Chairman of the Board, VIDA FLaSH Acquisitions, Medtech SPAC
Scott Huennekens is one of the inspirations for this Medtech Pioneers blog. When I heard he and Vince Burgess were planning an IPO of Acutus Medical in the midst of the pandemic, I knew I wanted to amplify leadership voices, like Scott’s, which have been driving disruptive progress despite huge hurdles. Scott has an amazing career which spans affiliations with over 20 medtech and biotech company boards, of which 6 have gone public (Digirad, Volcano, EndoChoice, Envista, Acutus and Hyperfine) and 10 have had significant exits over $300 million.
Recently he gave the keynote at LSI’s Emerging Medtech Summit in May 2021 and provided an inspiring narrative of his journey from childhood in Riverside in the LA area to Harvard and on to building successful medtech companies. Scott Pantel, Life Science Intelligence CEO, noted, “Scott Huennekens delivered an amazing keynote address. He has an incredible personal story and has built so many successful companies. But it was his vision for the future of medtech that really left our audience of investors and innovators alike inspired and fired up to think big and continue building.”
Where did ‘Go, Go, Go’ come from? [To those who know Scott, this has become his personal mantra].
It came about when email started. ‘Best regards’ didn’t feel like me; I wanted something different. ‘Go, go, go’ – it is the mantra of me. I want to lean in and take advantage of life and opportunities. You know the saying “How do you predict the Future? Create it.” ‘Go, go, go’ sets a mentality for the teams I was working with at the time. I have had to explain that over the years as a CEO to different companies. It doesn’t mean fire, aim and go. It means quality and speed, follow the scientific method and plan with a goal. It means do, check and adjust; but have a bias for action. At Verb Surgical, our “B” in V-E-R-B stood for ‘bold’ – we wanted people to take action and make decisions while following the scientific method. And we wanted to reward decision-making. When you are competing against big corporations, your competitive advantage is time. ‘Go, go, go’ is associated with that time advantage, making the most of it, and maintaining a sense of urgency. I joke the objective is to get the car from one point to the next point; you use the guard rails, don’t go off the road, but get there as fast as possible and the lines on the road are a mere suggestion. It is a mentality – I like being around people who are curious, energized, and those who want to accomplish and do new things.
This mantra of ‘Go, Go, Go,’ do you see it as a call to action for innovating new technologies and bringing them to the market? You are creating a whole new environment for surgeons.
In my experience, I see the momentum across a series of phases. At Volcano, we began in phase 1.0 as a startup; then moved into phase 2.0 at a growth and commercialization stage; then phase 3.0 as a public company; and on to our polycephalic 4.0 phase – multi-headed, multiple divisions with tremendous growth. At Amazon Jeff Bezos talks about everyday being Day 1; you never want to be complacent Day 2. By creating phases, I was trying to always keep it Day 1 and drive ownership and accountability for the current team of that phase to deliver our goals for that phase.
At Verb Surgical, we were speaking to J&J who wanted to build a new robot. Well the robot had already been done so we needed to advance the innovation. One of my favorite books is the 22 Immutable Laws of Marketing by Al Ries and Jack Trout, which says if you can’t be first in a category, create a new category. Intuitive Surgical is robotic surgery. So again, you look at the phases: phase 1.0 is open surgery, phase 2.0 is minimally invasive surgery, phase 3.0 is robotic surgery and that takes you to digital surgery or phase 4.0. We created this new category and coined the term ‘Digital Surgery’ at Verb in 2014-15. In this new category, you have robots, instrumentation, visualization, and navigation. It has to have connectivity amongst the tools, to the supplier to execute AI and to the physician to connect the pre-operative to the peri-operative and post-operative information that feeds into training and you get a virtuous cycle. I think every phase creates huge opportunities for disruption and you need to look for those, be curious about them, take advantage of them.
