Maximizing Capital – Accelerating Success with Fractional Expertise | LSI USA '25

Dan Sands  0:00  
Dan, okay. Hi everybody. Dan sands, Managing Director of factor seven medical. Thanks for joining today. Look forward to having this an engaging conversation around maximizing capital, leveraging fractional resources in your organization. So to start off, I'm going to get a little background about myself and kind of the why for the topic, introduce the panel and get into some Q and questions about this topic, and leave time for question and answer at the end. So show of hands. What's the makeup? How many early stage companies or founders in the room? Okay, how many investors?

Heath Naquin  0:53  
Investors are like, I don't know. I'm not gonna put my name. 

Dan Sands  0:56  
Any strategics in the room.

Heath Naquin  1:00  
All right, who are the rest of you guys? I'm just wondering, yeah, there you go. There you go,

Dan Sands  1:06  
Yeah. So, just a little bit about myself. I've been in med tech 34 years. I've started and led seven different companies early in my career, it was for established companies that I was involved in, starting up divisions that grew quickly, one to 20 million in eight years. I started another division that went to 15 million in three years. So I'm like, wow, this is a piece of cake. I got the startup stuff down. I started a solo venture in 2006 and ran that for 10 years, and really found out that it's not that easy, raising capital, finding the right resources at the right time, to scale, being capital efficient, all of that, so to hold that old journey. And then in 2016 started consulting and taking some fractional CEO positions. And again. You know, learning from past come on up, and we have a guest we have a guest speaker too. So through that journey, just understanding what it takes as a fractional and getting resources to get engaged in an iris venture early stage, and getting the right people, is part of the essence of why we started factor seven medical it started with seven of us. We got really creative in the naming. We wanted to be a factor in company success. Now over 300 consultants across the country that high expertise of all people that we know and trust and have worked with throughout our career, which is a differentiator when you know it's a trust environment and it's high risk of making sure you have the right people involved in the early stage company. So that's the essence of factor seven. And we we provide consulting services across the full life cycle, early stage, all the way up to companies that are 100 million in revenue. So about this topic, you know, maximizing capital being really efficient. And it really comes from the underlying concept of investors. Invest in people they, you know, it's just, I've had, over the years, several investors say I would rather invest in a C technology with an A team, rather than a C team and an a technology. And so that underlying principles has led us here today, and we'll talk more about that before we get into like the three main categories around de mystifying, fractional, the good, the bad, the ugly of it. And what does that mean from a investor perspective and really being capital efficient? So that's kind of the layout. We'll get into some questions, and leave time for Q and A. So with that, thank you for the guests on the panel here. And Christine, since you're like coming in here, we'll let you go first. Introduce yourself here and we'll get into some questions. 

Christine Horton  4:08  
Yeah, so sorry about that. Christine Horton, CEO of icera technology, so I won't delay anymore. I'll just leave it at that and introduce myself along the way. 

John Brumfield  4:22  
Jon Brumfield, CEO Berlin heels, 20 years Medtech and five months in this role. So I'm happy to share how I used some fractional leadership in growing my early team, 

Heath Naquin  4:37  
Heath Naquin, Vice President of Government, capital engagement at the Science Center in Philadelphia. Probably a different probably a different role. I don't have a C in my title, so that there's that, but we do a number of programs and activities focused on helping companies in their early stages of capital formation in what like growth and positioning for investment, and operate a number of different investment vehicles ourselves. So sort of. Have both sides of that, and we can talk more about that as we get into it. 

George Makhoul  5:06  
Good, very good. George Makhoul, CEO of Dillon technologies, I've been in the healthcare space for almost 25 years, and had a good balance of large companies like Genzyme and Stryker, and I've been on the smaller med tech side for the last six years.

Dan Sands  5:18  
Awesome. So let's get into some questions. So answer whoever feels comfortable, just answer away. So why fractional versus traditional hiring? And can you have the best of both worlds? That's kind of the first part of it. And, and at what stages do you consider bringing on a friend? 

