You always kind of go through that checklist of, okay, what's the technical risk? What's the clinical risk? What's the regulatory risk? And what's the market risk? Which is what we're talking about. A lot of people get so caught up on those other risks, they don't think about the market risk. In other words, how big is it? Can you really penetrate that market? And you definitely have to ask that question upfront because you're right, you can do all the right things from a technical, clinical and regulatory point of view and then get there and go, well, really the market's not that big.

Welcome to Medsider, where you can learn from the brightest founders and CEOs in medical devices and health technology. Join tens of thousands of ambitious doers as we unpack the insights, tactics and secrets behind the most successful life science startups in the world. Now here's your host, Scott Nelson.

Hey, everyone. In this episode of Medsider, I sat down with Daniel Estay, founder and CEO of SonoVascular, a company developing a combination therapy for venous and arterial thrombosis. Dan has over thirty five years of global medtech experience, including business development roles at Johnson and Johnson, where he worked on deals that helped create the world's first drug eluting stent and six years leading Abbott's cardiovascular device business across Asia Pacific and Japan. He also serves as a mentor in residence at Duke University's New Ventures Group. Here are a few topics we explored in this conversation.

First, how do you choose the right beachhead indication when your technology has multiple potential applications? Second, what signals indicate a market is large enough to support a venture backed Medtech company? Third, how should founders balance speed to first in human with maintaining data quality and regulatory rigor? And last, when should CEOs use convertible notes, and when is it time to move to a priced round?

Before we dive into the full episode, if you're a Medtech founder or CEO preparing to raise capital, you should check out the Medsider fundraising cohort. This four week live workshop combines small group sessions with real time feedback to help you sharpen your investor story, build a targeted investor pipeline, and run a focused fundraising sprint instead of a never ending slog. Over the month, you'll walk away with an investor ready narrative and deck, outreach scripts that actually get responses, a refreshed LinkedIn profile, a simple content plan that keeps you on investors' radar, and a repeatable system for running your raise. You can join the wait list at medsider.com/fundraisingcohort. Again, that's medsider.com/fundraisingcohort. Alright, let's get to the interview.

Alright, Dan. Welcome to Medsider Radio. Appreciate you coming on.

Good to be here. Thanks, Scott.

The people listening are gonna are listening just just to the audio, but I see the the devices in the background. Right? So this is like a this is a good background shot for this conversation. But that said, I recorded a a very brief overview, abbreviated version of your bio, but let's start there. Maybe in a minute or two, right, walk us through your background leading up to starting SonoVascular.

Sure. I got started early in my career really out of college, even before, if you include summer jobs. My mom and dad are from Chile, and my dad had a business distributing medical devices in Latin America for many years. I started working for him summers, in a warehouse, unpacking boxes of medical devices, and then when I graduated, decided to go work for him, and I spent nine years in that business. It was a great learning experience.

I always tell people, if you can do business in Latin America, you can do business anywhere in the world. You've seen a lot of different things, ups and downs, And our job was to develop the Latin American market, working through a network of sub distributors, in some cases direct to hospitals for Medtech companies. One of the things we're proudest of was establishing Boston Scientific in Latin America back in the day, St. Jude Medical as well. And it was a great business to my dad and to the family.

I ended up getting out because with all the consolidation taking place in Medtech back in the nineties, distributors were being disintermediated. It was very difficult to sustain that model. And you do a lot of good work, and I would say, you get rewarded by losing the contract because they go direct on you. So I said, I need a different rhythm here. Lucky for me, one of the gentlemen I was working with at St. Jude went over to J&J as the President of the Cordis Division shortly after J&J acquired Cordis, and he offered me the opportunity to join J&J and actually get my MBA at the same time. So I was doing that on the weekends at the University of Miami, And that was a great experience, I went into the business development group there doing M&A deals and licensing deals, something I'd never done before. But where I could help the group was, I brought a lot of knowledge about the products and the market. So my boss at the time, who now works for me in SonoVascular, we always joke about that, he was an M&A expert because he worked in investment banking before joining J&J. So he taught me M&A and I taught him about cardiovascular devices.

And it was an exciting time because it was again about a year and a half after J&J bought Cordis. The company was already starting to lose share for Palmaz-Schatz because Guidant had launched. And so there was a lot of panic about what's next. And we worked on the deals together with the broader team that created, ultimately created the Cypher stent, the world's first drug-eluting stent. So I think working through that and modeling the future was quite exciting, and that went on to become a $4,000,000,000 franchise before other companies jumped in and took share away.

So I spent a couple of years there. And then just to give the shorter version, after doing a couple of different jobs, ended up working for Abbott for about eleven years. The first five, I was in the broader business development group, so also doing deals. I was based both in Columbus, Ohio, as well as in Chicago, Illinois. And then about a year after we acquired the Guidant Vascular business, when Boston Scientific bought Guidant but had to divest the vascular assets, Abbott picked that up, I was offered the opportunity to go run Asia Pac in Japan for that vascular business.

I jumped on that because it was an awesome opportunity. A big change moving to Asia. We ended up living in Tokyo. So I was of course married and had two young daughters, so it was quite a professional and personal experience. The girls weren't thrilled to be going there, they kept asking when are we going back, but after six months of being there, never heard that again because they loved it, and it was a great experience for all of us.

It was the great years when DES pricing was still above $1,500 in some cases over 2,000. And so that business in Asia grew from under 200,000,000 to approaching a million dollars over the course of five, six years. So was a great ride. It was one of the most professional experiences of my life, as well as personal. Tokyo is a great place to live, and had a great team and spent a lot of time traveling, because those were the years when we didn't have things like Zoom, right? So my team was all over the region, so I probably spent eight months of the year on the road, which was pretty intense. Great experience there. It was time to get back to The US. I had one daughter already in college and so I was offered the opportunity to run a Medtech company out of Seattle. Did that for about two to three years.