I am excited about today; I feel it is the most exciting time ever in life sciences. Take IPOs, I am doing SPACS (Special Purpose Acquisition Corporations). People ask me why and it is because it is a new way to finance, execute IPOs and fuel innovation. It is particularly exciting to do SPACS now because we are at the exciting medtech 3.0 phase. Phase 1.0 is the medical device alone, e.g. an unconnected or dumb catheter. Phase 2.0 brings more sophisticated devices which are being developed such as pacemakers and advanced imaging. These devices have the advantage of Moore’s Law, semi-conductors and processing. Phase 3.0 involves not just the product; the product is now part of a whole solution. It is the robot with the instruments, navigation, imaging and an AI platform; all of this is the solution and it provides a bigger set of possibilities, such as increased access to patients, democratized performance of physicians, lower costs, etc. That’s what is on my mind. How do we create this whole digital transformation that revolutionizes healthcare e.g. genomics, vaccines, etc.
Take a look at diabetes and the advent of miniaturization, microelectronics and connectivity. With the Dexcom sensor and a Tandem Diabetes pump – now you can have a connected device that goes into your mobile phone which provides critical information to parents of children with diabetes. The physician and parent can monitor the child. AI helps optimize glucose levels. Whole different solutions are becoming possible. This was accentuated when I was on the Google campus in 2014-15 and saw what Google X was doing. I always loved the Astro Teller graph with technology trending up at exponential growth and human’s and government’s ability to adapt to technology trending slightly above flat, which creates this gap. We need to make devices or tools to bend the human’s ability to adopt and leverage technology. The innovation curve is driving upward because technology is delivering 10x and 100x improvements now in a short 10-year window e.g. sensors, computing power, 5G, genomic information – it’s insane.
‘Go, Go, Go’ started before the internet. Where did it truly start? Your Volcano days?
Okay, let’s go back to my early days. On my first driver’s license at 16, I was 5’5’’, 105 lbs with red hair. You better be able to run fast, otherwise you are going to get beat up where I grew up. There was ‘go, go, go’ from the beginning. It was in my DNA; I grew up in a bad area of Riverside, California with a single parent, not a lot of money and no one in my family had gone to college. I wanted to go to college, get out of there and escape. When I was 15-16 years old, I remember my mom gave me a poster with a saying “In the race to be better or best, don’t miss the joy of being.” Clearly, she had a concern for me then at a very early age. I feel lucky that I have that in me, a setpoint of wanting to try and do – maybe too much at times. I try to balance it all. I may try to do too much at times, but I would rather do that than the alternative.
Tell us about your career and how it got jumpstarted.
I went to undergrad at University of Southern California and got a business degree with an emphasis in accounting and then went to work for a big 8 accounting firm for 3 years. I never wanted to be an accountant; I wanted to get a job and have those skills. From the time I was 12 years old, I had a picture of Baker Library at Harvard Business School in my bathroom and I wanted to create businesses. I wanted to lead. I loved sports and teams. Coming out of Harvard Business School, I went to work at a small medical device company, Bircher Medical Systems. It was the very early days of laparoscopic surgery. Two weeks after graduating, I was at a Grand Hyatt showing surgeons how to take a gall bladder out of a pig. I fell in love with innovation and medical devices and the potential possibilities. Like teamwork in sports, in medical devices the teams are made up of amazing engineers, unbelievable physicians and marketing people coalescing together to catalyze innovation. I love all of that.
How did you get involved in startups?
After Edwards, I joined my first startup, Digirad, which had a focus on nuclear medicine. We went through challenging times and had to restart the company with a different technology platform. We went on to grow it to become a public company. I think what you learn through these experiences is the ability to adapt and change. You have to, because a big percentage of startups end up doing something different versus what they originally started out accomplishing. All of these experiences contributed to capabilities that led me to create Volcano, an early stage startup, and build it to $500M+ in revenues and a market cap of nearly $2B. Now as a part of Phillips, it is doing nearly $1B in revenues and is growing in low double digits. When translated into patients, that is nearly 1M people whose healthcare we are impacting every year. Today, it is likely that 15M people have been impacted and helped by Volcano products.
Tell us about your Volcano experience.
