Matt Angle:
Welcome to the season finale of Neurotech Pub. In this episode, I speak with fellow Neurotech CEOs, Konstantinos Alataris, Frank Fischer, and Marcus Gerhardt. We cover a lot in this discussion, but one of the big themes is how challenging it can be to raise money to build neuro devices. This episode was originally recorded last winter, and it was instantly one of my favorite episodes. So like a fine wine, I laid it down until the time was right to share it with friends…

Matt Angle:
Since the episode was recorded, Nesos, Paradromics, and BlackRock all had major funding announcements. Nesos and BlackRock underwent rebranding campaigns, and NeuroPace went public on Nasdaq.

Matt Angle:
This podcast was recorded during a bleak winter, but our optimism proved prescient. The podcast aged well, and now the field is the strongest, best funded, and most exciting that it’s ever been. I know you’ll enjoy the discussion.

Matt Angle:
To kind of warm up a little bit, I’d like to ask a kind of softball question in the beginning. One of the questions I have is about heroes. I’m curious if you have a hero that you’ve had the chance to meet? Have you ever had a chance to meet one of your heroes? And I’m curious what that was like for you? Marcus, do you want to start?

Marcus Gerhardt:
A hero… Many of them, in many different areas, from family members, my grandfather who had the privilege of meeting. So very happy to have done that. And can’t count the times I retell stories of his to my kids, but as it might pertain more to what we’re talking about today, meeting any of the BCI pioneers, and I’m sure we’ll talk more about them or get a chance to talk about them, in the course of this conversation. They were definitely heroes, even as I thought about starting Blackhawk Microsystems, individuals who have experienced enormous changes to their lives through accidents or diseases and how they turn that around into positive action. And all of them have managed to do that to different levels of success. And I appreciate that they still have their down times, but to meet any one of those BCI pioneers has been a phenomenal experience.

Marcus Gerhardt:
If you meet an Ian Burkhart who jumps into the ocean, as I would do with my kids any time in the year, then hits a sandbank and is paralyzed from the neck down, and then to meet him and hear his full story from start to finish. It completely blew away my concept of him as a hero. I would have assumed he was my hero because of just meeting that challenge and overcoming it, but then hearing the full story.

Marcus Gerhardt:
It just pales into insignificance, anything I might’ve perceived beforehand, the trials of his own family, not talking to him for a year because of his decision to move into a clinical trial when he’d already experienced so much, to some of the hardcore things where a BCI pioneer tells you that for a year after the accident, her husband would close the door to the pool because he was worried and knew that she would roll down if she could to end her life. Very heart-wrenching and direct stories that I could not have fathomed beforehand. So it was a privilege meeting them. And so eye opening. I treasure every moment of having spent with any of the BCI pioneers.

Matt Angle:
Frank, you had the opportunity to meet one of your heroes or someone that you’ve met has become your hero?

Frank Fischer:
It’s interesting, in terms of who popped to mind given Marcus’ backdrop here of the freight train. This will be an unusual one. But the hero that pops to mind was a man by the name of Bo Vea. Bo was general manager of the locomotive business, or General Electric and my first company, that I worked for after school was Wes GE, and I joined them on a training program and ended up in Erie, Pennsylvania, guess what, building locomotives. At the time, when I had just graduated with my M.S. degree in Management, and listening to all kinds of analytics of all types and things of this nature.

Frank Fischer:
And Bo and I, ended up, he was general at the business that I ended up joining at the training program, and very fortunately we ended up becoming best friends. He was almost like a father figure to me. We had interesting conversations about the importance of analytics and analysis, and everything else going into decision-making. And he would patiently listen to me. And after a drink or two he would say, Frank, it’s all about people. And I would say, yeah, yeah, yeah. Except these other things were… ‘Frank, it’s all about people’. And now, looking back over a 40 year career, when people would ask me that question, I would say, it’s all about people, and their desires, and what they’re made up of, and what it is that their families will accomplish and realizing what are the tools and techniques that might happen to be available. Bo was clearly my hero, and I’ve taken his lesson to heart.

Matt Angle:
What about you Konstantinos?

Konstantinos Alataris:
When I was thinking about your question, to me, it’s just someone, the way they think, the way they conduct themselves. The example that they set kind of stays with you, and the person that came to mind, it was someone that I feel, with the passing of time, and as we get older, becomes an even more influential figure for me, and actually this was one of my PhD advisors. Which at that time he was a nonlinear neural networks and modeling plasticity in the hippocampus. By the way, I’m talking about Vasilis Marmarelis. He was a professor at USC and Caltech, and he and Ted Berger at USC has done a lot of the work in modeling plasticity in the hippocampus, as far as memory creation.

Konstantinos Alataris:
And there is a lot of people that have come out of this lab, which by the way, is the underpinning of the current AI. We just learn, with more computational power, more nodes, just analyzing vast amounts of data. We just were not that creative at that time to call it AI, our marketing was lacking. But back to… he’s just the person that, mostly how he, he dealt with everybody else, and from a position of power, and the example that he set, and the values that you represented that kind of, to me, the testament is, to me, that the more time passes and more you think back, this person, which initially were not aware of their stature and what the impact they can have in your life, it gets better, bigger and bigger. Although you might end up seeing them less and less, but the influence gets bigger and bigger. So that’s, Vasilis always comes to mind.

Matt Angle:
Yeah. It’s interesting how our perspective of heroes and who we look at as heroes kind of changes as we mature. And we kind of go through the process, whether it’s appreciating a mentor more, or even just a frank kind of appreciating the words of your mentor more as time passed.

Frank Fischer:
What about you, Matt?

Matt Angle:
I knew someone was going to turn it around on me. It’s interesting. I’ve had the opportunity to meet a lot of my heroes because I’m a nerd. If you’re a fan of professional basketball, there’s a good chance that you’re not going to be able to meet Michael Jordan. But if you’re a fan of neuro prosthetics, there’s a really good chance that you’ll be able to meet Leigh Hochberg and Krishna Shenoy and some of the great players and BCI. And so I’ve had the privilege of meeting a lot of my heroes. I think one person that I really admire, and one of the smartest people I’ve ever met is probably Winfried Denk.

Matt Angle:
He was the inventor of two-photon microscopy, and made really important contributions to the field of connectomics as well. And just a very, very clear thinker. Intimidatingly clear thinker. All of your companies and your stories are pretty well known. And the people listening here will be familiar with the companies now, but I think it would be very interesting to talk a little bit about first, how we got here and kind of what the neuro tech scene has done in the last 20 years, especially. And I kind of wanted to start with Frank and NeuroPace started in 1997, and that was the same year that deep brain stimulation became available for Parkinson’s patients. And so I imagined that that was a very exciting year for NeuroPace. And I’m curious when NeuroPace first started out, what did they seek to do? What did they think was possible and how are they being compared to DBS? And then also when you came on board a few years later to be CEO, what was your assessment of the landscape?

Frank Fischer:
First of all, I actually was with NeuroPace right from the beginning. So when the first investment went into the company in December of 1997, I wasn’t CEO at that point in time, but I was on the board. And we had to take a step back to into the decade prior to the late nineties, I was the CEO of a company called Ventritex. And we had developed those state-of-the-art implantable cardiac defibrillators. And the company, that was, we did that kind of work over about a 10 year period and we joined that company two years into… after its inception, with temperature development, and took the company public. And as a commercial company we were then hired by St. Jude medical.

Frank Fischer:
During that period of time, I had come to know an inventor by the name of Bob Fischell, and Bob was a very interesting guy. He worked for the applied physics laboratory at Johns Hopkins. He probably has somewhere in the order of 225, 250 patents. Most of those in the medical device area, with his name on. And he’d periodically get an award. His son, who’s also a physicist, in David’s case a PhD, and a Canadian neurologist by the name of Adrian Upton, who was one of the very early sort of pioneers of things like brain stimulation or movement disorders.

Frank Fischer:
He worked with Cooper, essentially did a lot of interesting work. With both companies like Corvus that certainly do pacemakers, and vying for that application. Bob and Adrian and his son David, would twice a year, they’d go off and they would sit around and they would think about areas of need and they would generate intellectual property. So I’d gotten to know Bob because we actually had a license that, Ventritex, we had a license of intellectual property from them. And he stayed in post contact with the company for a number of years. And once it was announced that Ventritex was being acquired by St. Jude medical, he reached out and said, I’ve got this idea for something that’s entirely different and I’d like to talk and we did.

Frank Fischer:
And it was essentially the idea of green responsive neurostimulation with a cranial implanted device to treat neurologic disorders. And the idea of being able to monitor, similar, in one way, to cardiac technology and thinking about monitoring electrical activity and do something in response to that electrical activity. So it was a broad-based patent, actually several of them, that warned, so that the basis of the field, when nothing else was out there. We talked more over time and in a short stint at a venture capital firm, Kleiner Perkins and we actually invested prior to what was the sole seed industrial at that point in time. And that was the funding that took place in December of ’97, to create the company. And basically, there were three things that utilized that seed money to do, I should say two things. One was again, think about it, there were no long-term proper implanted electrodes in the brain. There was no real knowledge of whether or not on unusual activity that would lead to a seizure within a given patient repeated.