And then we wanted to get back East because our family, our daughters were living back East. My wife is also from Chile. So her family was in down in Chile. So Seattle was still kind of far away. And we ended up coming to Chapel Hill, North Carolina, had never been here before, had no previous connection other than a good friend of mine is a surgeon here and showed us around and like, this is this is pretty nice. So I started consulting for a company, and while I was here, I came across the underlying concept, is now SonoVascular, which came out of the Joint Department of Biomedical Engineering between NC State and UNC at Chapel Hill. And I've been doing that now for the last several years and been here for nine years, the longest we've been in any given city. So that's a little bit of the whirlwind of my career.

Something's going right in North Carolina, for you to to kinda hang there for more than a decade now. But Yeah. That's a super helpful overview. You've got a ton of experiences. You could probably spend the the whole hour, right, just talking about, like, various moves and transitions and your time in Japan and in Asia during kind of a booming market where it seems like every device company was like circling Asia as the next growth opportunity.

Things have certainly changed quite a bit since then. But let's talk about SonoVascular. And maybe frame this up as if you and I are both in the space, right? So we could kind of go into the weeds quite quickly, but maybe zoom out and for those listening that maybe are an ortho or some other sector of the device space, like what is it? What are you solving for? What's different about the catheter?

We're going after the broader market of both venous and arterial thrombosis, and our first focus is on venous thrombosis of both DVT and pulmonary embolism. And we have a catheter that effectively delivers ultrasound to the distal tip as you engage the clot. And while we're doing that, we're infusing a mixture of microbubbles, which serve as mechanical amplifiers once they're activated by the ultrasound, and to the same channel, we're infusing thrombotic drug or tPA to enhance the effect. So it is a combination therapy, it's a dual mechanistic approach, both mechanical and pharmacological. And that's really what attracted me to it, because I kind of go back to my days of the drug eluting stent, you know, how do you combine a mechanical mechanism with the pharmacological mechanism to really get the best and safest outcome, and so that's what really was the early attraction to this technology. So far we're seeing in our first human studies, a very safe device and also a very effective device that could again, pull on both of those levers.

Yeah, and we'll go back and learn a little bit more about kind of what you've, lessons learned not only throughout your career, but, like, building SonoVascular. But I'm on the website now, sonovascular.com. I say sono just because it's easier to to spell for those listening, but sonovascular.com. So just kinda Right. Kinda like what you what what you think. Sonovascular.com. We'll link to it in the full write up. I highly encourage you everyone to kind of check it out.

It's really cool device. And I wanna ask you one follow-up question in regards to the mechanism though. You mentioned the microbubbles. Touch on that because I think that's pretty unique, right? Because you're using ultrasound and then also this microbubble kind of like amplifier, think is what you called it. But yeah, like what's the rationale? How does that help dissolve or solve for lead to more efficacy when it comes to this?

First thing I'd say is they've been on the market for over twenty years now for diagnostic imaging. So they're we work with the number one company, company called Lantheus that makes the Definity microbubble So those bubbles are infused systemically today, and then they basically put an ultrasound probe so you get a better image. The bubbles are activated to give you better resolution in simple terms. Those same bubbles, if you hit them with a different frequency, different acoustic parameters, they become therapeutic in nature, they become resonators.

And so to your question, what happens is the bubbles begin to oscillate and rupture, creating both stable and inertial cavitation, and so that begins to break down the fibrin in the clot, debulk the clot, but it also enhances the permeation of the drug that you're using. So we're able to use a lower dose of the drug, but to get a bigger effect because of the cavitation.

Okay, got it. That's super interesting. And then we're recording this in early twenty six based on your LinkedIn profile, which we'll link to in the in the show notes as well. Looks like you started the company almost exactly five years ago to the month or close to it anyway.

Yeah. I call it the practical founding date. I mean, if you go back legally, was 2018, but that was just in the early days, so I could take the license to the underlying IP from the universities. But for the first several years, really the work was being done within the academic setting funded by NIH academic grants. And it wasn't until 2021 that we sort of took it out, raised our first money, did our first proof of concept on an animal, and then sort of to raise more money and hire our first engineers.

Okay, got it. So a little over, I mean longer than five years, but like five kind of, I guess more practical years if you will. So like where's the company at in terms of, you mentioned a feasibility study, where we at today and kind of what's that look like over the next year?

Sure, so we completed enrollment in our first human study, which we did down in Chile, connection there, obviously to my background, and that we completed enrollment last fall and we have six month follow-up now on seven of the 10 patients, the other three are coming back here in the next few weeks. This was a big year for us because we're doing two things. One is we're looking to get approval of our IDE to start the DVT pivotal study in The U. S. So we've been, we just had a pre-sub with FDA that was very positive a few weeks ago, and the second thing is we're going to do a feasibility study in our second indication which is pulmonary embolism.

So we'll be doing that in the second half of the year. So a lot of work right now on our second generation catheter, sort of taking the learnings from the first study and how do we make it better to use that now both for the PE study as well as the upcoming pivotal study later this

Okay. Got it. And the first in human feasibility study for PE, do you plan on doing that in Chile as well?

Not Chile. You know, we're still looking at different sites to make a final determination, but it'll be overseas.

Okay. Got it. Got it. Okay. Super helpful. So definitely fun stage, right? Not that you're all the way through development per se, but in patients is a certainly a huge inflection point for any any startup in Medtech.

No doubt about it.

