Thanks, Ray. Thanks to all the other speakers. Wonderful presentations. I'll try to be quick because we don't have too much time. We end at 8.30, right? Yeah, we want to have a little time for Q&A if we can. Okay. All right. So my financial disclosure, I'm founder, inventor at Schilder Innovations, the second company I've been involved with. This is the one I'm founder of. I started this company. I've been a board member, et cetera, et cetera. In a minute, just little tiny royalties. I'm going to go kind of quick. So my educational credentials, why are you here listening to me? What do I have to say? Well, I was a faculty member years ago. As Ray said, my first company, I invented a device with a team of engineers for STEM orthopedics that sold Arthrex. Schilder Innovations is our biggest investment of our family, and that's been over 20 years since my invention date. And 11 times my wife and I have invested over 11 years. So just to get you an idea of how much you might want to fund, and we'll describe why during the talk. FXUnited is my newest clavicle venture with a friend of mine who used to be CEO of Snowmobile Orthopedics. So 15 issued patents, founder, board member, Harvard Surgery Leadership Program. If anybody's interested in leadership, and I was aiming for an entrepreneurial course. I think this morning's session was better than part of the entrepreneurial section of that program, but it was a great program. I learned a lot. So if anybody's interested, it was great. Overview of development process. So if you're going to raise money, you've got to understand the development process very well, because the people going to invest in you are going to understand this process. So a lot of this is nice overlap from all the other talks, but the product ideation is obviously free you think, right? But then, to Stu's point, you've got to pay Stu to get a patent. And anybody can file a patent, but not everybody can get an issued patent. So get the right attorney is my lesson there. Product development, as you've seen from the previous talks, takes money and time and expertise. Product validation also takes money and time and expertise. So I wrote three papers. One is scientific testing with ASTM testing data and FEA analysis, and then I wrote a short-term clinical research paper, and then a nine- to ten-year results clinical paper. So each one of these becomes important for the people who might invest in your company, because they're looking for value. Product launch costs more money, and commercialization costs a lot more money. So investor strategy. So before you raise money from investors, you need to know how they think. So I just want a share of hands here. Who thinks the best value for your $10,000 you're going to invest in Ray's company is in the beginning of the company, early stage? How many hands? How many hands on people want to invest in later stage company, and that's the best value for $10,000? Lots of hands. So we don't have many. I thought we had entrepreneurs here. I thought you guys were like want to take risk and want other people's money. So it's a complicated scenario. This is very important to understand. But in the beginning, early stage investing, you put in $10,000. The company's worth $100,000. Guess what? You get 10% of the company. Later on, you invest $10,000. You might get 1% of the company. So the value is much less later, but the risk goes down as we go. And the other thing is your early stage investment is great. You might get 10% of the company, but then you raise another round, and you raise another round, and that 10% goes to 5%, goes to 2.5%, might go to 2%, then 1%. But 1% of $1,000,000 is a lot better than 1% of $100,000. 1% of $100,000,000 is pretty nice. So that's the way we look at this stuff. So the investor strategy, if you're going to raise money from your wife's grandmother and your beginning stage startup that has no product, probably not a great idea because it's not a safe investment. If you're going to raise money from somebody who's friends and family, you might want to tell them that these are risky. So an alternate investment makes a lot of sense. People look at the stock market. It's in a bubble. Real estate's in a bubble. Where do they want to put their money? People are looking for other places to put their money. Right now, they might want to invest in your little company because they might want progressive growth, or with the software, they might shoot for explosive growth. Those are options. So on our side as the inventor and founder, you want appropriate financing, which is the right financing at the right time. So my wife Dana worked for Amazon Web Services team years ago, and she mentors young entrepreneurs. And she had somebody call her up from Silicon Valley, and a young student, and they say, we just got $300,000 in funding. Isn't that great? And they have really no company yet. And she says, well, it's great, but you lost your company, right? So they own 90% of your company now. So you don't want money before you need it, and you don't want money too early, and you don't want money from the wrong sources. So appropriate financing is, first of all, look at yourself in the mirror, bootstrapping yourself, your partners, just like you guys have talked about, putting your own money, not just your time, but your own money in. Then friends and family, but that can backfire when you lose your friend's money. Grants are non-dilutive. They're wonderful if you can get them, but they take a lot of time to get. Startup companies in the early stages might get angel funding. That's nice. It's money. Some of them have some expertise, but if you really want expertise, it's the next round when you're becoming commercial with the venture capitalists who put in more money, but they also bring a lot of expertise, a lot of connections. Most of our companies will not go to private equity, but that's the sort of final stage. But some of Lou McIntyre is working with private equity and orthopedic practices, which is a little bit different. So Ray wanted me to throw in a few slides from Shoulder Innovations, which is my startup. So this is the problem here, is deficient bone that I saw 20 plus years ago before reverses were out there, and there's no bone left. So do you total shoulder with a bone graft, or do you do a hemi? Neither one of them does very well. Reverses can do well, but that's a salvage procedure, and that's a newer procedure. The current designs at the time were keels, and they can broach right through the glenoid vault. They can hit the vascular artery. They can hit the nerves. They can loosen because a normal glenoid at five years loosens at a rate of almost 40 to 50%. And the fixation depends on the backside, which makes no sense. Why would you want all fixation on the backside of your implant to me? So my light bulb moment was when I drove over a manhole cover on the way to Willits. It was up in the countryside where I was working on the border of blogging and wine country, and I said, what? That thing never loosens. It never loosens. You drive over it all the day. So why would we