Matt Angle:
Was it clear at that stage that the first indication would be seizures? Or when did you move from thinking about neurological disorders more generally to targeted refractory epilepsy?

Frank Fischer:
We did think, right from the get-go, that the first application will be epilepsy, and the reason was because you wanted something with some degree of frequency. That in fact, you could look for, if it existed, some type of unique event or series of events that occurred that you could then respond to. We didn’t know what they were, we didn’t know what we would do in response, so question number one had to be, do those patterns in a given patient repeat or not? We knew as a population, they were all over the map, but in a given patient was there repetition or not.

Frank Fischer:
Second question was, if you delivered stimulation, could you disrupt that unusual activity, such that it wouldn’t progress to a seizure. Now we didn’t answer the part about would it not progress to a seizure, but in a laboratory and an epilepsy monitoring unit at Columbia, we did establish that the patterns, in fact, look like they repeated. And that was in phase two monitoring. And we did establish that if you delivered stimulation it looked like you could disrupt that activity. So with that we were able to then move to the next endeavor to raise funding and money rather than have our first venture around the financing, which took place in April of 2000.

Frank Fischer:
Once we had enough that confirmed what looked like the basic principles were there, we were confident enough that we could take pacemaker type technology from a mechanical electrical software sense, and adapt that in the right manner to be able to accomplish something like this. And again, epilepsy was chosen because of the frequency of seizures, and the ability to… Probably, if we knew as much as we know now, I’m not sure it would’ve been our first pick. But it was. It’s taken quite a while, but we feel good about the progress we’ve made.

Matt Angle:
Marcus, the story of the Utah Array, this is running in parallel now to some of this early deep brain stimulation and then kind of responsive neurostimulation. Can you tell us a little bit about the history of the Utah Array leading up to when you co-founded BlackRock Microsystems in 2008?

Marcus Gerhardt:
Yeah, it really starts with Dick Norman, at the University of Utah, who starts developing this initially as a vision electrode, something to help his vision work. And the exciting thing today is that we’ve kind of come full circle and some of that is starting to happen. Dick Normann was kind of the first and was working with engineers in his lab. One of them was Vinn Engo, who today works at BlackRock Microsystems. He’s the longest standing employee we have. And I always like to refer to him because without ‘Goldenhands Vin’, I’m not entirely sure we have ever been able to build the Utah Array to today’s level. So he’s one of the unsung heroes of the Utah Array’s success story. Someone who joined Dick Normann’s lab very early on as a technician.

Marcus Gerhardt:
And it goes from there, it receives a major boost when John Donahue joins Dick Normann and says, well, why don’t we take this technology, and in the research field, apply it to the brain and much grander visions than of a neural interface develop. And that’s when ultimately they go from research to trying to incite and incentivize businesses around it. Cyberkinetics is formed. They raise a fair amount of capital for the time, I think it was around $60 million to spend on creating the first BCI neuro interface. When I joined this space in 2007, 2008, not knowing very much about it at all, I looked at it from the business perspective and from the medical device perspective, from the VC perspective. Up to that point, I’d run maybe 11 or 12 ventures, all in disruptive technology, none of them in the medical field. And so I was very new to this space and I look at it and just think, what a disastrous space for VC to be active in.

Marcus Gerhardt:
It’s a graveyard of failures. And my response to Florian Solzbacher who had called me, I was in London and said, Hey, now’s the time to start a business together, what do you think? My response was, you’re out of your mind. I mean, look at this. Here, let me pull up all the stats. Let me show you the performance of VC is in this space of private equity in this space, Frank just mentioned Cylner Perkins, and theirs was a success story, but I’m pretty sure if you ask them for their internal data, they’ll give you 19 failures to the one success story they had in that space. Anyway, I was at first shocked.

Frank Fischer:
Marcus, don’t exaggerate, and tell me 10 to one. Its basically 10 failures for every one success.

Marcus Gerhardt:
Just goes to show how good Cylner Perkins is, huh? So I was shocked and I look at what they’re trying to achieve. And I said, well, on the back of an envelope, I think this is going to require $3 billion. And that was just me not knowing anything about the space. And to be honest, it’s the one thing I will hold onto today. It’s going to take $3 billion. There is no two ways around it.

Marcus Gerhardt:
So to see Cyberkinetics, try it for $60 million. It was audacious, but we needed that. We needed that courage, because everything they built up, we’ve been able to use and build on. Cyberkinetics pushes this down the regulatory pathway. They make the product a little bit more stable from the lab space, to something that was a little bit more replicable in terms of the Utah Array specifically, but they also add to it a data acquisition system and ensure that this product platform receives FDA approval. And that was critical for the later success, and maybe we’ll spend a bit more time about that later, but that just so you know, up to the developments of sort of 2007, 2008.

Matt Angle:
Three billion is a big number. Frank, how much money did NeuroPace raise, to get to market?

Frank Fischer:
Marcus was describing basically the terrible amount of money that might be necessary, and three billion is way higher than what it took us. But it took us a lot. I would say in terms of, until approval, the order of magnitude, 400 to 425 million. Probably 400 million to approval. And there’s been subsequent raises since then. What’s really interesting to me, is if you compare what it took NeuroPace, as contrasted to what it took Ventritex, and the cardiac field, which was an established field, and things you could build on. And frankly was easier from a technical perspective. We raised somewhere between, before taking the company public, no more than $125 to $150 million and that was a very successful company, commercially, after approval.

Frank Fischer:
So it really ends up, it took us so much longer, and required so much more money, was two things. One, it was a much more difficult regulatory pathway, because what we were doing was totally viable in brain, as contrasted to prior experience for FDA in the heart.

Frank Fischer:
So we had to do a feasibility trial as well as the pivotal trial. And then there was the gathering of data, that was multi year data that had to be accumulated and then organized, submitted. Going through the balance of that process. So we did our first implants in 2004, in our feasibility trial and we weren’t approved until November of 2013, and so what you have is a record of that continuing ongoing expense, that has to be maintained and placed anything with capability and now certain patients and you’re learning more, you’re doing all of that kind of good stuff. And the total amount of money to approval was probably, I say anything north of 400 million, somewhere between 400 and 425. And then you get into the commercialization aspects and that’s a whole different ball game. I’m sure we’ll talk more about that.

Matt Angle:
Konstantinos. 2006. What was your assessment of the field of neuro technology?

Konstantinos Alataris:
Well, I think at that time was pretty much the beginning of the failure of all the peripheral neuro scheme companies that were tackling obesity, like Leptos and Teromedics and bunch of others. Cyberonics was doing vegus nerve stimulation for obesity. So it was really that wave. We did not have Northstar, because the first shining example for potentially viable business, short of Ventritex, in neuro, was Northstar. Which Northstar was able to remember them. And they were able to go public while they were waiting for the results of their pivital study and they had a successful IPO. The raised probably a hundred million and their stock price did well. Everybody was happy. And then the results came out and they missed the endpoint. So the company pretty much folded and St. Jude bought their assets for like two million. But until point, that was much later, Northstar was considered one of the success, but it wasn’t in 2006, quite yet.

Konstantinos Alataris:
Neuro, it was still one of those things that you had to explain why nothing else had worked. That was the difficulty. And I was already, you could say I had an interesting starting point because I was part of a venture fund. I left the venture fund stuff to start Nevro. Nevro came out of it, just a simple question. We were working with physicians at Mayo here at Stanford, and it was a simple question. What can really happen if we expand our toolkit outside the box that the big companies were giving you? What if you go outside the slow, low frequency, hit a nerve with a posit fires and you expect us to do something. Just put them out to purpose pacemaker technology. So we didn’t know if something is going to come out of it. We didn’t know the areas, per se. And it wasn’t at that stage, to even by a gap in the IP coverage of Medtronic or St. Jude or Boston scientific, but it was the opportunity to explore the potential for better efficacy. If you actually expand your toolbox. And clearly, did I mentioned that we mainly explored was frequency.

Matt Angle:
And were you getting a lot of push backs when you were racing? Were people looking at the graveyard of previous neuro tech companies? What was that experience like?

Konstantinos Alataris:
I don’t think there’s ever easy to raise money for a device. I haven’t found that over the years, no matter what. What helped us was the people that we are able to attract around the table. And those are people that I still remember. The people that made the critical contribution as far as how do we navigate those waters? How do we properly test these new tools and how do we chart a path that will lead us to a product? So we did initial work with Mayo, interdisciplinary team at Mayo. A lot of the fundamental breakthroughs came at Stanford. We were actually single-cell recordings from the cord and kind of understanding what kind of signal we were sending to the brain. Because remember to me, this is all about Nevro is about how you pull backs.