I used to like, I mean, earlier in my career just gloss over that fact, of like, you know, some random startup that I'd see, you know, in Endovascular today or something would announce, you know, first in human study, it's like, you know, but it's like to get to that point is huge.

I would say that that first patient that was the most anxious and excited, confident, but anxious and excited I've ever been in my life. I mean, really, all that work comes to life really, that moment.

No doubt, no doubt. Fun year ahead, it sounds like in 2026, but let's transition and go back in time and spend the next maybe twenty, thirty minutes kind of covering some key functional areas that every startup is gonna kind of have to master or at least overcome if they're gonna they're gonna experience any sort of semblance of success.

And I guess the the first one I wanna touch on is is take us back to kinda like that 2020ish maybe time frame. You've seen a lot of ideas. Right? Whether in your previous kind of M&A roles with large strategics or even, you've done, you've been involved in kind of the startup ecosystem for a while. So you've seen a lot of things, but you decided to pursue this one. So what was it about this particular idea and maybe kind of speak to the other maybe physicians or other entrepreneurs out there that are kind of thinking about the same thing. They're like, I think this idea has legs, but I don't know whether to go all in. Chose to go all in on SonoVascular. So help us I understand.

I think for me, really got down to differentiation, right? Something that was truly unique. I go back to my days when I was in Asia for Abbott, and when we had the most fun was when we had really unique differentiated products. Once things got commoditized, it was a very challenging market environment. So the Red Ocean prices took a hit, and so you're always looking for what's next, what's truly different that can make a difference for patients, but also that could be a growth driver that's sustainable for the business.

So that's the first lens I sort of apply is, is this different and unique? Am solving something that has not been solved before? And sort of guarding against, I don't want to sort of, there's a lot of herd mentality in Medtech oftentimes, so especially when people are chasing big markets, and sometimes you got to go against the grain a little bit, that may make it a more of an uphill battle, but ultimately I think you're rewarded if you sort of stick to your conviction that this will make a difference and sort of separate yourself from the pack later on. So that's the first thing I look for. You know of course you need to be solving for a meaningful unmet need and that sort of dovetails to differentiation, right, I mean is it different enough that it's addressing the drawbacks limitations that doctors currently have with what they're using.

And so, and the third thing is for me is, again, given my background having worked on drug eluting stents, was that, okay, leveraging more than one mechanism, the mechanical aspect but as well as the pharmacological. If you can make that work in a, in this case, a true cath lab based interventional procedure, that should you know really make a difference down the road. So those are the things that I was looking for early on that attracted me to this.

Yeah, all very good points and sometimes it's hard to gauge differentiation right, because in hot space that you're in right, which is kind of this thrombectomy thrombolysis kind of arena, especially with the potential PE application on the near term, I would say near term horizon. Sometimes it's hard to gauge like how hot a market will be, right? When you start working on something five, six years ago now at this at this point in time. So how big is is the market or how like, how do you choose like, are you focused on that early on when you see it when you see a a particular device that appears to be different? I mean, you do do you sort of gravitate towards, like, well, mean is this even a market that could support a venture backed startup in the Medtech space as an example?

No question, you know one of the things I also do, think it's on my LinkedIn profile is I help out as a Mentor in Residence at Duke, in Duke New Ventures here at Duke University. That's And the first question I asked faculty that I mentor is that, you know, you really have to commit yourself that this is big enough, that's commercially viable, that it's going to attract investment dollars because it may, I've seen a lot of good ideas that will really help patients, but ultimately it's more of an inch, it's not big enough to stay on its own. So I think really answering that question is key upfront. And so in this case, this is obviously a large market, multi billion dollar in scope is the projection. And I think if you look at other interventional categories over the last thirty years, there's good reason to believe that this one will sort of play out very similarly going forward.

So I think that's a good comparable for this business. And the other challenge is really, where do you start? Because we do see this as a platform technology that could be both fixed and arterial, right? So there's a lot going on for acute ischemic stroke, there's an arterial thrombosis, you know, peripheral vascular, and so we sort of said, well, what's the current size of device, you know, because if you're going go into the brain, it's got to be a lot smaller, as you and I both know, it takes more engineering to take something that's a, you know, 12 French catheter and take it down to five French catheter. So which are the larger markets right now?

And so you go through that screening process, and it was pretty clear that the broader venous thromboembolism market was where to start. So this is as the beachhead and sort of that build out from from there.

Got it. Yeah, that's great. The reason emphasize market size, because sometimes it's sometimes you could you could go after the wrong device just because the market size is so big. Right? And kind of artificially chase something. But it's such an important thing because at the end of the day, like, unless you you're at that stage in your career or, you know, have had the, are in a situation where you can fund a company yourselves. Mean, every single project that eventually turns into a company in Medtech requires a fair amount of investment dollars, right? And if the market's not big enough, you're gonna have to probably chase different types of capital in essence, right? Maybe get to a certain inflection point. So it's just sometimes it's just really hard at those early stages because you could be stuck on this what appears to be a really, really great idea and it is solving for a need, but maybe the market's just not big enough and you know, and that could change the trajectory of the startup pretty quickly.

No doubt about it. I try to pull on my experience in business development because our job was to sort of assess technologies, assess companies, you're working with a cross functional team. And so you always kind of go through that checklist of, okay, what's the technical risk, what's the clinical risk, what's the regulatory risk, and what's the market risk, which is what we're talking about. A lot of people get so caught up on those other risks, they don't think about the market risk. In other words, how big is it, you know, can you really penetrate that market, And you definitely have to ask that question upfront because you're right, you can do all of the right things from a technical, clinical and regulatory point of view and then get there and go, well, really the market's not that big.