Heath Naquin  5:38  
I can do a filler question for the audience real much, sure, yeah. So for the late comers, we had a little question. Who here's with the founding team, the startup team. Don't be shy. Okay, cool. In your pitch deck, do you have a bunch of people on there that show all your amazing expertise, and your board of advisors that are not really advisor, the kind of advisors and sort of attached, right? Okay, so, I mean, this stuff happens, right? But you scratch a little bit, and that's where this question really comes up. So now that I've bought the panel time Christine,

Christine Horton  6:14  
so we use both, and we have used both all along, full time FTEs and fractional um, and we, honestly, our fractional folks have been with us, and they are on my slides and I and they're on my org chart as part of my team. They when we have our executive executive leadership meetings, they are part of my executive leadership meetings when we have our summer fun days and we go boating on Lake Minnetonka and Minneapolis, because that's where we're based. They are included in that, and they are like truly, part of our team. We have added more fractional people as we have gone along, and we have added more FTEs as we've gone along, and that really is based off of, you know, a couple of criteria, which is sales people are not fractional people. So that decision is really an easy one for us. As far as, are they FTEs, or are they fractional? Do I need a full time? CFO. I don't, I done a lot of financing, know, a lot of that, but so a fractional CFO makes sense. Same thing on the regulatory side. We've got our clearance. We're 510, K we've done a couple letters to file. So that's been an easy decision for us as well. So it's been a, it's been a easy decision for us, on on that, you know, for visera, but we balanced it pretty well. And on the finance side, it's really helped us quite a bit too, and our investors have liked it. So that would be, you know, it's an easy answer for us.

George Makhoul  7:59  
Oh, yeah, I think it depends too. Is you're a CEO, you go in your organization, and you're going in there with a certain set of expertise that you're very comfortable with. And I think you go in there and you look at, what, what do you have on your team, and what are the dynamics? Because you may not need fractional help immediately, but if you come in and you have to make personnel changes, or if you have departures, then you start to look at, okay, what's your level of replacing that talent? How good are you through that interview process? Because you can only work with the if you use retained surgery referral network for so far. But then you have to figure out what are your needs going to be. And then that's where you can start to assess, Okay, should we bring in somebody full time? Should we bring in a consultant? And I think there's just different ways to package that, and it's it's helped us a lot, especially on the R D side in our organization, where, when I came into it, there had been some turnover in R D, probably three cycles of teams, and there were a lot of changes made to our products. So we really needed some good expertise. We would come in there and stabilize what we had as a continuing, sustaining engineering project. So. And then that leads to the evolution of other things you may encounter, project management, full time leadership, potentially four different roles on the team having that's where you can start to have that good dialog of, okay, what makes sense for us. And then if you have a good partner, I happen to use factor seven for part of our fractional work, and they actually were so gracious enough to actually help us go through the search process as we were looking for our next R and E hire, which was like another set of eyes for things that maybe my expertise would not have been able to assess every little detail that they would ask certain questions. So there's a lot of different ways to use fractional help, and I think you have to be thinking about it from all

Dan Sands  9:39  
angles. Yeah, before we get to John, just in terms of that cost of attrition and having the wrong people and maybe at the not opportune time it happens. So can you put a measure on that? I mean, have you anecdotally, it's like in the eyes of investors, how big of an impact? Well,

George Makhoul  9:58  
Dan, you bring up a good point, right? So. So everybody here, how many people here are profitable right now, sir, I assume everyone here? Oh, okay, a low number, right? Yeah. So cash burn, right? You talk about some of the other panels. Is critical, and you think about all the things your investors care about, right? They're not sitting in the room with you thinking about, okay, hey, I gotta build this great culture, and we gotta have this good team. And they're not, they want you to do that right, and they're on board with it, but at the same time, it's you got to sell and get things moving. So what is going to be your hurdle for time? So if the fractional can speed that up for you, you need to take action on that if it's going to work out well for you, if it's a Few Dollars More here or there, as much as it might be a painful discussion for you with your investors or your board. If they're watching closely everything you spend your line items on, you're going to be able to message that back and how you're going to get speed to market. At the end of the day, they're going to forget about the 10 or 20 or $30,000 extra it might have cost for that same transaction, right? Because the end result at the end of the day is what they really want to see. So if you can prove that out. I mean, for us in particular, it saved us months of work, months and I think it probably would have translated to something else that's not tangible, which is longer term, because had we made a mistake up front, then the time to unwind that individual or individuals and the project and the work you just get so far behind it could it could set you back years, and think about it, in our world right there's an expiration on all of us as leaders of companies, so we have to make good decisions right away.