Konstantinos Alataris:
Nevro is about how you pull back some of the memory effects in the brain; the central sensitization, what really happens after the brain gets used to the chronic pain. But short of that, the one thing that helped us is that we were able to go to meaningful, preclinical data fairly quickly and quickly to the clinic. And I can tell you exactly, a key person was Jason Collier. He was a neurophysiologist here at Stanford and that’s where a lot of the initial experiments to understand the signal, the impact of our signal to the upstream information, to the brains. And then given the device, we were able to go to the clinic quickly.

Konstantinos Alataris:
And that’s where, when you start going to the clinic and from short-term, two weeks to six months to 12 months, that’s what really helped our ability to fundraise. So we raised the series B based on the two week data. So SCS has a two week window where we actually test whether a device produces pain relief. So that, was something that we were able to elaborate. And we started with two week clinical data, compared that to how long it takes you to do a deep brain stimulation in clinical data, it’s night and day. So that’s, what that pace on the clinical data helped us and I started the company in 2006, we had the current device commercialized in Europe.

Konstantinos Alataris:
I commercialized in Europe in 2010, Michael domain commercialized it in 2016 in the US. And this just has nothing to do, it’s just the FDA process. But also you start creating a data set, revenue projection, the sense of the adoption internationally. And I think we were one of the first people that were able to show, to build a business, a commercial business internationally. But we had to build the Salesforce, it doesn’t come by itself. And then, how do you bring the right people? It’s always the people. And how do you kick down doors when you don’t have a data set? Or to put it more complimentary, a dataset it’s evolving.

Konstantinos Alataris:
How do you build a market? How do you compete with Medtronic and Boston Scientific and St. Jude, when your data set is three months old, six months follow-up? That was a different commercialization approach, but it’s possible. And now that we are trying it and you just have to put the effort behind, bringing the people.

Matt Angle:
Second company, Vorso, you started about 10 years later. Do you see the world of neurotech being different today than it was 10 years ago?

Konstantinos Alataris:
In what sense? In many sense, I see no difference. The difficulty in raising funds, the old school approach of what it takes and what are the milestones? The same arguments about reimbursement, even when there is huge companies right now between Nevro, Inspire Medical, that have built huge neurostim products with huge revenue, right now. So even at this stage, I think people, I find it that investors are still not to the point that I would expect, willing to fund early stage opportunities.

Konstantinos Alataris:
Everybody wants to be on the mezzanine around for Nevro, by the way we did not do a mezzanine for Nevro and the people that were around the table, they went on to have a great outcome. Similar story, obviously for Inspire, that as we always say. So there’s, a lot of bright examples right now that you can actually build a business, you can actually challenge the incubates like Boston Scientific, Abbott, Medtronic, that’s been proven. But I would have expected to see much more willingness to fund early stage ideas, especially now that we have a better understanding that we can have even higher level effects.

Konstantinos Alataris:
And the science has progressed to the point that we’re looking at three things: inflammation, we’re looking about auto immune disease, there’re companies with implantables or wearables that are looking to peel back or retrain the brain, to better control immune response. And we know the pathways’ understood, there’s implantable data that shows that you can actually move it from one side to the other side of the equilibrium. So scientifically, there’s so much progress with different tools, expanded tools, even on the sensing side, on the actual coupling to nerves or the brain. And really our understanding, in my view of this, two level of opportunities.

Konstantinos Alataris:
One, is the high bandwidth opportunities. The Utah Array, the Neuralink and all of these applications, that you need that high bandwidth. And it’s moving, I mean, there’s real progress and real results that start to come out of it. And then there’s more of the system problems like chronic pain or chronic inflammation. Where we’re really talking about network effects, memory effects that build over time that you can address it with a different tool set. So, the science has progressed, the ability to support the science, I wish we could have done better, frankly.

Konstantinos Alataris:
Unless you can have someone who makes an impact like Elon Musk and Neuralink and pulls one’s efforts out of obscurity, when there is so many others that are equally deserving.

Marcus Gerhardt:
I think Konstantine focuses in on an absolutely critical area, which is that of fundraising. Because at the end of the day, if we don’t fund these things, they just don’t move forward. I have to echo some of the words he says, let me, first of all, I’ll preface this with a story of Black Heart Microsystems. I pitch up, I’m concerned about this space. I tell Florian as much and I go away for at least six to nine months to think about how we’re going to commercialize his IP, right? Because, that’s what he approaches me with. Our story goes back three decades, in fact.

Marcus Gerhardt:
Unlike Franks, where he approaches it from different business perspectives, the reason I’m here at Black Hawk is because more than three decades ago, I meet Florian at high school and I asked him what he wants to do. And he says, “I want to create the bridge between artificial and natural limb.” And I’ve always been inspired by people who have a vision like, that as early in their life. And so when Florian, then three decades later with a lot of academic, but also business experience behind him approaches me and says, “Hey, listen, can you help me build a company here?” I was more than happy to put my skillset, which was venture creation behind that.

Marcus Gerhardt:
So, we have the vision and I bought into the vision, this idea that we will drive forward on getting this link between natural and artificial limb. And the way we do it is with this brilliant asset that we find in Utah, which is the Utah Array, a cyber kinetics that’s about to run out of money and we effectively swoop in and we take on that asset. And even back then, my choice was to go out on a VC style fundraise. And I told Florian that I just did not think that was feasible because it was, as I said, such a poor track record. But also everything you do in engineering a medical device and I can only confirm this now, a decade later, it takes effort.

Marcus Gerhardt:
It takes people and it’s not a software code that you can rewrite in six months. If you lose your head engineer, you lose that life’s work and you can write it down in a work instruction as much as you want, it’s gone. And so if you close down a company that you’ve been investing funds in, it is, chances are, gone. Trying to replicate that, just not as easy. So what I implored Florian to think about, was instead of a one application, one big fundraiser approach to this… And we could have taken BCI on as the one thing and carried on where cyber kinetics stopped.

Marcus Gerhardt:
I said, “Why don’t we build a cashflow positive company? And we buy at our time. We stand on our own two feet, we do not rely on a VCs when we do not rely on the whim of the fundraising sector.” And to this day, this keeps us in the game. I mean, in the last decade, I have seen more companies come and go in BCI, but we’ve stuck around. But to konstantine’s point, I had always hoped that at some stage or other, the investment community would learn, right? And many things have changed, fundamentally changed. I mean, 10 years ago, I could not point to an Inspire, as Konstantine has just mentioned, right?

Marcus Gerhardt:
An implant in sleep apnea that if you look at it, actually technologically, not that fascinating. And everybody in the BCI world will just throw up their hands and dismay at how simple and basic this technology is. All of my engineers will say, “Oh, that I can design and build in my sleep”, right? But you know what? That company is now worth $4 billion. Where did it all start? It all started in a big medical device company in 1995, where it sat for 12 years without doing very much at all. Then left it and then had good people, many strokes of good luck, no doubt and another 10 years. And it goes from hundreds of thousands of dollars of value to billions of dollars.

Marcus Gerhardt:
Great story, great example. I can point to Nevro, I can point to NeuroPace. Frank does not know this, but in my fundraising pitch at the moment, I mentioned NeuroPace more often than anything else. And why? Because 10 years ago, if I’d gone and I went out to some private investors, but if I’d gone out to the market at large, what was my story going to be? But the complete unknown. Today, I can mention Elon Musk and that’ll bring in some, either those that like him and think he’s a hero or those that hate him and want to compete with him. I can point to established medical device companies, I can point to the auditory sector.

Marcus Gerhardt:
Before COVID hit, I would play this little game; I’d be in an airplane, every time I’d watch everybody, all of them come into the plane and I would try to identify how many people would come onto the plane with that little button behind their ear to signify that they had a cochlear implant. And you know, it? It started four years ago, hardly ever. Just before COVID hit, I was on a flight from Houston, four people came onto the plane with a cochlear implant. These are serious numbers now. These are millions of patients being positively affected. So, I don’t need to stand there and say, “Ooh, neuro will go the way of cardio.”

Marcus Gerhardt:
I can show concrete examples. I can show the cochlear implant market, I can show a sleep apnea implant, I can show Nevro. I can show all these neuromodulation implant companies, I can show NeuroPace and epilepsy and say more and more epilepsy labs are using it more and more patient stories out there. So the science is changing, Konstantine is right. But the applications are changing, the success stories are changing. And yet still he is absolutely right, the investment community is 20 years ago. And for the life of me, I don’t quite understand it.

Marcus Gerhardt:
And I also don’t think we’re going to move forward if that learning doesn’t slowly or more rapidly permeate into the investment community.

Frank Fischer:
Well, certainly as a thought focus is, there are separate issues for it. And one was, if investors take a look at the commercialization, how long it takes really to commercialize in the neural space. It’s a difficult comparison to other medical device stories. And so that’s part of it. Nevro commercialized the product that you need. But the market was known to have existed for… I’m trying to think of it as one of the first implantable spinal cord stimulator. Actually it was implanted, I think it was order of magnitude, somewhere in the early 1980s.