Yeah, let's transition somewhat to kind of still focusing on the early days of SonoVascular. And I don't want to get necessarily into the weeds on what technical decisions do you make trying to iterate or pivot on a certain device, but really more curious, especially considering kind of your roles mentoring other entrepreneurs at Duke. Where do you think most early stage CEOs or founders go wrong when it comes to trying to deploy limited capital at a prototype, the Alpha prototype, right? Where, again, funds are limited at that stage, but you need to sort of make some meaningful progress. What do think most people get wrong at that stage?

I can tell you what I look back on and say, you know, could I have done something differently? Talking to other CEOs, I think, you know, when it's that early and you have limited capital, it's like, well, how do I get the right expertise and that balance between going externally versus being able to leverage internal resources, right? You know, if you're working with contractors, expensive, you know, and so there's that tension between what you can afford to spend versus what you need and what it's costing. So I think that's the early on, that's the challenge. I mean, I'm not an engineer, so I've met CEOs that are engineers and they can do a lot of work on their own as CEOs right early on, and not having to rely on an external vendor.

In my case, we had to hire good engineers, we had to work with external groups to be able to sort of translate the idea into a sort of a minimally viable product. So I think that's, you know, early on, that's the challenge is how do you balance that? You know, get the right people on board in a way that you're not burning excessive cash, but getting, you know, derisking what you're doing and building value. So it sort of facilitates fundraising going forward. Because ultimately, if you're not making progress, as you know, it's going to be difficult to get that next round.

And particularly in an environment where it seems like the investors are moving, the goalposts will keep moving to later stage, right? I'm sure you like me, you've heard many times, we love what you're doing, come back and you know, when you have this and then you come back with that like, well, great, but now we want to see something else. It's it's just really challenging in that regard.

Oh, no doubt. And I don't think that trend is going to stop anytime soon. Right? There's kind of this this concept of goalpost shifting later later. I mean, sometimes you look at the the pure dollars that are going into to Medtech VC right now. And it look it can look promising. Right? But the reality is, like, most of those the majority of that that that capital is being, you know, deployed to later stage companies that are further derisked. Right? So that leaves this this this gap, right, for companies at at this sort of stage.

Right? Fastwave included, right, in my in my shoes where it's like there's there's not you know, capital is hard to come by, right, at those even even if you're making meaningful progress and in patients, it's still it's still still challenging.

No. No. No. No doubt about it for sure.

Yeah. I wanna circle back around to your first in human feasibility study in Chile. So sounds like you had a connection, right, because you, you know, you spent so much time there earlier in yr life. But walk us through kind of whether you wanna focus on kind of the decision to go there and kind of learnings from doing a first in human study in in in Chile or or or maybe even the thought process with respect to PE. Right?

Because sounds like you're evaluating you're kinda going through the same process again and and, you know, geography is still kind of up in the air at this point. But, you know, what are a few lessons learned, you know, that maybe other other CEOs that have not gone through this before and have not done a first in human feasibility study, like what do you, are there a couple of things that you think would be especially helpful for them to know?

Sure, I mean, I think it starts with speed, getting to the clinic as quickly as possible, particularly in this fundraising environment where it's tough to find investors, large investors that would invest in preclinical assets. So getting there quickly was key for us. Even though FDA I think has done a great job with the EFS program and you can get there earlier, for us as a company the challenge was, it was on the one hand everyone's saying we really like what you're doing, it's differentiated, but it is a very novel approach, right, it's not an aspiration catheter, it's not a basket capturing clot, and so I almost feel like we had a higher bar in terms of having to prove to investors that this is really going to work, and so we said we got to get into the clinic because if we can't show some effectiveness in humans, this uphill battle of raising money is just going to get more daunting. And so I said, okay, well, so we got to go quickly, you know, where is there a country that, you know, we can get there quickly, but also then you want to have, you know, quality, right?

So it's the facility, you know, operating under GCP. And then do you have a team that you can trust that's responsive, right? Because even though it's an acute procedure, we wanted to follow these patients up to six months. I've gotten feedback from friends of mine that have done studies in other parts of Latin America, and it was a bit of a mixed review, some had good experience, others didn't, and when it was a bad experience, again, it was a sort of a lack of responsiveness and follow through, and it got back to sort of the trust factor. So being able to work with someone I've known for thirty years, who was one of the top vascular surgeons in America, and then the mini CRO we used, who had a close relationship with him, sort of brought it all together, right?

We can move quickly, it's group we trust, very responsive, and ultimately I think that allowed us to execute very well. The last thing I'd say, and for us, it was, know, there were times where we're like, wow, enrollment's really slow, is trying to find sites that can enroll patients quickly. And sometimes it'll, you you have to be a little bit lucky, but so for us, we sort of got out really quickly, and then things slowed and we sort of hit the summer months down in Latin America, and it's like nothing much was happening. And then once people came back from the beach, it sort of picked up again. But, you know, hindsight, it would have been nice to have something a little bit more consistent, right? Where you're getting those two, three patients a month over time.

Yeah. Yeah. Was there anything specifically you did to like, try to ramp up enrollment again? Is that, is that literally just the, an issue related to seasonality, right? And the patients were literally, literally at the, it was the summer and they're at the beach and just didn't see a lot.

Yeah, mean, think that's part of it. I mean, sometimes it's just a lot too, right? Because we screened out several patients. So there were months where we were busy screening and just, you know, none met the criteria. You know, we were treating in Chile in one site, but the patients are coming from all over the, most of the capital city, but in some cases outside of that.