Vince (Burgess) and I were building Volcano; I give Vince a lot of the credit. It was a big roll-around IVUS system with friction to use. I compare it to the Gordon Gecko big brick of a cell phone that did one thing. You then look at our Apple iphone of today, it has all of these apps and connectivity and it became a platform. Back then the trigger was Microsoft Office. We wanted to be like Microsoft Office; we wanted to be the platform which is at the center of a cath lab with all the apps which would work on it. Boston Scientific may have had a better rotational catheter. Lotus 1-2-3 may be better than Excel but the product is no longer a spreadsheet; the product is Microsoft Office. You need Internet Explorer, Word and Excel. That propelled us to do an open source, integrated platform; it became a land grab and we captured 70% of the installs. I think there are now 10,000 Volcano systems installed in cath labs around the world. Then you look at coronaries, peripherals and neuro applications and Volcano just exploded.
Tell us about Verb Surgical and the development of a next gen robot.
We met with J&J and told them that we don’t think we should do a next gen robot. I thought we should create digital surgery and create a whole new category – a platform with all of these apps that makes it difficult for Intuitive which doesn’t have wound closure, minimally invasive surgery instruments, etc. At Verb we were creating a platform for surgery. There may be instances where you might want to or have to do some of the cases with open surgery and some with a robot open, or laparoscopically with a robot. We wanted a hybrid approach; we wanted to cover off everything. That was a whole new way of thinking beyond Medtech 2.0 where it was just about the device.
Medtech 3.0 it is about connecting all the different devices or how to extend the reach of the platform. At Acutus Medical, we have mapping, navigation and connectivity with our partnership with Biotronik. We have a full line of therapeutic catheters in development and in the market (CE Mark). So, you see, we are replicating what we did at Volcano. We are doing the same thing at Nuvasive (I sit on their board); our pulse navigation and imaging system is coming out. We have a robot in development and we have best in class guidance for minimally invasive spine surgery, implants, etc. We are making the product much bigger in terms of the total solution.
And now you are seeing many companies adopt that digital surgery platform approach. Again, this approach leads to improved patient outcomes, lower costs and better access. At Verb, our goal focused on access; there are 7.5 billion people on earth and only 2.5 billion have access to surgery. We wanted improved options for those 2.5 billion and more importantly, we wanted to provide access to surgery to the 5 billion without it. And, we wanted to democratize the delivery of that from a performance standpoint so that the performances are raised for all surgeons at varying skill levels – like what they are doing at Corindus, now Siemens.
What future medtech innovations are you excited about?
The ability to remotely execute procedures. I can add AI information that leads to things being done without an intervention by the surgeon or the surgeon is overseeing and overriding interventions as well. I see a future with OR connectivity, such as with Proximie, another company with which I am involved. With Proximie, a rep can be involved with a case remotely. An Acutus Medical mapper can be involved with a case remotely and draw borders or interface with the physicians. It is like that show where you can dial in to the experts; it allows access so mappers, reps and other physicians who can join in remotely to support the OR physician. I don’t know what the killer apps are going to be yet.
One thing I learned at Google, is to create a culture to try a lot of things to see what works and kill the ones that don’t. They do search very, very well and they built many strong apps around it e.g. gmail, google maps, youtube, google photos, etc., but there were many apps that never took off. Other companies, they are afraid to make mistakes and they are afraid to kill things off. At Google the culture celebrates testing and trying things and if something doesn’t work out, the teams are moved on to other projects. That learning is valuable.
What has been your biggest challenge in recent times? Doesn’t sound like it was the pandemic.
Six and half years ago, post Volcano, I was trying to decide if I wanted to invest and join boards or be a CEO again. I joined the board of a great company called Sonendo, they have a super cool ultrasound technology for root canals. I can see them going public in a year or two. After serving on the board for awhile, I realized that I wasn’t ready to be a coach, I still wanted to be in the game. I didn’t want to keep score, didn’t want to invest, didn’t want to be a trainer. I wanted to be a player. So I went back and launched Verb Surgical.
Post Verb, I was ready for that next step. I have to remind myself given my ‘go, go, go’ mentality that I am now the coach; I help Vince, the CEO of Acutus – I am not the CEO. All organizations I have run or been involved with, I draw the organization chart as an upside-down pyramid with patients and physicans at the top. I am at the bottom. I work for the physician who works for the patient. That is the mentality we wanted to have. It creates the right perspective I wanted to have; I work for you; we want humble, servant, thoughtful leadership in the organization. So whether I am working with Amir Aghdaei, CEO of Envista or Chris Barry, CEO at Nuvasive, I work for them. I am not the CEO; there are some things I might do differently; I give them my opinions and my best advice and they need to run with it. That has been a little bit of an adjustment for me. I tend to want to dive in and be more of the solution.