Frank Fischer:
So, you had 30 years of history of building a business and being able to talk to an investor about why your product might be better or is better and there’s a large established market. And therefore, you should invest in me because I’m going to have the opportunity here, where a lot of the other things are established, to really make an impact and make it in a quick period of time. That’s one area, if you’re trying to do something that’s brand new, I think you inspire because the reception for those in recent news.

Frank Fischer:
If you’re trying to get into a new space and you don’t have that commercial comparison or history, if you will, that somebody else is broke, it becomes that much more difficult. I’ll also say that, another thing that’s happening in 20 years or 30 years, there’s been dramatic change in the whole venture community. Believe it or not, probably five years ago, the venture community was collegiate. I mean, basically they looked to co-invest in opportunities. Today it’s predatory. Basically, it’s you either invest in this round or we’re wiping you off in terms of your prior investment.

Frank Fischer:
So what happens is, there used to be people that were seed level investors, that had the belief that they were not going to get wiped out if they couldn’t continue to invest as the company progressed. Today, that’s not the case, right? Basically everybody has to say, “If I’m going to do an initial investment, I have to be prepared and be able to continue to invest in my pro-rata, during the life of this [bottle 00:36:08] so that, makes the environment that much more challenging than it was previously. So, you combine all of those things and that’s a marker to why it is as difficult as it is, to get an investor in this space.

Konstantinos Alataris:
I have a question for Frank. In pharma, there is all these different elaborate deal structures. Basically there’s business development, why it has never happened in the reality, right? Not low follow investments side, VCs. Why have we never seen real business development deals on the device side?

Frank Fischer:
I think it’s because, there’s so much money that is generated in pharma, that they literally… When they invest in buying the very, very early stage company where there’s some evidence that something might work, they are almost playing the venture game. And for a pharma company, if they have a successful approved product that’s covered by intellectual property, they can make a huge return. When they own a company successfully, like a venture firm, then one out of every 10 candidates and maybe one out of all these five candidates that progressed to where they’re starting to phase tree and they could fall.

Frank Fischer:
Because, they also had evidence along the way as to which ones are not likely to work and which ones they can drop. So, I think it is simple, the probably large amount of money that pharma has available to it, for that application, is contrasted to the medical device space.

Matt Angle:
What do we think happens when medical devices. And bioelectronics start invading those markets? I mean, already, we see it with Vorso. We see people looking at how neurostim can be used to address auto immune disease. We see it in NeuroPace, that model of detecting electrical signatures for neuro psychiatric or mental health. And then triggering neuromodulation, that’s a really broad model should scare a lot of pharmaceutical companies. What do we think it will take before the money starts moving around?

Frank Fischer:
I think it’s going to be, one, one or more entities actually. And now on the pharma side, actually recognizing that and investing in the device company. Showing that that combination can work and be attractive and be meaningful to them and say it’s going to take to the establishment of the pattern. Because, that pattern goes into just the [00:38:31]. I’ll share with you that, oh, I don’t know, order of magnitude four or five years ago. We were having a conversation with a pharma company, about leading the line of investment. And this, to me was just amazing. This is one of a few companies that was still interested in developing drugs for epilepsy.

Frank Fischer:
Because, that’s common goal in terms of being in vogue or out of vogue and in this period, only a handful of properties that actually were moving forward with drug candidates for epilepsy. And one of the things that we had shown were, by going through the data we had accumulated. Was that, for a patient that has an implant and the changes made by the physician, in the medication that patient was taking, we could show in a matter of two weeks, whether or not that medication was likely to work for that patient. And when yo think about, what was the other feedback mechanism for a pharma company? Epilepsy patients are seen every three to six months.

Frank Fischer:
Physician changes the medication, patient comes back three or six months later. And asks the patient how they are doing and has asked the patient previously to cheat the manual seizure log, which frankly, patients are unopposed and they have a door. And that was their feedback mechanism. And I’d say to them, “If you’re developing a drug, I can tell you, in phase two, whether or not this drug is worth it or not.” You don’t have to wait until you have spent a billion dollars getting to the end of phase three, to open that envelope and figure out if this sucker works or not. They didn’t give you this one.

Frank Fischer:
It was almost like you’re speaking a foreign language, because it was so far out of the model that they had been used to. Still amazes me to this day, that these are the rules.

Konstantinos Alataris:
I actually have a different take on that in the sense, I don’t disagree, but there is something that makes me hopeful. In the sense that now that we’re moving to potentially addressing other invitations, whether it’s you name it, either neurodegenerative diseases or autoimmune diseases. We need to go closer to pharma. What I mean by that, they’re not going to ever embrace a device in that sense, but the data set can go closer to the dataset they are expecting, because that’s always the sticking point. And right now in all these new indications, more complex diseases, the clinical comparison, the clinical path is being dictated by the pharma side of the FDA.

Konstantinos Alataris:
As it should, because there’re no devices in some of those cases. And the more, we developed that data set, that’s the same data set that you’ve may be created to go to MAR, if that’s the autoimmune disease you want to target or other equivalent diseases. I think when you do the same regroup clinical development, then it will be a ground up wave from the physicians. And you need to have something to show the benefit, everything has pros and cons, right? You need to show how your equation, the pros and cons equation is better than a drug.

Konstantinos Alataris:
Not to mention reimbursement and all these issues that are not insurmountable, but they are huge. So that, will get them to start thinking.

Frank Fischer:
Well, the only thing that can form in a sense, around this line, is actually, I’ll say a synergistic flag that’s slightly different than the typical synergistic device that is thought of. And with drugs, we had all the varies. Epilepsy is such a complex series of diseases. We can have a circumstance where a patient has different onset zones and that a pharmaceutical can actually control one of those onset zones and stimulation will work for the second one. Nobody ever thought that, that could be possible. In fact, we didn’t think it could be possible until we discovered it.

Frank Fischer:
In epilepsy, one of the stages that people go through when patients can’t be controlled with medication is they go to, what’s known as phase II monitoring. Where, hood strips and depths are placed in or on the brain and nowadays there’s something called serum EEG, which does a similar thing to the popular hoods. You’re trying to find out where the epilepsy is starting for a given patient. Typically, a patient is in the monitoring unit for perhaps seven days to 10 days. And a decision is made based on which side of the brain are we seeing lots of activity originate and trying to make a decision based on that.

Frank Fischer:
So, we were in a typical trail, we had 82 patients that had gone through phase II monitoring. And there was a decision either that this patient would be an excellent candidate to have epilepsy surgery so, let’s say a temporal lobe removed. Or the opposite decision was made because there was onset activity from two sides of the brain and you couldn’t take both temporal lobes out, to use that example. What we found in each one of those 82 cases, the patient said, “I don’t want this type of surgery. I’m going to try this new device, to see whether or not this can work for me.”

Frank Fischer:
So, over time after the patient was implanted, recovered back on the medication, living their normal life, 20% of the decisions that were made in phase II monitoring as to whether or not it was unilateral onset or bilateral onset, were wrong once the patient was done. So think about that; without choosing to have the device implanted, either one of them, in 13 of those cases, a left temporal lobe remove that would not have fixed the patient’s condition for example and vice versa.

Frank Fischer:
Where there were in fact patients that later on, you find out with years worth of data, Hey, there’s a non-dominant lobe here that can be removed without a problem and the other side can be controlled without a simulation. That little combination of stuff is yet to be explored and that’s just in our field. Imagine after the start of us through the curious in the entire field.

Marcus Gerhardt:
Maybe just to add to that and provide a little bit hope. And I think the train analogy is now being used a couple of times, so I’ll just carry on with that. Like Konstantine said earlier, that train won’t necessarily hit the station. Our belief is and my personal belief is that there is nonetheless, an unstoppable momentum towards implantable devices. And while the pharma industry is phenomenally strong, I think we’ve just got to also understand that the medical device sector at large, is a slow one. It’s a traditional one, it doesn’t move overnight.

Marcus Gerhardt:
And while Matt, you and I are thinking BCI and how we can do not 100 channels, because that was 2006 when we did that, let’s do a thousand channels, right? And we were going to come out with this 1,000 channel device this year and then lo and behold with a 10,000 channel device next year. No, no, no, you’re already doing 100,000 channels. And then somebody’s going to come up and say, “Hey, I can do a million channels”, right? This is important in our space and I don’t want to in any way, denigrate that at all. But at a clinical level, we’re looking at devices with two and four channels.

Marcus Gerhardt:
And Frank, your device is living example of that. And so I have actually had many conversations with my team about…

Marcus Gerhardt:
And so I have actually had many conversations with my team about the perceived arrogance that we can sometimes take on in our innovation field of saying, “Hey, it’s about thousands and 10 thousands of channels, that it’s about a device that’s no longer this big, but in fact, miniaturized.” I mean, we’ve taken our data acquisition system from a rack mounted device, down to a head stage that weighs less than a gram. And while I’m really happy about that, and I think our team can be proud of it, we’ve got to recognize what speed the medical device, clinical device world moves at, but I am seeing them change.