And so, you know, the team luckily did a good job of getting the word out, and all the patients are coming from the public healthcare sector, right? So patients that in most cases would not get treatment where they were because they didn't have the technology or the expertise, nor could they afford it. So if they come to our study, everything's being paid for and you're getting treated by some of the best physicians in the country. So I think there was the team did a good job of getting that word out. So referring physicians to say, hey, look, here's a patient, we bring them in, screen them, and then hopefully they would enroll.

But it gets back to you have to have a team that you can trust because you are, you know, you're several thousand miles away. Right? And so and so as much as you can be there in person, you're not there most of the time. And so having that level of ongoing communication was key.

Okay. And then with with respect to the the regulatory process in Chile for for maybe someone listening that is considering possibly going there, what does that timeline look like in terms of getting ethics approval? Is it reasonably sounds like it was reasonably quick.

Hey, everyone. Let's take a quick break to talk about Fastwave Medical, the company I co founded and lead as CEO. We're developing next generation intravascular lithotripsy, or IVL, systems to tackle complex calcific disease. Over the last few years, we've closed a series of oversubscribed funding rounds, bringing the total investment into Fastwave to over $50,000,000 Corporate interest in the IVL space is growing too. The $900,000,000 acquisition of Bolt Medical by Boston Scientific in 2025 and Johnson and Johnson's $13,000,000,000 acquisition of Shockwave Medical signal a lot of attention on emerging IVL startups like Fast Wave, and we're making serious progress. In addition to recently receiving our ninth patent, we've successfully completed peripheral and coronary feasibility studies and are gearing up for pivotal trials. If you're interested in investing in the fast growing IVL market, head over to fastwavemedical.com/invest. Again, that's fastwavemedical.com/invest. Now let's get back to the conversation.

It was less than three months from the time we applied. Okay. So there was depending on the hospital. So we went to one ethics committee that sort of governs several hospitals and that was relatively quick. Then you have to get to the ethics committee at the hospital itself.

And originally we had two sites selected, ended up just using one site. You know, the other site, they were asked for things in the agreement that just didn't make any sense to us. So we ended up just having the one site.

Yeah. One of the other things that I guess you mentioned that is, I think worth like emphasizing too is the follow-up, right? Because you're gonna follow these patients after after six months. And sometimes I think that sounds maybe obvious, but sometimes you can get sort of solely focused on enrollment. How fast can we enroll the study?

Right? And that don't get me wrong. Like, that's important for sure. You don't wanna be just burning cash enrolling, you know, with with, you know, sites that are enrolling slow, but you could end up in a scenario where, hey, you you enroll extremely quickly. It only takes you maybe a month or two to enroll, you know, your you know, fully enroll your feasibility study. But if you're losing patients on the back end, it's just like a leaky bucket. Right? And so, you know, being mindful of the coordination and follow through, and then how good are these clinics actually at getting their patients back? That's so important and definitely worth going into detail on if you're pursuing markets that you're not familiar with.

No doubt about it. And there, like I said, we work with the, I call it, a CRO, but a small group that I've known for many years, and they did a fantastic job. So basically, we were sending a van to pick up the patients, right? So it was almost like a concierge service, right? So between the site and the CRO, there was really good coordination to make sure those patients were coming back.

I think some people opt to, well, I'm going to deal directly with the site, you can do that, but you start seeing there's a lot of intangibles, right? They don't anticipate, and that's where a good CRO locally, especially overseas can really make the difference as was the case for us.

Yeah, that's super helpful advice. Let's spend a little bit of time talking about fundraising, right? Because I think you guys just announced maybe that you closed on, I think looks like the maybe, Yeah. First close. First close of your series A. Is this your series A?

It's our first price round.

Okay. First price round. Okay. Got it. Yeah. So that's a that's a big that's a big inflection point, I think, for any startup. So you made it this far without a price round. Okay. That's capital efficiency, right?

Well, there's some lessons learned there, which I'm happy to share, but yeah.

Yeah. Well, let's talk about those, right? Like what do you know now at this stage, right after having gone through kind of the fundraising gauntlet that you wish you knew maybe two or three years ago?

Yeah, think if I do something differently, it would have been to approach the cap table more strategically. I mean, have a strategy for other aspects of the business, perhaps when it came to thinking about the longer term financing strategy and how that impacts the cap table and the balance sheet, would have done a bit differently. So we raised prior to this round, we raised 10,300,000.0 through a series of convertible notes. That made sense early on, I think looking back, we probably should have gone sooner with a price round, because ultimately got a lot on balance sheet, that accrued interest is eating at you, it's dilutive. And so now, it was also a function of at that time, we wanted to move quickly, the fundraising markets are difficult, what's the easiest way?

So if you sort of easily fall into that, but let's just raise another convertible note, right? But they start to they start to sort of, you know, complicate things. And for us, the big part of the first close was converting all that. So the good news is, you know, we've converted all the outstanding notes. So as of the end of last year, our cap table is really clean, it's the preferred and the common, our balance sheet's a lot cleaner, and that matters because that now we're going out for new investment, people want to see that, right?

People, they look at your cap table and your balance sheet and say, wow, you got over $10,000,000 of principal and accrued interest, and that's sitting on top of everything else, that makes people nervous. So I think, looking back, perhaps being a bit more strategic about when to use a convertible note and when to say, you know, it's now it's time, even if it's a smaller round than you want to start to do, to price the company basically.

Yeah, that's such a good point because I think it's so easy to gloss over and not really spend a lot of time thinking through even at the early stages because you're so focused on, hey, we've money in the door, right? Money in the door and don't get me wrong like ultimately you you gotta get you gotta find find money to keep these these companies alive. I so I don't want. I mean I certainly appreciate that but at some point you know the I think I think the takeaway here is don't keep kicking the can down down the road right at some point you're going to you need to address address kind of this this issue sooner rather than later. And it it will it will bite you.