not a deficient bone take a littler implant and inset it like a puzzle piece inside the bone, and you have a circumferential rim of containment around the implant? So you have a whole new type of fixation. Not only do you have 100% backside fixation every case, you also have a rim, like you put a little quarter in a little slot that you're going to save the quarters. People used to do that. Maybe not anymore. And so that's the rationale. That was my original design and then patent from there. So that's what it looks like down the bottom right. So that's the reaming in, and that's the inset glenoid, and that's what it looks like down there. So you can also make a smaller incision. I also save the capsule I incise it. I don't excise it. I leave part of the labrum, and so it's really a different technique, and it's further on to the adoption idea. It takes a while to convince other people this is a better idea, and that's part of the problem. So financing phases. Bootstrapping will get you in the initial patent work. It might get you initial patent filed. It might not get you one issued. Early product development, scientific analysis, et cetera. Then you might need more money for the next phase. Angel investments can help you develop your team. When you need to commercialize, you probably need venture money, at least in medical device space. Key principles. Back to what Mike said. Stay lean. Minimize your cost. If you get money, stay lean. Utilize work for equity when you can, so you're not using up all your cash. Cash is king. Sell fun for as long as possible. Common theme. Here's another thing is pick your partners very carefully, so your investors are kind of like your partners. They're kind of like your new family, right? So they're going to do a lot of due diligence on you, so you should do due diligence on them. You don't want somebody who's greedy, who just wants to make money, who doesn't have your, like you were saying, I want to help people. I want to help patients, et cetera. You want them to have the same morals and values because you're in bed with them as soon as they give you $10 million like our two venture capitalists in Series C. So I would base that, I did base that on trust and respect. I picked somebody who I knew and really liked, and then you want knowledge and experience, and that all gives you value for your company. So internal financing is within your own company. So my wife and I invested, and then we invested, and I have to go back, like you were saying, you talk to your wife about 25. I talked to my wife about $400,000 we put into this company, and she says, can we do that? And luckily she's a business person, so she didn't say no. This is in like the 11th round. And what the problem is, like we said before, you get diluted. So if you own 10% of the company and somebody invests $10 million, then all of a sudden you go to 5%, to 2.5%. So if you invest your pro-rata equity, every time there's 10%, you can invest your 10% of the next round, then you stay whole. But that costs more and more money, and at a certain point you've got to say, that's enough of our percentage of our wealth, we can't risk too much. The other thing is it maintains control of your company, so the board doesn't change. Every time the board changes, every time you take new money, you've got a new person on your board, the board structure may change. These are the people that call the shots in your company. These are the people that make the decisions, the big decisions, the finance decisions. So external financing advantages, great financial stability, we just got $21.6 million in Series C in November, that's great, woohoo, right? You get expertise, which is really important, sometimes mentoring and coaching, and high-level strategy, which is really key as you go commercial, because these guys have done it before, these VCs at a Silicon Valley that we have. Disadvantages are you dilute and you lose control, which can be bad, but it also sometimes good, because you have somebody who knows what they're doing having more control. So successful financing round is great, you hit the home run, go have a bottle of wine with your wife or husband, your company's primed for success, but that doesn't equal success, right? It's a measure, so you won one round in golf, you are in the first round of Wimbledon, but you haven't won it. There's no guarantee, so use your money wisely, still be lean, as you said, those books are great. I have an extra one from a Harvard professor on rebel leadership, which is really fun, because I think you guys are all rebel leaders. So what determines success versus failure in your company? The same things, the initial factors we've talked about, identify a problem, solve the problem, prove the problem to other people, get them to adopt and make sure it's cost efficient and fits the space. Engineers love to design a great big thing that doesn't fit in the shoulder, so you have to work together, and that's common. Adoption, adoption, adoption is the most important part in the end, so your fundraising potential is based on how you're doing. So do you have early success? They're going to look. Do you have patents issued, not filed? Do you have FDA approved implants? Do you have clinical data? Do you have scientific data? Every one of these adds value to your company, product development, etc., etc. In the end, the big exit needs significant sales revenue for medical devices, not necessarily for software. So here's an example of my early data showing VAS pain score of almost 8 pre-op and then post-op, it's almost 0. So you show those results and get those published in a nice journal like the American Journal of the Shoulder and Elbow Journal, that helps a lot. Post-funding, okay, you got VC money. Now, guess what? Your team better execute, because these guys are not necessarily Mr. Nice Guy. They want results, which is great if you're a founder. You want your CEO to be held accountable by these VCs. So they're going to want patents, FDA approvals, and by the time we're raising money here, product launch, sales, etc. So more implants, finish the product portfolio, etc. Exit depends on appropriate financing, that's why this is key. Pick your investors carefully. Be capital efficient, common themes, and hit your milestones, another common theme. Final lesson is, raising money takes a lot of time, a lot of effort, and it takes money, because it's time and effort from your team. So plan ahead, be prepared, and never run out of money. Never, never, never. Because if you run out of money and you're a company that has product and has inventory and has customers, guess what? It's like dropping the anchor, your boat sinks. Because a big company might buy you, but they'll buy you for pennies on the dollar because they know you're desperate. So don't ever run out of money, cash is king. Great, I hope I did that quick enough. Here's my email if people have questions or comments or they want to learn any more that I might know. Great, thanks Ray. Thanks Steve.

development process

investor strategy

startups

funding

early stage investments