Dan Sands  11:29  
John, your perspective, 

John Brumfield  11:31  
Yeah, so I would say I've used this, this function, specifically in the finance side of my company. The company has been around for 10 years. I came in five months ago and looked at the organization and thought, you know, how do we make this more efficient? How do we escalate it? It's a European based company, but we need to focus on FDA. We need to focus on other countries. And so I was looking at a multinational expansion over the near term. And from a you know, controlling bookkeeping standpoint, we had somebody doing that, but it wasn't at the strategic level. And so if I want to think about, where do I want to set my headquarters up, and how do I do a funding round and look at debt versus equity? And, you know, that next strategic level, I thought about, do I just bring on a CFO as a kind of a consultant and just advise? But I found pretty quickly that I needed this kind of strategic thinking on a regular basis, so a day a week, maybe two, four hour days a week, kind of thing. So now I have a a fractional CFO that supports all my board presentations, supports my strategic planning, oversees our current controlling function, and they're doing the audits. So they're working on where's the accounting in different countries. But I am also bringing on a full time CFO. So through that work, we came up with the discussion that, no we actually need a full time CFO at this point, so he helped me with that decision making, and I also see it as it's a relationship that I plan on continuing even after I hire a CFO, because there's going to always need to be continued support. So it gives you that flex where, if my current CFO slam on a capital deal and we still need to work on closing the books in the year, I might need to bring on that fractional maybe back on a little bit more than before. So it's a really nice flex for us. Question

George Makhoul  13:28  
for you, just to follow up on that, did you feel like now having that fractional person has set your organization up? So now when you go to recruit and hire a full time CFO, you actually have something maybe you stood up for getting maybe a more, higher caliber individual to come take over. They have to build it up from

John Brumfield  13:44  
the ground up. I also put the fraction on my interview panel, yeah, so, so it was CFO to CFO got to, got to speak, and he got to ask them, you know, unscripted questions about So, where are we in the state of affairs? And, you know, how are you setting up this budget? I see you're changing your accounting company in Switzerland, but Germany is still this other one with they can have that conversation way better than I can. Yeah, right. So it was super helpful from a recruiting and evaluating side. Yeah, very good.

Heath Naquin  14:11  
So I was going to talk a little bit about slightly earlier stage companies for a minute. And so I think everybody knows this, but the cost of a bad hire is like, exponential, right? I mean, everybody knows this, yeah. You know, when you talk about, from an investor perspective, you as a one or two person founding team, and so often, like in our programming, we're helping companies in that one to $5 million raise. So it's a little in there. They're in their early gestational areas. You know, I know a guy, or have a friend or and the legal is not clear, and all that sort of stuff's happening. And that's back to that board of advisors thing I brought up earlier. So they get their first chunk of money, they start onboarding people they kind of know, and then next thing you know, they have to completely explode the company, because it's not right. Mm. It doesn't fit. Investors are asking questions. I've heard horror stories. The worst I've heard was it cost $4 million to get rid of an intern, one intern at the wrong time for a number of reasons, which I'll not get into here. I will only do it over drinks. But you want to start quantifying the thing of a bad hire and not bringing the right talent at the right time, that's a bad thing. And you talk about it from an investment perspective, this, you know, just so we're clear, money's a little tight, right and, I mean, right now. And so talking about, how do you be super efficient and communicate that to the investment community as you're asking for money and having it with some authority that these aren't just people, a guy or people I know these are people that are integrated parts of my team in a castle, capital efficient manner. Now that, all right, we can have a conversation, right? And so just wanted to start put some scary numbers around things going sideways. So, yeah.

Dan Sands  15:57  
Well, you know, the reality is, if you're in the capital constrained situation, difficult raising capital to attract the right talent, to pull them away from other more stable employment options. I mean, there's, you know, I went through that dynamic because I wanted these people that really had the expertise to move the dial, but we're just at a stage in the company that you don't have the capital runway, the uncertainty of raising capital, development delays, etc, so you sit there, okay, do I compromise and bring in somebody that's less caliber, less money? So there's always that dynamic of the capital at play. So to that end, on more of the kind of the HR related compensation, and then the dynamics of introducing fractional to maybe some established team members that have been maybe legacy longer term. Have you dealt with any situations where, you know, hey, there I have to explain this away to not, you know, ruin the culture that you're trying to develop. But how do you augment and navigate through, you know, the compensation and just the cultural dynamics and attracting the right people to your organization? You want to touch on that one,