Marcus Gerhardt:
They are approaching it from a slightly different perspective. So while our big vision is still to make people walk again, talk again, see again, and hear again, and we’re going to have to devise some really good devices and you’re going to have to have success and Elon is going to have to have success, and I hope we’ll have success and all of us together to even achieve half of that. And that’s a great driver to have. What’s motivating the medical device players? Well it’s costs, it’s manufacturability. I mean, these guys are currently going from a cardio heavy field, to more and more interest in the neuro field because it’s dwarfing that space, right? Today’s neurological disorders in the U.S healthcare system already outweighs the cardio space by four to one today. And we haven’t even seen the full…

Matt Angle:
I partially agree with you, but also for some of the conditions that we’re talking about for first step locations of BCI, these are really unmet needs situations. And for those kinds of devices, I don’t think you’re very cost sensitive. I mean, CMS is reimbursing the Argus 2 retinal implant at $145,000. There’s not a lot of optionality there. Yeah, it’s true, if you’re making a pacemaker, everyone makes a pacemaker now and it’s kind of a race to the bottom, but if you’re making a brain-computer interface, that’s going to allow someone to communicate that’s locked in, or is going to allow someone to control their wheelchair, I don’t know that we’re going to be as squished.

Marcus Gerhardt:
No, and you’re right about that, Matt. I’m just saying that there’s these two angles, right? And I’m starting to appreciate both of them, which is one, you’ve got your medical device company. It’s worrying about manufacturability about cogs, but it’s driving in this direction as well to Constantine’s point. I think there will be partnerships. There will be this drive towards saying, “How can I get my device into these markets? How can I generate more data across the board?” I mean, the medical device world is in the stone ages by all comparisons. When I pay somebody across the globe, $5 for a beer we had in Korea, right, that is faster and technologically more advanced than me finding out what my blood pressure is. I mean, what the heck? But, I’m seeing these guys starting to come out and realize that, you know what? The devices that were being deployed in the neuro space today is really just a follow on from the cardio space.

Marcus Gerhardt:
I mean, it’s tubing, and let’s put wires down the tubing. That’s the state of that field. They’re not going to be able to customize that, they will have fixed costs that are quite high. They will not be able to produce at volume. They need new solutions, and I think you will see integrated electronics, microfabrication. These kinds of things become more appealing to those guys, and they have the volume. Now, switch sides to these high-end high impact applications. And I made this point, I think, at the technology leaders conference just at the beginning of the week. And I know it’s a cheap shot, right? But an M1 tank costs $4 million. $4 million for one tank, okay? And your interface, let’s take it at the high price point of $250,000 if you’re going to implant a paradromics device with a surgery, with everything else or the Blackrock Microsystems, Utah array, with a wired device and whatever.

Marcus Gerhardt:
Okay? And we’re going to charge it out right now, because Matt, you and I don’t want to be poor folk forever, while Medtronic CEOs get to earn the beautiful stakes that they earn for taking absolutely no risk while you and I take all the risks. So let’s say we want to earn a bit of money, and we’re going to price it out at $250,000. We can get 20 paralyzed individuals to go home today and tell their carer to leave them the hell alone for two to four hours, because they’ll be fine playing computer games, or interacting with an XL program, or doing whatever they’d like to do for two to four hours using this neural interface.

Matt Angle:
I completely agree with you. And I also think when you start reframing it in that practical application oriented way, you also start to come up with a number that’s a lot less than three billion. You don’t need $3 billion to deliver those outcomes to patients. If you want to merge artificial intelligence to the human brain so that you can download yourself and live forever, I don’t know that might be a billion dollar price tag. But if you want to help wounded veterans live better lives, if you want to help people who can’t communicate, use the computer and play StarCraft, that’s a much lower price tag.

Marcus Gerhardt:
You’re absolutely right. Today, the device that we have, it’s wired. It’s not wireless at this stage. A BCI pioneer, a tetraplegic patient can take home on Tuesday and a great presentation by Jen Collinger from Pittsburgh, and Nathan Copeland, tetraplegic patient following a car accident in very young years, and they’re doing the whole thing from his home. And he’s describing how he’s doing his research at home. He doesn’t have to travel to Pittsburgh and the research lab anymore. He can do it at home. Why? Because, he’s got the Utah array. It’s, yes, wired and it’s connected to a portable device. And I tell you what, one of our engineers put it together, designed it over the course of 18 months, and it will not boggle your mind, Matt, you will not be impressed by the look of it. It’s not a piece of art and it most certainly would not intrigue any of the researchers in our direct environment, but you know what? It works.

Marcus Gerhardt:
And it has allowed Nathan to stay at home, and not vegetate by not being able to do anything else, but be taken care of. He is in the study, he is active. When he’s free, not doing that work, he can play games and he interacts through his neural interface with that game. So I completely agree with you. Even today, technology is that a state where it can be taken home, where it can improve patients’ lives, where it can contribute to the independence of these patients. So the price tag of $3 billion, I think I just want to relativize. It’s more… 10 years ago, if you want to go all the way to a fully implantable, doing everything, and I think when you add up neuro pace, when you add them all together, you’ll see that this space has invested that amount to get to fully implantable chronic devices. But along the way, we can take very meaningful steps with imperfect product and it will have a huge impact on the patient population.

Frank Fischer:
Matt or Marcus, have either of you guys talked to potential payers that would, in fact, reimburse for a system that gets somebody that is a paraplegic.

Marcus Gerhardt:
That’s a really good question. And what I’ve done is I’ve tried to calculate backwards, right? What’s the cheapest we could provide this imperfect product to a paralyzed patient? And we came up with sort of 25,000 to $50,000, if you include the surgery, maybe you’re at $75,000. That’s already a different price tag, by the way, from the $250,000, I just used as a marker. And I said, “Who would be willing to do that?” And I’ve done the calculation on the cost of healthcare. And I get quite close. I don’t quite get there, I can’t quite justify it at this stage.

Marcus Gerhardt:
I think once I can prove that Nathan can get back into the workforce, that Ian Burkhart, for example, he wants to be a CPA. Once I can show that we could integrate him with an XL program, and he can now be a CPA more efficiently than even I can, as an able-bodied individual, he’s no longer at a disadvantage, but maybe even at an advantage. Once I can show that, I can make the economic case that the cost savings on his health care and him being able to join the workforce again is a positive one. And we should be putting that money on the table. But at this stage, I can already convince the non-for-profit space that 50 to $70,000 to have a major impact on an individual. A Bill Gates Foundation, for example, is a meaningful investment because how much money is put into all sorts of weird and wacky investments that may or may not have an impact in four, or five, and six years, when I can show that this individual will have a positive impact.

Matt Angle:
I was going to say another point is that you said payers, but for a lot of the first patients that will receive a brain implant, we’re really talking about CMS. They’ve been out of work for quite some time. I don’t know if you’re familiar with the breakthrough device program at the FDA, but there was recently an announcement that breakthrough devices will have reimbursement from CMS when they come out of the gate. There’s a kind of concurrent approval there. And that makes a really big difference for someone like Marcus or I. Already, we see Neuralink and Synchron have breakthrough device status with the FDA. And so it’s very clear that the first-generation of brain implants will have some help because that’s obviously one of the biggest hurdles for med device companies, is getting coding, getting reimbursement for those first years. And I think we have help there.

Frank Fischer:
That’s absolutely huge. And in the breakthrough device program, could be helpful with that. If you haven’t, I would suggest that you actually set up meetings with CMS now, just to do two things. One is to talk to them about your concept, and kind of begin to get them familiar with what it is that you’re trying to do, and you don’t go and ask for anything, you’re just talking about the technology. We did this at Metrofax 15 years ago, and essentially, they loved it because everybody that comes in wants something. So for them to spend an hour and have somebody talk about things potentially exciting for them, they loved them. We develop relationships that they… Paved the way well into the future. So I would encourage you to do that because the other part of it is, it’s one thing to get somebody the device that you’re talked about before. Second side, in terms of that, the reembursal amount, that wasn’t a big amount of money, it’s 125,000 bucks.

Frank Fischer:
So it sounds like you can start to get into the range of numbers that might be appropriate here, but I would really encourage both of you to do that as a first step. The second thing that’s going to help you is if you have subsequent kinds of dialogue with them to be able to talk about with a higher degree of certainty, that you’d be able to get this reimbursable, it’s going to help a hell of a lot relative to raising money. So, that’s the second piece of advice.

Marcus Gerhardt:
But the good thing is to see that there’s so many other efforts on the vision side, and also on the auditory side happening with these neural interfaces that I think, over the next five years, we’ll see a flourish of activity, and that will be positive. And I appreciate that one thing going wrong hurts Matt’s efforts, and my efforts to try and get the message out there. But you can’t have all successes, and right now I’m just seeing a lot more.