I mean, undoubtedly, like, you end up in a scenario where you've got too much convertible debt in your cap table, it does it hurts. Right? You know, institutional investors do not look they they don't necessarily like that, you know, as you as you pointed out. But let's talk about raising a price round in these early stages because ultimately, you need a lead. And and a lot of times, you know, just like just like natural human behavior, right, people wanna follow people.

And it's sometimes it can be hard to find a lead that steps out and prices the round. So generally speaking, what's your take? I mean, wait for an investor to price it? Are you okay with pricing it yourself in those early years? Like what's your general take on that?

Well, for us it was a bit of a hybrid, because our lead investor is also our largest investor. It's a group called Harbright Ventures here out of the Southeast, and they're not your traditional venture group. I mean, have a fund, but it's a small fund. Most of what they invest is they'll aggregate their limited partners or their network into SPV special purpose vehicles, and that's how they've raised most of money. They also manage the angel network for NC State, and so they have quite a bit of investment into the company already.

And so as we were thinking about this first priced round, again in a challenging fundraising market, well, if it's hard to get a sort of well established institutional lead right now to raise, let's say, 15,000,000, Well, what's the minimum we need to raise to get some meaningful milestones? What I talked about earlier, in our case, getting the PE data and then getting the IDE for DVT approved. We said, okay, well, 6,000,000 with up to eight, that's what we need. We need six, but we'll go to eight if that's available. And we said, well then who can lead this?

Do we need the traditional VC to lead? That's a small round, we said, Harbright can lead, and they were willing to lead, they've been terrific partners for us. And so we negotiated with them, and it was a fairly lengthy negotiation in the end, even though they were our existing partners, to get to terms which were satisfactory for them and to us. And you have to understand, I understand that, you know, they have to act on behalf of the A investors, right, so they want to make sure the market, that the rates are within the market in terms of valuation and all the other rights that are coming with it. So that's the approach we took, again they've been terrific partners.

We may have a co lead emerge as well, so we're in discussions with a few groups right now that have expressed an interest. So again, was priced around, size it to get to those next meaningful milestones, and then provide enough runway so we can raise the subsequent round. But in our case, saying, let's not make it so big that we have to rely on someone who's going to write a $5,000,000 check, right? Yeah, yeah. That was the calculation we made in this round.

Oh, that makes sense. And give us a sense for like kind of the, and every investor is gonna be different, but kind of the time it took to kind of get to terms, because the reason I bring that up is sometimes other CEOs I talk to are like, they're they're kinda going through the same process or they're trying to it's it's a dance. Do I need to find a new lead? Can one of our existing investors step up and lead, etcetera? They don't factor in enough time, right, to get to get something like that done. So give us a sense for kinda what that was like for you.

You know, it kind of reminds me of my days working in business development, right? I always tell people the easy part was agreeing on the acquisition price. Once you got into the contracts, the devil's in the detail. There were a lot of, in the case of an M and A deal, reps and warranties and covenants, all these things. It was somewhat similar here, right?

I mean, the easy part is really agreeing on what's your pre money value. But getting into that, talking about the investor rights that go with it and everything else, that's where it ends up dragging on, taking longer than you thought it would. Again, I thought it'd be done thirty days, it took closer to sixty to seventy five days by the time we had an executable agreement. So it's really just the details, It's getting into things that and as a first time CEO of a startup, I'd not been through this process, right? So I've done a lot of contracts, but not this kind of contract.

So again, once you get into it, you realize, okay, now I understand all these different things that we have to look at that the other side may want, and what does it mean for us as, in my case, as the founder or, you know, on behalf of the existing shareholders in terms of, you know, their participation rights going with this, etcetera, right? And, you know, what are the liquidation preferences? All these things that, you know, I knew about, but once you get into negotiation, you're seeing it in the contract, it really brings it to life and you realize that that's what takes the time to get to something that's executable.

Yeah, listening to kind of hear you riff on that is like the rule in Medtech, is like everything takes twice as long and is twice as expensive. It kind of applies to, you know, to even even even getting through a, you know, an you know, identifying initial lead and coming to terms on on what the round round looks like.

Yeah. Speaking so I was just looking at the the the legal bills of the day. There's no question. It probably was two times more expensive than I though it was gonna be. So so for sure. Not just longer, but more expensive.

But so crucial. I mean, we're laughing about it, but so crucial to find right counsel, right, experienced counsel that can that can that can support that process. Because if if you, you know, you get the wrong people around the table, can come back, another one of those things that can come back to bite you certainly.

Think that's a great point, because if you work with firms that are doing enough of this in our space, they really know what the going rates are, they can tell you what's market and what's not. So and that that can really make it a shorter process and a less costly process too. So I would definitely encourage people to work with a group that again, does enough of these things that they really understand, have a good pulse on the market.

Yeah. Yeah. Because it's not just sort of the legal verbiage, right? Whether it's a certain rep or a warranty that you're making or whatever, like there's a lot of lawyers that could do that, but the experience and understanding kind of market terms, right, that you data that you wouldn't or info or data that you wouldn't otherwise have unless you're doing a lot of transactions, like that's super, super helpful. On that note, before we kind of get to the next topic, anything else when it comes to fundraising that you can think of, whether it's pitching investors or trying to even find investors to pitch, like anything else that stands out and kind of things that you picked up on, you know, raising capital over the last couple years?

