angels and device expert
- Karl Handelsman – a general partner emeritus of CMEA Capital and therapeutics expert
This post and video about revenue models that feature the investors working with the class is excellent as well.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
If you are new to the lean startup approach, I recommend reading all of Blank’s blog posts about the class. For a quicker path to lean wisdom for healthcare, here are the four changes he recommends that universities and research centers make for a more successful tech transfer process.
Get the PI out of the building
Blank has found that primary investigators are particularly good at gathering data and ideas from customers and then pivoting an initial idea to fit the market, instead of going with an untested first idea.
“The biggest challenge is breaking out of the idea that you can’t allow a PI to get his hands dirty,” he said. “Only the founder can get outside the building and test these hypotheses, and in this case it’s the PI.”
Vitruvian is one of the 28 teams in the class. The team members include Dr. Hobart Harris, chief of General Surgery, vice-chair of the Department of Surgery, and a professor of surgery at UCSF. He is also a principal investigator in the UCSF Surgical Research Laboratory at San Francisco General Hospital. Dr. David Young is a professor of plastic surgery at UCSF and his areas of expertise are wound healing, microsurgery, and reconstruction after burns and trauma. Sarah Seegal and Cindy Chang are also working on the team’s first product, MyoSeal. The product is meant to:
promote wound repair via biocompatible microparticles plus a fibrin tissue sealant that has been shown to prevent incisional hernias through enhanced wound healing. The team believed that surgeons would embrace the product and pay thousands to use it. In week 2 of the class, 14 of their potential customers (surgeons) told the team otherwise.
I’ll spoil the video for you: Through conversations with customers, the surgeons found that not only did customers not want what the team was building, they would pay more for a different solution.
Create two tracks
Blank said that building a minimum viable product needs to be a distinct effort from the commercialization work – which is where the lean approach comes in. He said that making the product better is one track and answering the question “Does anybody want this and what do they want?” is another one.
Blank predicts that making this change will lead to rapid commercialization.
Researchers who don’t want to have multiple customer conversations should apply for pure research grants, not SBIR or STTR funding.
Plan for five times as many customer conversations
Blank said that the biggest lesson he has learned from his going-on-three-years of work with researchers and clinicians is that entrepreneurs have to understand many more customer segments than leaders in other industries.
“With a med device, your users are five or six different types: doctors, grandma who is getting the hip implant, the hospital purchasing group buying the implant, payers, and even CROs who are running your tests,” he said. “An entrepreneur needs to understand all of them on Day 1 because every one of them can make or break your business.”
It’s about listening not pitching
I asked Blank if the transparency element of the lean startup technique has been a challenge for any of the teams he has been working with at UCSF. He said that he discussed this with each group during the application process and screened out companies that might have a problem with it. He also said that the teams in the class have learned that the lean process does not require sharing intellectual property or detailed information about a potential product.
“By getting out of the building, you’re trying to understand the road map of what’s outside the building, not trying to get an order on day 1,” he said.
He said a common misconception about the lean process is that it is about selling and convincing.
“When healthcare entrepreneurs realize this, that makes them exhale,” he said.
The 28 teams have their demo day on Dec. 10 in San Francisco. Blank hopes to take the program to different groups within the NIH next.
