Dr. Tom Duerig founder of NDC, Nitinol Development Corporation (alternative name, Nitinol Devices and Components), spoke on the topic of entrepreneurship, at www.bio2devicegroup.org event. Duerig said, while there isn’t a given recipe for entrepreneurial success, there are certainly ways that one can fail and knowing that can help one avoid these common modes of failure.
Duerig began by giving the history of how he found NDC and it begins with the story of the metal, nitinol. While he worked at Raychem, he realized the enormous potential of this metal. He formed NDC in 1991, with no patents, no IP, no business plan, no space to work, no products and a tiny sum of $420K raised from individual investors comprising of friends and family. “What we had was vision”, said Duerig.
So what is nitinol? Nitinol is a metal alloy of nickel and titanium. Nitinol exhibits the unique properties of shape memory and superelasticity, along with twinning. What is extraordinary about nitinol is that its super elasticity effect is within a very narrow temperature range; the temperature inside a human body. That makes it ideally suited for medical devices, particularly devices implanted inside the body. Nitinol is ideally suited for stents and guidewires. Its super elastic nature enables it to not cause trauma and force vessels out. It is biocompatible and gives exceptional displacement controlled fatigue resistance performance.
1. Entrepreneurship is akin to navigating through a maze of pitfalls and yet if you don’t buy a ticket, you don’t win, said Duerig. So number one reason for failure is when you have an idea but you don’t take a chance. At NDC, they had one idea and found one easy product to launch in eye glasses. That was a wrong product and they were in a wrong business with ultra thin margins. But they had bought their ticket.
2. It is easy to run out of cash, said Duerig. Keep the burn rate low and be proud of it. It is not important to have a fancy facility, when the cash is fast depleting. Raise more money than you need and then honor cash as if it were your life savings, said Duerig.
3. Next it is important to change and being ready to pivot. However, when you want to ride a big wave, you need to be 100% committed. And yet, when you see indications that things don’t seem to go as planned, then it is important to get out fast and catch the next big wave, observed Duerig. For NDC, a right wave arrived in 1993, and that was the wave they caught; making medical stents.
Even when you catch a good wave, you can’t ride it for too long. Engineers often love their ideas and don’t know when to quit, said Duerig. Often there are indications that no matter how committed you are are to your idea, it might not work and it is better to quit. For instance, when an entrepreneur can’t raise independent money, then it is probably not a viable idea. At NDC, they were however trapped by their cap table; they had given away too much equity for eye glass business. So they needed to sort out those details.
4. It is important to not have a divisive cap table. A divisive cap table leads to lack of unity in governance, and divided governance leads to failure. Duerig’s advice to the entrepreneurs is that simpler a cap table is, easier it is. Learn and know everything about liquidation preferences and hire a good attorney, said Duerig.
5. Consider a small win, to be a good win, said Duerig. He warned against excessive greed. Durieg advised entrepreneurs to share success, know their limitations, and celebrate the wins that come their way. When J&J came knocking, NDC accepted the deal and became part of J&J. Initially, it was hard being a part of a behemoth. But J&J came to treasure the diversity of thought and considered it a highly successful acquisition.
Durieg helped launch many stents and other medical products, while at J&J. But a few years later, another wave arrived: another window opened, and Durieg led successful negotiation effort with J&J, for NDC spinout. NDC now operates as a highly successful, privately held company, with 500 employees, with healthy balance sheet and high profitability. Durieg remains the CTO, but has recently stepped down as CEO, so we have to watch for the next big wave he will catch.
6. The last point may seem like a no-brainer, but it is perhaps Durieg’s most pertinent advice to entrepreneurs. He said, luck plays a part and it is possible that luck may not be on your side. How can an entrepreneur prepare for such an eventuality? “Don’t give up your day job”, said Duerig.