A couple of things. One is just you really have to work hard at telling the story, and you know, I find myself every few months, I'm sort of modifying the pitch deck, you know, what did I learn from the last several pitches that I could do better to make sure the story is appreciated, you're getting the key points, and you know, sometimes they give you nine minutes, you know, they give you five minutes, they get twenty minutes, and so it's that's the biggest challenge is getting the story across in a compelling way when you have very little time. So I think, you know, just giving yourself enough time to prepare and have different versions of your deck depending on how long and who the audience may be, because you may have an audience early, really early investing with angels, they're more generalists, right, they're not medtech experts, and so you can quickly lose them if you get into the weeds on the clinical technical aspects versus if you're talking to a very sophisticated VC that does a lot of Medtech deals is in the vascular space, they're going to want to focus more on the detail. So that's one thing.

The second thing is, I'd say, is really exhaust all non dilutive options. You know, we've applied for some grants on, I shared with you that unfortunately last year, we got disqualified by one grant for a foreign risk assessment, even though we're not aware of any foreign risk, that's a topic for a different day. And people sort of tend to focus on SBIR grants, but there are so many different agencies out there with different grants. What I recommend to people is spend a little money and have a grant expert do an assessment of your company, your technology, and come back to you with, okay, what's out there in terms of what can you apply to.

It's not just NIH, it's not just SBIRs, there's so many different things, so to understand that, and then strategically say, okay, we're going to apply to know X, Y, and Z, Cause there is money out there. It does take time, you know, more time than cost. I don't recommend leaning with that. You know, when I mentor people at Duke, go, always focus first on your private equity finance, it's like sort of getting money from the private sector, but certainly try to supplement that with non dilutive funding opposed to the way around, because if try to rely on non dilutive funding, it's just going to take you too long and you may miss your commercial window. The flip side is even though you're focused on the private market, don't lose sight of there's real dollars out there, notwithstanding the current interruptions obviously, because the given some of the disruption right now with the SBIR program, there's delays, but I still think over time, you want to make sure that you understand every possible funding source that's out there, and you're going to need an expert to really, you know, make that assessment.

Viewing it as a supplement, I think that's a great framework and super, super helpful, right? It should hopefully supplements, right? You're diluted funding, and I'm glad you brought up kind of the first starting off with more like an analysis, right, of what's available, because sometimes it's easier just to, well, we're going to go to NIH, we're going to go to SBIR, right? And to your point, like there's a lot of other potential options, right, available. And so that's super smart to kind of start out for that kind of that macro kind of overview of what's available based on kind of the company and the technology you're working on.

Really, really good advice. Well, just going back to your comment about story, we hear that, right? Eventually, whether it's an institutional investor or a physician sitting on the other side of the table, like ultimately people are buying stories, buying into your story. But the timing that you mentioned, right, I think is so crucial because they're kind of interrelated. Like if you've only got twenty, thirty minutes max, right, with a venture investor and you could easily get maybe they start out the pitch starts out and they've got a bunch of questions.

Right? You could you could be twenty minutes in or twenty five minutes and only have five minutes left and you haven't hit any any of like the main points that you wanna cover in your story. Like, it's just super you wanna be mindful of that, right, as you kinda go through these pitches of, what are the what are the top, like what are the top three things that I really need to get across to get to the next meeting? Right? And making sure that you at least, at the very least, touch on those.

And if if you can get through your whole deck, great. But oftentimes, you're you're not able to, you know, and need to be mindful of being able to, you know, tell your story in a longer version or an abbreviated version.

Yeah, it was a struggle for me a bit because coming from working for companies like Abbott and J&J, you know, were trained to, you come in with a 100 page deck, God forbid you get anything less than that, with a lot of detail, you know you may not get through it but you expected to have it, and then in this setting where again you have ten minutes, and you got max 15 slides and you got to get a lot of information across. And hopefully the outcome is that they're willing to take the next meeting, Or talk some more about the technology.

Yeah, and that should always be the goal in most cases is getting into next meeting, you know, pushing the ball, you know, further down the or kicking the ball further down the down the field with each each meeting. You're not gonna get a I'm gonna get a yes. You know, the the first couple the first pitches. Yeah. Yeah.

Yeah. Pretty rare. So that said, I wanna leave enough time for the rapid fire portion of the interview, but but I would be remiss if I didn't kinda touch on this the the topic of, like, of of of recruiting talent and and hiring. You've built out so many teams, you know, throughout your career, big and then now, you know, smaller teams at at at SonoVascular, including a lot of mentorship, right, throughout your throughout your your journey as well. So are there are there a few things that, like, really come to mind in terms of whether you wanna, you know, specifically talk about recruiting and finding talent or or even just, like, hiring and building out a team. Like, what are what are a couple things that you think are especially impactful, you know, for other other other medtech CEOs?

I mean, like any job, think cultural fit. And what I mean by that is is people who are are gonna do well in a startup environment. It's not for everybody, and I've had the good fortune of working for large companies, as well as small companies, and now a startup, and it's very different. So it's a little bit of the wild, wild west, where it's not as structured as the big companies. So people that are comfortable in that environment, you know, where things are changing quickly.

And then there's a certain amount of stress, right? I mean, there's no guarantee that a year from now there's a paycheck, right? Because the fundraising environment, so someone's gonna be really comfortable in that setting. That's the first thing I look for. And it doesn't mean you can't make that transition from a big company to a startup, you just have to make sure that that person has that ability, not everyone can, and vice versa.

Some people who have worked in startups would never survive in a big company because they sort of get lost in the bureaucracy and the politics of it. So that's the first thing. Second thing is your functional hedge, making sure that they can run independently. As a CEO, I'm so consumed by fundraising that I don't spend as much time as I'd like on execution of the business, working with them closely. And so you're going to get pulled away, especially the early you are, you know, with fundraising, which is almost feels like 100% of your time.