My biggest problem right now is saying ‘no.’ I am a people pleaser and I like to help people and companies. I can get overextended. It isn’t fair to my wife, kids and friends. I am trying to put those boundaries in place – although I am not always successful.
Is there a technology opportunity that you have your eye on?
There is a wonderful ecosystem that exists – people that work in basic science, those that work in translational medicine and advance the innovation and there are what I call amplifiers and lastly optimizers. In that middle phase is where I tend to gravitate. I can see patterns, such as how to put technologies together and prepare companies for the growth stage. I like creating those new categories. Once the category has been created and the curve has started to flatten, optimization becomes key and that is where I am less interested. I want to go find the next growth area.
So, for me I look in the middle phase for things that can have the biggest opportunity. I am somewhat indifferent on the space, I just want to have the biggest clinical impact. I seek opportunities where the highest number of people can benefit; that means that it is a big, targeted addressable market which will attract financing and strategic interest. With strategic interest and investment, you can attract the best management and the opportunities snowball. What does happen is that these opportunities coalesce around key growth areas, such as minimally invasive surgery, whether it is neuro, cardiovascular, peripheral or the whole area of electraceuticals e.g. neuromodulation for pain, epilepsy or sleep.
As you develop these next gen platforms, how do you know when it is ready?
One of the best researcher-scholars was Clay Christenson, who recently passed away. He wrote The Innovator’s Dilemma, which said new technologies come to the market and they are good enough. They don’t meet all the needs or have all the bells and whistles but over time they grow up. With other over-engineered technologies, they get pushed into boxes. As long at the technology meets the innovator’s dilemma and are scalable and have optionality into the future states, then that is terrific. Balloon angioplasty had issues, so then there were experimental stents which led to drug-eluting stents with led to precision-guided drug-eluting stents. Net, now you have the right person getting diagnosed with the right delivery mechanisms and understanding the right placement, confirmations and 98% success rates across all providers. It has been democratized. Bypass surgery used to be $45K/per procedure. Now angioplasty has improved and is lower in cost. And because of vascular stenting, it has advanced the technology into structural heart applications.
What disease state is ripe for innovation?
The brain. It is where the heart was at the beginning of my career. Back when I started my career at Edwards there was one market that was over $1B in revenues in cardiovascular; that was heart bypass surgery – not valves. Now there are probably 15 such markets in the heart that are each over $1B in revenues – EP, implantables, neuro, peripheral, structural heart, monitoring, imaging – you name it. The brain is where we are going to have tremendous clinical advances whether it is pharmaceutical, electraceutical, interventional, monitoring, sensing o imaging. A lot of things I am doing are converging around the brain – monitoring, imaging, interventions, etc.
Looking at the brain, where is innovation heading?
I look at analogues from the pre-operative funnel of diagnoses through the continuum of care, as you follow the patient journey. In cardiovascular, you have family history, stress test data, cholesterol levels, episode data, holter wearable information, apple watch monitoring, interventional stenting or angioplasty, and post-intervention patient monitoring. If you look at the evolution of the cardiovascular patient journey and contrast it to the brain, do we really have any non-invasive brain monitoring? Is there a wearable to monitor cerebral blood flow or intracranial pressure? No, there are none.
In the future, we will have non-invasive monitoring of the brain or stroke evaluation. For example, Hyperfine has portable MRI and others are developing ultrasound wearables which will help develop brain vital signs. These devices will be in every ambulance, ER and ICU. In bypass surgeries, they would love to have brain vitals. Then you will get better diagnoses, which will lead to guidance of better intervention. We will understand the brain better. It is in-process; Neuropace went public recently. It took them awhile, but they were in this space early on. We will optimize technologies and build minimally-invasive interventions, hybrid drug-device therapies in neuro. In many areas of cardiology, the innovations have plateaued. All of us who have been in cardio are now building neuro intervention companies.
You are a strong supporter of SPACS – why and why now?