Matt Angle:
Like cyber kinetics, they broke a lot of ground for people to come after them. So it’s unsuccessful for them and their investors, but for the field and for the momentum going forward, they did a lot and Bob Greenberg especially should be commended.

Marcus Gerhardt:
Absolutely. And Bob Greenberg at the Alfred Mann Foundation, we’re working with now trying to pull them into kind of other vision approaches because there’s just so many out there. And some of them have huge technical challenges, still some of them, and he’s the one who’s been building a neural interface over… Whatever, the course of nearly a decade. But you know, Frank, when we deliver a hundred channel or a thousand channel epilepsy… Implantable epilepsy device, I’m going to shout your name from the rooftops. And I’m going to say all of it was only possible because of Frank. The reason why we could push NeuroPace out of the market is only because of Frank. Matt’s going to do the same to me, Matt’s going to sit there and say, “Hey guys, Paradromics was only able to move Blackrock out of the market, and completely jump over the Utah array, because these guys had broken the ground before us.”

Frank Fischer:
So, what else I’ll say to you… Now, I don’t want to dissuade you from after the epilepsy application, but I will say it’s clear that there are certain disease states that really need to understand what single neurons are doing and be able to respond. And there’s other disease states. If anything, you know what we’re proving? That epilepsy is a network.

Marcus Gerhardt:
And Frank, Blackrock isn’t intending to become the next epilepsy company, don’t worry. But here’s something that goes to the heart of, I think how ventures are created, at the core of it, again, back to your point, Frank it’s people, right? It’s people and what motivates them. And so we’ve been exposed to epilepsy because of the research market. We provide these tools. This is how we set up Blackrock Microsystems to provide tools to the research market, generate revenue, be profitable, stand on our own two feet, while we then proceed, at our own pace, with BCI and with other areas and other interesting NeuroTech developments. Well, being exposed to that epilepsy market, and very often we refer to it as epilepsy as piggyback, right? Epilepsy is being used to research other things, which I always felt was quite negative. And it’s four years ago, now, I am in Europe, in an epilepsy lab, together with one of our lead support people, visiting a customer, we walk in to a young patient, a young woman’s room, and she’s got this enormous turban on her head, right?

Marcus Gerhardt:
And I turn, in my ignorance, to the epileptologist and say, “Oh, wow, is that the new a hundred channel device that we’ve built?” And he’s like, “No, no, no, no, no, this is 64 channels.” And I turned to my support person because back in Utah, we had just put a three gram head stage doing 256 channels on a rat. And I said, “Hang on. We are treating a rat better than we are treating a human being? This 21 year old woman has a turban on her head…” She’s gone through four years of trying every medication under the sun. She’s already lived through hell on earth. And now we’re asking her to sit in the hospital, wear a turban, every time she wants to go to the loo, she’s going to go disconnect from a hundred cables… It just…

Marcus Gerhardt:
I turned to my colleague and I said, “Even if the Natus’s of this world, the big epilepsy companies, don’t make this their business, we’re going to make it ours. We’re going to make it ours not because there’s a big business at the core of this, but we’re going to make it our business to improve this patient’s life. We’re going to change the form factor of that turban. We’re going to try and get rid of that thing, and lower the form factor, increase the channel count.” And that’s effectively the starting point where Blackrock gets into clinical translation, and taking some of this great neurotechnology in our platform, and applying it to clinical applications today. From electrodes, to various other components.

Marcus Gerhardt:
But it’s all about the patient, and being driven by that, not necessarily a market size. And I understand how complex and difficult epilepsy is. So there’s no aim to be the epilepsy company of the future, but there is an aim to put technology out there to the benefit of the patient, because already today, there is enough technology that could change, fundamentally, the state of healthcare, the state of diagnosis, and the state of therapy if we push some of this technology into that space. I’ve spent a lot of time in the last two, three years reminding our engineers that we’ve got to also realize how that’s done. We can’t just sit on our high horse, developing the newest of the new, we’ve got to figure out how we translate it, and transfer it to the clinician, and to the patient.

Matt Angle:
I want to try to bring Konstantinos back in here. I hope he hasn’t fallen asleep on us.

Konstantinos Alataris:
No, no. I’m actually following that, because, listen, both what you’re doing. I mean, I don’t know any experimentalists that hasn’t used the Utah array, or hasn’t been able to learn, and advance the field forward. And what you’re doing is… Both of you are extremely innovative. To me, at the end, it’s how do you get there, right? What’s the interim step? And maybe you need the pig with a funny name. Is there any way to kind of reframe the discussion, and bring people that are new coming to this field and create visibility, allow that visibility to expand to other efforts. So it’s not about a single company, new running, but there is a person that comes through in a different area and creates all that visibility, can we spread that over the other efforts and highlight if you have more, not an antagonistic, but more synagonistic.

Konstantinos Alataris:
Now they’re all advancing this field. That might reframe and be the best for all of these companies in the field, to me. And at some point, we got to get away from people funding businesses that are… Basically all they provide is like a hims and hers. How can I find a business that provides me a prescription for hair loss at three times the cost, and I miss my primary care physician visit, which is the best thing you can do for prevention. I mean, this is crazy. And if you have innovative things that actually help people with real problems, so there must be a way to bring people that understand the potential, and highlight all the approaches. With their own pros and cons, and everything has its own advantages, and probably will find its own niche, and new running might be slightly different than you tolerate, for certain… I cannot think of it right now, but I’m just saying that there has to be different areas that each one of them might be a little bit more suited.

Marcus Gerhardt:
I think, Konstantin, you’re absolutely right. I’m sometimes reminded of Kennedy’s words about academia, and why did he avoid academia? And he said, “Well, there’s way too much politics.” And the question was why? And he said, “Well, because there’s so little at stake.” And I felt a little bit that the neuroscience research market is a little bit like that, that there’s not enough at stake. And then there’s this immense competition of just unbelievable genius minds. And I’m the least smart of them all. So trust me, I have nothing scientific to contribute at the end of the day. No insight whatsoever. They are brilliant, they are smart, but it started becoming sort of a competitive scene.

Marcus Gerhardt:
But look at… The times are changing. NeuroTech overall. And the allure and fascination of NeuroTech is rapidly rising. And someone like Elon Musk just contributes to that. I always say rising tides will benefit us all. Look, we have a podcast here, we’re, arguably, two competitors. I mean, at the end of the day, Matt and I could be argued to be direct competitors. He is setting out to replace the Utah array with a much better and much higher channel count device. I’m trying to replace Frank and Europace, and the epilepsy space. Konstantin, we’ll have to figure out… I think you’re the winner in it all because you’ve got your space that’s actually making money, and lots of it.

Matt Angle:
Something that I think will be interesting for some of the entrepreneurs that are starting out right now and trying to do something in neuro. There are people investing in neuro, and there are people investing in medical devices, especially Frank and Konstantinos, so I’d be curious to hear… You both have backing from Silicon Valley investment firms. Did you find that there was some mismatch of expectations between your investors rooted in Silicon Valley, move fast, break things, and then the reality of building a class three device, and building a medical device, and doing this kind of work? Was there any investor education that you had to do, or just simply getting the investments, not the end of the story. You also then have to work with those people. I’d be curious to know what your experience has been.

Frank Fischer:
Well, when I think of this relative to Europace, as indicated earlier, Clyner Perkins did the seed investment, and they actually had a group that invested in the healthcare space, and so these folks were knowledgeable, Joe Lakoff, who now has moved from Clyner Perkins Medical Device, to being one of the owners of the Golden State Warriors, building an incredible business. Has a masters in public health has been interested in the field, spent 20 years at Hunter Perkins investing in early medical device companies, so he was very, very knowledgeable. And Brook Byers was also very, very knowledgeable. So their expectations relative to time, were much more realistic, as compared to what you would think of as the classic Silicon Valley high tech investor, that’s just looking for…

Frank Fischer:
The question that they ask is, “Okay, you say you need this much money for the… To do this, how much faster can you go if I give you more money?” And as soon as somebody answers that question, they go, “They don’t have a clue as to what it takes to get a medical device through development, and all the regulatory hurdles that you go through or whatever else.” So, in our case, even though several of the companies that invested in us, I would say… Probably over time, a half a dozen at least that had Silicon Valley roots to some degree, also were medical device investors. And so, we didn’t really end up having that big economy between expectations from a technology standpoint, and the medical device front. I don’t believe that to be the case today. I think today you’ve seen a lot more separation of inter firms in terms of specializing in technology, versus specializing in, let’s say, the medical device area. So it’s more difficult from that perspective.

Matt Angle:
Konstantinos, You’ve had two runs now, what has your experience been?

Frank Fischer:
No, with Nevro, it was all medical device investors. We didn’t have that many groups as Frank and NeuroPace, but those were typical strong, from J and J that came late, obviously, to know about to NEA, three arch basically capped out. So these were all knowledgeable medical device investors with other… With a significant device practice. Nobody came by and said, “How much faster can you go if I give you three times the money?” We would have taken the money, by the way. But now, I think it’s interesting that I do see a new investor groups from the tech coming closer and closer to the healthcare and device, and to come to devices, you have to go buy diagnostics.