And so making sure that people that are leading engineering and department development, you're leading your clinical efforts, they are seasoned enough that, yes, they're checking in with you, but they can really run independently. I think that's key. And the third thing I'd say is, especially for those key roles, is you have to be co located. So coming now, and maybe that sounds old school, but now looking back at what it was like pre Covid, right, we went through Covid being on Zoom, and now we had some experiences here at SonoVascular where some people were remote, and it was just very difficult. You know, ultimately we have to be together, you know, for a number of different reasons.

And so those are the sort of the key things that I'm looking for. I'd be reluctant, say differently, I'd be reluctant to hire someone who I don't think can, you know, sort of operate well or comfortably within a startup. I'm not gonna hire someone for key functions that can't co locate with us, right. That just, my lessons tell me that that's over time, it's gonna present a problem.

Yeah, those are really good pieces of advice. Let's get to the rapid fire portion of the interview. But again, for everyone listening sonovascular.com, sonovascular.com We'll link to it in full write up on Medsider. If you're new to Medsider or these Medsider interviews and maybe this is your first time listening, these audio podcasts are accompanied by a longer form write up that really touch on a lot of the key lessons that our guests share, including a lot of the really valuable insights that Dave has given us throughout the past hour or so.

So highly encourage everyone to check out the longer form article. And then if you don't get there, head on over to sonovascular.com. So with that said, Dan, let's get the rapid fire portion of the interview. First question is what is the one thing that you're most excited about over the next twelve months at SonoVascular?

For sure, it's getting into the clinic for PE and then getting our application into FDA for the IDE study. Those are the two things that we're most excited about and most focused on.

All right, since founding the company, you're five plus years in now, what's the most surprising or maybe the most unexpected thing that you learned?

I think for me in this case, is something that came out of academia and looking back, I probably underestimated the amount of work that was needed to take something, even though a lot of work and research had been done, to the point where this is really a minimally viable product that could one day be commercialized. That's the biggest learning for me was just how much of a hill we had to climb. Just given my lack of experience in doing this, it wasn't evident at the start, but over time it became clearly evident that wow, I underestimated how much work and effort we need to get this to really, to a point where, okay, now we think we have something that can really fly.

All right, let's say we just finished up dinner or we're finishing up dinner, a small intimate setting there in Chapel Hill maybe with a group of other Medtech entrepreneurs, and you wanna leave them with one thing, like a billboard type of message that they really need to get right or understand you know, have experienced any semblance of success, what would that be?

Well, you've probably heard this before many times, but I'd say that, you know, from my experience, this has been the most rewarding journey of my career, but it's been the most challenging, right? I mean, it's hard, as it should be, right? So I would say resilience, patience, perseverance, just conviction, right? I mean, you're going to get so many no's along the way. It's easy to sort of fall into that trap of doubting yourself, doubting your technology, and so I think you have to understand that the path to success is not linear.

It's not just sloping up. It's going be like a roller coaster with a lot of twists and turns, and So just being able to sort of get through that not lose sight of what you believe. With my colleague, we kind of joke, I gave him credit for this one. Time we get a no, rather than dwell on it, have the saying, step up or step aside. Someone says no, step aside, our journey continues and so that's you have to feel yourself and so you know, stay positive even though it's, you know, the reality is and you know, for fundraising, most often you're gonna get a no.

And oftentimes the no doesn't come with a lot of explanation, right? So you're sort of left to wonder what the issue is. Again, you've probably heard this many times, but I'd say that that's just patience, resilience, conviction, you know, don't lose sight of what you believe, and that will take you through most, if not all the challenging times.

Yeah. I like that that phrase step up or step aside. Right? We're moving on either way. It's good stuff. Alright. Last question. Take us back to your, late twenties, maybe early thirties, your careers, you know, probably, you know, starting to really take off at that point. Anything you'd whisper in the ears of the younger, the younger version of yourself?

I would say build the best and broadest network you possibly can. I mean, there's no question that especially Medtech is a big market, but it's also a small market. And I think that if I look at the success that we've been able to enjoy here at SonoVascular as an example, building that network, not just investors, the people that help and support us. I mean, really makes a huge difference. So if I can go back, I'd be even more proactive about building a network, because it takes work, right?

And it's easy to sort of fall into your own sort of cocoon and say: you know, I'm happy where I am, but I'd say, regardless of the job you're in, always look to broaden your network, and I think that's going to really pay dividends down the road. So I wish I've done a lot of that, but I wish I would've done more. Oh, yeah. And more often.

Yeah. You and me you and me both, and you certainly have to be intentional about it, right? It's not like people are just gonna come find you early, especially earlier in your career. So, that's really, really good way to kind of round out the interview, I should say. But Dan, can't thank you enough for coming on the program. This has been fun.

Oh, it's my pleasure, Scott. Thanks for inviting me.

Yeah, super cool technology. I geek out on the cardiovascular stuff, so obviously I'm biased, but if you're not familiar, this is really cool technology. It's definitely differentiated in what is a a pretty hot space and kind of the the thrombectomy and thrombolysis arena. So sonovascular.com, s o n o vascular. So sonovascular.com is the website, and then you can also we'll also link to it in the full write up on Medsider.

We'll also link to to Dan's LinkedIn profile as well. So feel free to reach reach out to him there. So, Dan, have you hold on the line, but for everyone listening, thanks as always for your attention until the next episode of Medsider goes live, everyone take care.

Hey. It's Scott again. One quick thing before you go. You see, I love bringing you insightful conversations with the founders and CEOs of medical device and health technology startups. But here's the thing, I'd be super grateful if you could help me reach even more ambitious doers who share our passion.

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