Christine Horton  17:15  
sure, well, I think it goes back to where I started, which is the part of my leadership team. So my fractional folks are all executive level people for the most part. So by having them part of the executive team, I establish expectations, right? That's on me, which means everybody on my team knows that they report to me, this is the expectation. I also think that I don't ever want to be the smartest person. I am not that smart, actually, quite frankly, like I'm not very smart. I know that, so I want smarter people with expertise in other areas to be standing shoulder to shoulder with me. I don't want to I don't want to know regulatory that much. I want to know enough to know if you're very good at your job, if you're going to get me through, if it's actually a letter to file, or we should be doing a 510, K I've been doing this 33 years, and I know if you know what you're talking about or not. I want to know that our quality system is going to get us through an audit or not. I know enough to know that, but I don't want to know what the quality system I don't want to know what the documents are. That's not my job. I'm the CEO. I need to raise the money. I need to make sure everybody, you know, everything, is moving that I talked to corporate counsel that the board is happy, investors are happy. So I need to know what the expertise are. And a lot of times that comes down to what you said in the culture, and that the fractional people are just part of that culture. They're part of the thread of what we're doing every single day. And so if there's, you know, something that's not jiving, then it's the same as if two FTEs are not jiving. It's the same expectation that you have that you need to work it out. You need to figure it out. You know, you don't. You're executives, that's what, that's how the performance should be, as far as compensation. Yeah, yeah. I'll let somebody else answer that

Dan Sands  19:23  
in terms of, like, retainer based project base, is it, you know, each, each situation different, I mean, from a competitive standpoint of alternative things that you could do is a direct subcontract to a firm, or, you know, retaining somebody on directly as a fractional versus hiring.

Christine Horton  19:44  
I will say this one after somebody's been with us for six months as a fractional person, they do get equity in the company. So if you have been with us for six months and you have performed, there is a small equity component that will come with you. Staying, and if you're not there after six months, and you're not a part of our organization, and you've either exited, or you're a long term person, because now you have a reason to, you know, be a part of what we're doing. And so that is a little bit different, I think, than what a lot of companies do, but I do consider you that much a part of the team, and I expect that much elevated performance out of people.

Heath Naquin  20:26  
Just to give a quick proxy on this. I mean, I sort of equate this, in some way, to legal right. You know, there's a difference between having a lawyer and working with a firm, right, especially when you're trying to look at things like the last panel is around IP, right? If you talk to a lawyer, they may be able to file stuff for you. But if you're at a firm, even though it may be slightly more expensive, they can usually have on their bench somewhere an expert that can actually help you with your claim, writing and doing it in a more efficient manner. So just talking about little bit about the Delta, if you will, between working with an individual as a consultant versus working with a firm. That's one area, and then two. Another thing to think about is, if things are going wrong, it's a lot easier to hot swap something out if you're working with a firm versus working with the guy you met at the bar over there, and they gotta get rid of him and whatever, right? So just want to point out a couple of those, those things, and

George Makhoul  21:33  
let's go, we can talk more in detail offline about compensation, how you structure some of those things out. But if there's people in the room who are doing fractional work or looking for that, I think again, I'm sure some people think there's someone's gonna be short term and then end up being someone you need longer, right? And there's ways to structure, I think negotiations, to figure out what that looks like, for how it's going to impact your budget, right? I mean, it's their business also. So I think we have to think about what are the different pieces of the puzzle you're trying to put together, and then you start to budget that with, with what you're going to be spending for that bit. There's all kinds of ways to structure it. I think you have to also think you can be creative with that. It's not always fixed.

John Brumfield  22:12  
Yeah, I'll add real quick when I think of like a Hema project. So you need to do a market assessment to figure out what what the reimbursement landscape is and that's like a known project with a beginning and an end. That's a consultant, in my mind, but something that you need support structuring the next month, the next quarter, the next raise there's going to be raised right after that. Now you're looking at someone that's durable, that's going to stay with you for a while. And the question is, can you hire someone, and can you afford someone that has 20 years experience and worked with 15 different tech companies. My interim, our my fractional CFO. I call him interim, my fractional CFO. He sits down with the team and says, here's the spreadsheet I've used with these clients. Here's how we can adjust it. I've taken your spreadsheet and adjusted it, and when there's resistance from my team about, well, that's not how we've done it before. He He's used to this. He's used to coming into an environment where the company has a culture, and he can't come in and just change it all, but he can show them. Here's how I do it at five other firms that I work with, and why it works really well. And so that expertise and knowledge, yes, I only get them two days a week, but it it really brings I mean, I couldn't afford them five days a week, but I get that level of professionalism for what I need it for. Did