We spoke earlier of that Astro Teller curve, well you need capital to bend the curve e.g. seed stage, venture capital and public equity capital. Historically there have been two ways to access public equity capital: 1) direct listing or 2) conventional 1933 IPO. Roughly 99% of IPOs are conventional 1933. Now SPACs have been around while, but they have really evolved in the past couple of years to be high quality alternatives for companies. I think this is a good thing to help drive next gen innovation, you need access to capital. These SPACS are billion-dollar opportunities. Late stage growth capital is limited so you need to go public. I think there is a real opportunity for operator-led SPACS. Frank Litvack, my partner, and I have raised risk capital and created a private entity. This entity goes public and raises a commitment of capital that is put in a trust. Let’s call it $200M, for example. The company is now public and goes and looks at these very exciting companies we have been speaking of; these companies each need $150-250M to drive their commercialization or clinical work. We select a company to invest in and merge. We may raise additional capital to total $300M and now that company is valued at $1B and Frank and I join the company’s board.
I also look at SPACS as the ‘uberization’ or ‘netJetting’ of private equity. Before Frank and I would have had to go raise a private equity fund or public hedge fund. That is a 10-year partnership commitment. There is a lot of friction to that versus a SPAC where I make it a fractional ownership. I do one-off equity firms by executing SPACS. I can do as many as I want over time and have shorter windows. It creates more opportunities for operators, like myself and others. Bob Palmisano, Omar Israk, former Chairman and CEO of Medtronic, and Lux Capital have SPACS. These are talented and very experienced people; these are people that have the ‘go, go, go’. I see the SPAC trend as very attractive and productive. In fact, Frank Litvack and I created a SPAC firm called VIDA FLaSH and we want to flash forward technologies.
More about Scott Huennekens, Chairman of the Board, VIDA FLaSH Acquisitions, Medtech SPAC
Scott Huennekens is a successful Medtech CEO, Chairman, board member, entrepreneur, and investor, having been involved in one of those roles in 20+ startup, growth and public companies with market valuations that have totaled over $20b and more importantly over 20 million patients that have benefited from the therapies and diagnostics of these companies. Current professional affiliations include Executive Chairman Hyperfine, Chairman Acutus Medical (NASDAQ: AFIB) IPO August 2020, Chairman Envista (NYSE: NVST) IPO September 2019, Board Member Nuvasive (NASDAQ: NUVA), Executive Chairman Digma Medical, Executive Chairman & Investor Wondr Medical, Chairman of the Board & Investor Kardion, Board member Q’apel Medical, CEO & Board Advisor & Investor Proximie, Board Observor & Investor 270 Surgical, Board Member & past Chairman Medical Device Manufacturer’s Association (MDMA), and advisor to Peloton Equity, 8VC and Accelmed Equity.
He completed his role as Pres & CEO of Verb Surgical in early 2019. Verb was Google & J&J’s Surgical Robotics and Digital Surgery platform start-up to revolutionize the future of surgery which J&J acquired in 2019. Scott joined as employee #1. Previously, Scott led Volcano Corp. (NASDAQ: VOLC), a leader in minimally invasive therapy guidance in interventional cardiology, as its first & only Pres & CEO, from start-up in 2002 to its IPO in 2006 and sale to Philips in 2015. Volcano 2014 revenue was > $400 million and its market capitalization peaked at nearly $2B. Prior to this, he was at Digirad Corp, a diagnostic imaging solutions provider, from 1997 to 2002, as President & CEO. Digirad went public in 2004 (NASDAQ: DRAD).
He graduated Magna Cum Laude with a BS in Bus Admin from the Univ. of Southern California in 1986 and earned his MBA from the Harvard Business School in 1991. Past affiliations include 12 other public and or VC funded medtech and biotech company boards of which 8 have had exits over $300 million, including Chairman of Endochoice (NYSE GI), Chairman Sonendo, board member Vicarious Surgical, board/CEO advisor Digital Surgery/Touch Surgery. Scott has also been awarded E&Y’s entrepreneur of the year award in 2010 & was recognized by Goldman Sachs in 2016, 2017, & 2018 as one of the 100 most intriguing entrepreneurs at its annual Builders & Innovators conference.