Frank Fischer:
You have to go by internet pharmacy. So it takes a while for the water to come all the way to devices, but it is encouraging that it is coming. And I see the new breed of investors could, frankly, from the medical device, the people that I knew when I started Nevro and not when I started, but when I started Nevro, most of these people are not… If I think of my investors, three out of five that are not in business anymore. Then new investors that come more from the tech side.

Marcus Gerhardt:
Matt, maybe if I could ask you a question following on from what Konstantin just said, are you noticing that maybe there’s better acceptance, or starting to be an easier acceptance of the kind of innovation that we do because we’re starting to talk similar language and we talk about similar concepts?

Marcus Gerhardt:
We’re starting to talk similar language and we talk about similar concepts. I mean, data being one. Sure. We’re device people, we’re creating these implantable devices, but at the end of the day, what are those devices doing? They are generating data and that’s what pharma understands. That’s what the tech investors Konstantinos just mentioned, understand. That’s what they’ve been investing over the course of the last five to ten years. Anybody who’s done Facebook, anybody who’s done…that’s what’s at the heart of it. Are we getting a little bit more positive resonance from them because some of the concepts are now starting to overlap or what are you seeing or is that just not happening yet?

Matt Angle:
I would say that we’re having meetings with investors now, that never would have talked to us four years ago. The effect of Elon coming into the space, I think also Bryan Johnson at Kernel, this is normalized neurotechnology in the minds of many tech groups that do hardware, not necessarily medical device hardware. I think that you have this interesting mixing going on, where you have these kinds of crossover investors that are starting to look at neurotechnology, but at the same time, you have a retreat it’s sort of entrenchment in their old conservative ways of traditional med tech investors.

Frank Fischer:
First off we estimated this was probably four to five years ago, that if you went back to the year 2000 and you looked at the venture funds that either were solely medical device, or had a significant component of their practice in medical devices, we estimated that 80% of them were gone. They either had shifted over, basically to technology, if they continued at all, it was much more that thrust. To go directly, Matt, to the question you raised, I think what’s happened because of what’s happened because of Neurolink and Kernel with Bryan Johnson and others, you get people that are now listening where they wouldn’t have listened before, but they’re still trying to understand what does it translate to.

Frank Fischer:
I think that’s the key for us is to not only be able to talk about the type of data that is being generated, but it’s a whole lot different than gathering data so you can target advertising and things of that nature. It’s really a translation into what will this mean from a business perspective. That’s what I think is potentially very exciting. And frankly, at NeuroPace, we’re learning more every day and then translating that we now think of ourselves not as a device company, but as a disease management company because the value of the data being generated in terms of what it gives to the physician to optimize care, or certainly better the care for the patient is night and day.

Konstantinos Alataris:
I was intrigued recently, I listened to Brian [Johnson] at the neurotech leaders forum. And he, within one sentence, connected what he was doing now in neuroscience and appreciate that’s right now non-invasive, but you know, he also clarified that who knows that may become invasive one day again. But when we started talking four years ago, that was his starting point, looking at invasive. But what I found most intriguing actually in what he said was in one sentence, he connected what he did before, which was a payment system, which was Venmo, a payment system and what he was doing now. And he was connecting the two through that concept of data and through the concept of breaking down barriers and making things sort of more transparent and simple to use. And if I think of today’s healthcare system, I mean, just with what we’ve experienced in the last nine months, what frustrates the devil out of me is this lack of transparency, is this complicated way of doing things and trying to get our heads around managing a pandemic.

Konstantinos Alataris:
And I’m thinking really humankind hasn’t really moved on from even 80 years ago, actually 80 years ago, we respected the value of a good vaccine. But to me, I was intrigued by the fact that he connected the two in one sentence. And that bodes well, Matt, I think for our efforts as well, because it means that there’s a whole sector of investors out there that yeah, sure, they don’t quite know what it means for them, but they’re starting to see a common language. And I think that’s been sort of a common thread of this podcast, even that these languages are so different from pharma to med device, to the VC, to the VC fund is on a five-year term, how long it’s going to take you to build your device from start to finish. And how does that fit with a five-year term of a VC fund that needs to return.

Frank Fischer:
But Marcus, most venture funds are not five years, they’re ten and they normally, it’s not unusual for them to extend them, but it is unusual for it to get beyond twelve years or thirteen years. And so I’m sure your point is exactly the same…

Konstantinos Alataris:
The five years was arbitrary.

Matt Angle:
From my standpoint, I think that medical device companies, because of medical device funding have made smaller, more incremental bets. And as a result, the payoffs have been smaller. But I think some of the opportunities that we’re talking about, I think that if you’re looking for a comparison, you have to look outside of medical devices. I think you have to look at other transformative platform technologies that that can address really wide markets. I think like a Moderna is a good example. I know that’s very topical now, but there are structural differences between a therapeutics company and a medical device company. But in terms of scope of opportunity, I think you have to compare the NeuroPace thesis or brain computer interfaces to something much larger than a company that makes stents or even a company that makes a me-too pacemaker.

Marcus Gerhardt:
Let me just follow on with that and ask Konstantinos. Konstantinos, you’re in a space, and I thought you were very complimentary about our endeavors in the innovation field, so thank you, but you’re in a space where you can run a company with a $5, $6 billion market cap. Let’s say you now close out your next venture and it’s super successful. When you think about the next thing you’re going to do, is that next thing in that field, because creating another billion dollar company is just a little easier, or would you be open about doing something in a completely innovative field and taking on board all that much more risk? Sure, The pay off may be a $6 or $7 billion company, but how would you kind of approach that, given that you’ve got experience now in a sector that is more established and that has a realistic path to a market becoming a $five billion market cap company?

Konstantinos Alataris:
You’re talking about someone that has a successful experience with one of those companies that actually was able to…

Matt Angle:
I think Marcus is trying to hire you

Marcus Gerhardt:
No, I would’ve pulled out the pigs if I wanted to do that.

Konstantinos Alataris:
I’m not kidding, you need a pig with a funny name. You need to reframe the proposition. You need to talk the big picture. Talking payers and going the usual route is not going to get there. But if you have people that actually see the long-term vision, then you can start changing the system because the system is built against you right now. Right? For all of us, it was just in some cases, I think Frank mentioned it with Nevro. We had an existing market, we had codes at the end we were able to improve those codes, but that was there. The flip of the coin is that whenever we were fundraising, or at least me at the beginning, before the IPO was, everybody will say, yeah, but you’re going up against Medtronics and Jude and Boston scientific. So you can say all you want. This is an existing market positive. The other side is well, these guys have a bigger megaphone. So their marketing is so much better than yours and nobody’s going to be able to open the door to a new therapy.

Konstantinos Alataris:
So you can look at it either way. That’s why to me, in order to change the system, you need to find support from people that are willing to help and fund that. So if there is an opportunity and I don’t know the person, someone like Elon Musk and Neurolink and all that, my hope would be that this kind of reflects on the whole area as far as the potential. And we’ll start talking in terms people can understand and the long potential.

Konstantinos Alataris:
A little bit more direct to your question is not so much an operational person, what do we do? I don’t play golf so I have to find something else that’s exciting. And the one thing you get is the opportunity to do the stuff that excites you. And I do have that opportunity. The more key question is what happens with funding? We’re going back to that, right? What are people funding right now? And if you look at the funds that remain and how everybody is being pushed towards the late stage, it’s a lot more funding resources for low capital equipment endeavors like online pharmacies. There is funding for late stage efforts that need additional mezzanine funding. But as it was 15 years ago, it’s still fairly difficult to raise early stage funding. Some of it is because there’s no continuity in the funds that will be able to support those businesses.

Frank Fischer:
Let me share a story that I hope you guys find interesting. Over the years I developed many close relationships with physicians. One I’m thinking about in particular contacted me about three or four weeks ago. And he had written an op-ed piece for the New York Times. And he asked me to read it and tell him what I thought before he would submit it. He’s a neurosurgeon and what he was doing was a very complimentary piece about Elon Musk and his investment. His whole thrust was to essentially chide existing medical device companies for not doing something similar and saying, you should do this. You have every reason in the world to do this. You have the resources to do this. You’ll have the eventual benefit to do this. You should do this. And so, I read the article and having served on a number of public company boards, it was obvious to me that his article was not going to have any effect on any one of those companies. And the reason being that they are public companies, they’re measured by quarter to quarter basis in terms of their performance versus expectations and it’s a short-term horizon.

Frank Fischer:
And they’re not going to make, as Elon Musk has taken 150 million bucks at this stage, out of his pocket, to put into Neurolink because he has it. To him, that’s what the cost of that plant factor in that. What I was telling my friend was this is exactly the kind of thing that a company, a public company, is not going to fund. But it is exactly the kind of thing that rather than this incredible scattering of research scholars that our federal government spends, that we should really, the focus should be trying to get them to understand that this is the kind of thing that as a nation, we should be invested in. Not I’m going to give a gazillion grant opportunities to everybody under the sun and have very little, frankly, karma. Unfortunately, he was supposed to rewrite the article and send me a draft, but I haven’t heard anything. So I’m not sure.

Matt Angle:
Your message is sent now. It’s delivered to the internet. And I just wanted to ask one question to kind of end things on a positive and forward thinking note. The three of you have a really kind of privileged perch looking out forward at what’s going to happen in neurotechnology. What do you think is going to happen in the five to ten year timescale that people listening to this podcast might not realize is already underway. Paint us a picture of what we can expect.

Marcus Gerhardt:
I’ve always said that people vastly overestimate what they can achieve in a year and vastly underestimate what can be achieved over five or ten years. I am potentially a hopeless optimist here, but I see actually a very bright future for us all. And I see that manifested in several different areas. For starters, I think the medical device world that is a bit more conservative, needs to change. It needs to feed a healthcare system. And despite the fact that there’s public companies there and they have to behave in a certain manner, I completely agree with you Frank, but where are those dollars coming from? And at some stage or other it’s the healthcare system that pays for it. And I think we are going to be forced into it, whether we want it or not, a rethink of the healthcare system and how we spend dollars and where. That in and of itself will lead to a change and a drive towards more implantable solutions, more medical devices teamed up with pharma, with bioceuticals, with electriceuticals and all the others to just improve it. So I see a development there, maybe not as fast as I would like to see it, but it will happen.

Marcus Gerhardt:
I also feel that on the innovation side, we are going to see more and more of the examples of inspire, things that just leap frog, because the funding is there and they find the right application and the product just makes a lot of, the technology makes a lot of sense and answers the need. With one inspire, we will see another 3, 4, five like that. And I just hope Matt, that one of those is in our field and that it’s you, or that it’s us, or that it’s someone else. And I’ll happily take you along the ride. And finally, I hope, and I do believe that we will see patients and in our field specifically, Matt, of heavily disabled patients of people who are paralyzed to people who suffer from ALS and are locked in where we’re now seeing the onesies and twosies. I mean, we’re now on patient number 27 that has had a fundamental change, not just in their life, but in what they were able to do of moving a prosthetic arm, of moving their own arm, of being locked in and now communicating, they are not locked in anymore. You cannot define them as locked in anymore. That barrier has been broken by these phenomenal pioneers and what follows pioneers is just a bigger wave.

Marcus Gerhardt:
And so in five to ten years, I don’t know whether it’s hundreds or thousands, but I am convinced there will be a large patient population who will be able to do things. Who will have greater independence than they have today. And I think it will be at a level that blows our mind ten years in the past, our minds of today. And I’ll look back on this podcast and I’ll just hope that I was wrong because it’s even further ahead than that.

Matt Angle:
Frank, what do you think? Where do you see?

Frank Fischer:
I think in a five year time horizon, I see a more modest improvement during that period of time. But what I do see is implantable devices, for example, similar to the NeuroPace device used in other applications. We’re currently part of two studies. One of which that’s been funded by NIH, one of which has been funded by an independent organization to look at depression and also addictive behavior.

Matt Angle:
It looked like obesity. I thought I saw overeating as one of the…

Frank Fischer:
It is obesity in terms of the very first attempt, but it’s really essentially what it might mean for addictive behaviors in general. Not only the first experimentation is taking place in the obesity arena. The work that’s been done thus far on animals that kind of led to getting to this point, is compelling. So it’s just really interesting to think about what might happen there. What might happen in the psychiatric areas that with the ability to have electrodes in the brain and determine for certain disease states, what’s the baseline.

Frank Fischer:
If you think about basically bipolar disease or something like this, where you can just think that there’s variations that are taking place, the ability to measure, the ability to deliver adaptive simulation to counteract what it is that you’re seeing, why can’t you get back to a normalcy, and why can’t we do these things? And I think we can, again, I think that it’s kind of a more modest in terms of what it would take on the technical development perspective and also what it would take from a clinical perspective. All of those things take time and five years goes by very, very quickly in applications like that.

Matt Angle:
Konstantinos, what’s your five-year prognosis?

Konstantinos Alataris:
One thing’s for sure, We’ll be five years older. Things change, it can only change for as much as we can push. I think you need a couple more products to the market with success so we can advance the discussion. The fact that you even see technology companies started getting into disease prevention, that to me is an interesting first step because after prevention, diagnostic prevention, you go to actually therapeutic prevention stopping the disease from developing.

Konstantinos Alataris:
To me, that’s kind of, if we can actually have an impact there, it’s not going to be the end. It’s going to start making inroads into that area to start preventing and slowing down decay. Then I think everybody will recognize the potential here. So as long as we see enough potential for people show, demonstrated with data, the potential that is there, then we’ll get the opportunity to keep going at it. And then we’ll talk about the next ten years.

Frank Fischer:
I’d also like to add what our children commented. I also see in the next five years, and that is much, much more effective means of gathering and analyzing data for mobile improvement of patient care. And I think that is very real and very realistic in terms of being able to be accomplished. In fact, if anything that should be before that earlier part of that five-year period, because that’s a matter of stuff that’s available to us now and putting it together.

Marcus Gerhardt:
Just to add to that and echo it has also, Frank, a company that a good friend of mine co-founded a couple of years ago, just been rebranded, I think, is Huma and started as Medopad. The idea was let’s take the iPad, let’s bring it into the hospital environment and make everything and old data much more accessible, has turned into one of the most exciting healthcare companies. And I know they’ve just rebranded and I am really looking forward to that level of efficiency in the hospital set up.

Marcus Gerhardt:
And what’s great to see is it’s not just a tech company from Silicon valley. That’s trying to change how we behave, but it’s the more conservative elements in the economy taking it up and saying, we need this, we need this kind of change. We need this easier flow of data and better patient care. I would echo what Frank just said. And I think with that confluence, you get a little bit of what Konstantinos said earlier. The messages start becoming a bit more similar across the board. Maybe we’ve got to do a better job. I think there was a clear call there, Matt, to you and I, that we’ve got to change our messaging and improve it.

Matt Angle:
I heard a pig. I heard a named pig.

Marcus Gerhardt:
Listened while we were talking, I went on Amazon and I ordered one. It’s a flying one, it’s a flying one Matt.

Matt Angle:
I actually push back on that a little bit. I don’t think that we have to double down on crazy to push BCI to the public. What are we looking at? The first applications of BCI will be sensory deficits like blindness deafness, motor deficits, like paralysis. I mean, literally these are biblical things. Thousands of years, people have been waiting for the day that the blind will see, the deaf will hear, the lame will walk. And now we’re technologically in arm’s reach of that. And people are bullshitting about living forever and augmenting their cognition. I don’t find that crazy shit as interesting. I don’t find pigs running around as interesting as I do fulfilling these kind of generational challenges.

Marcus Gerhardt:
That’s right, Matt. But what our challenge is to create the bridge and clarify to the listener that what you and I are talking about has an unstoppable momentum about it. Because I talked to investors left, right, and center. I talked to families and you know, everybody’s intrigued by me saying, we’re going to make people walk. We’re going to make people see, hear, and talk again. Okay, that has an, at first, great impression, but then enters the suspension of disbelief and how we’re going to achieve that.

Marcus Gerhardt:
When I have someone listening in whose daughter has epilepsy and who at the age of then whatever 25, 26 is faced with a choice of no children, or finally putting an implant, an RNS NeuroPace device into her brain, it takes a year to convince her mother to do this, but then does it. And today has two children and lives a very fulfilled life. That onlooker and listener he’s on board. I mean, he practically sent the funds that day, but I am not able to convey, at least I am not, maybe you are, Matt, to convey that message of the unstoppable momentum of being able to restore function to people with your device, or our device…

Matt Angle:
To be totally honest, when I’m telling people about that, I’m showing clips of BrainGate, I’m showing your device.

Marcus Gerhardt:
That’s the part we’ve got to get better at. So maybe we’ve got to pull in Konstantinos and we’ve got to pull in Frank because they’ve done it. They’ve done it.

Konstantinos Alataris:
The point there is listen, I have no interest in gimmicks. I’m with you. I have no tolerance for that. The point was not to put lipstick on the pig. The point is, how do you use that publicity to help the real efforts, the ones that deserve it and all about that, the pig only shoes that it’s alive. You take the fear and use it as a bridge to get you to the next level of efficacy of a product. So in that sense, right, it has to be something real. Gimmicks last only for five seconds, don’t get you to a product?

Matt Angle:
I think that’s part of what the community can do. And I mean, that’s why I’m glad that we’re here talking today. And I think a lot of people are going to be interested to hear this conversation. So thank you very much for joining me.

Marcus Gerhardt:
Matt, thank you very much for organizing.

Frank Fischer:
This was a lot of fun. This was terrific.

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