George Makhoul  23:24  
you bring up a great point? Right? Two things in there. One is the fractional is there for the reason of because it's the way you've always done it. We need something new and different, right? And also, sometimes your fractional person doesn't want to become an FTE. That's why they're doing fractional work. So things I think

Dan Sands  23:41  
about, yeah, just in terms of any situations that weren't so positive or good, what were kind of some any underlying elements, or what to look out for in evaluating somebody for a fractional role, it's all sunshine. So,

George Makhoul  24:02  
I mean, you know, we've had we've had some, we've had a handful, or it wasn't great. And again, there's things that you don't know, and sometimes the firm you're working with doesn't always 100% know what you feel great about the people they're bringing to you, because it's in their network, and it's people that they know, and it's people that they trust. But sometimes certain things happen with the individual that maybe it's been a longer time since they've worked with them directly, and you find out that they're just not really delivering what you need. I think if you've got a good firm who's helped you place the fractional, they feel really responsible and want to take ownership on that, and they want to make it right for you. So you just have to be vocal up front and don't just absorb that lack of performance, because it's what you have, right? I think it's like you talked about earlier. You can pull the rip cord and you can make the adjustment, you can be

Heath Naquin  24:47  
okay, yeah, I'll build on that slightly, because we often work with a lot of a lot of early stage companies, as I mentioned, and a number of our programs, and ultimately, you know, I. Yeah, it's a little bit of what you said about where you know you can correct for the right fit and make sure the culture works and all those sorts of things. But oftentimes, for founders, they don't know exactly what they need yet, to be quite honest, right? And so they're saying, I need a CFO, but what they really need is a regulatory person at that moment, right before so they can even get to the investment round to happen. So there's a part of this where you, if you're working with a group, that can take the time to get to know you as a founder a little bit and be like, hey, just letting you know, you might want to think about X first that that's a valuable thing to have. Because often, at least at the early stage, whatever you think is going to happen, you may not be the talent you need right that moment, later on, it becomes a little easier to plan you're moving. And that's slightly different, although it's not always the case, but, but there's something to bring up. So

John Brumfield  25:56  
yeah, so I have another fractional group that I use for FDA support, and, yeah, I have to part ways with that partner, and I have to explore a new partner. So now I'm here at LSI, meeting with with supporters in this space, because I'm evaluating who can fill that gap. And so that's on FDA, but clinical, you know, in vulnerability sharing, where I am in my company, we're preparing for designing a pivotal trial. I have no idea at this point if it should be 100 patients or 500 patients. So I need to sit with my clinicians, and we need to talk about, what are the endpoints. But I need him at the table. I need regulatory at the table. I need these people, and I don't have that expertise today. So am I going to go out and hire the, you know, the medtronics and the Bostons and the Abbott experts. I can't afford that, so I could also hire consultants to do this. And then the question is, is that continuity through the life cycle what I need? But I think I'm leaning more and more on going fractional for some of these functions.

Dan Sands  26:56  
Yeah. Victor.

Audience Question  27:01  
I look at things a little bit later and start up quite advanced, very advanced as compared. And this is first time I learned about the fractional executives as such, not that I'm not use them as consultants, but what's in for the fractional CEO that brought me to a unicorn? What's it for him? So how does that move from a part time? And I do that because I can't afford to write this guy a check, and it's probably worth a full time salary of capital to 300 grand to start. But I don't have that right. So the solution that you guys discuss is attractive to me, but I ask myself, what's in for this guy?

Dan Sands  27:56  
Great, great question. I've had a fair amount of experience in this and in taking some fractional CEO roles myself. So it's a combination. And over the years, I've kind of come to the denominator that you know you can be allocated equity. But again, if certain milestones aren't hit, you know that equity potentially is zero, so it's very high risk to attract the right CEO, the right all the you know, I call it the DNA of that person, to bring them in. Do they have the expertise? Do they have the network? Do they have because at that point, you know, as a founder, you're getting married to this person. I equate it to, and it's certainly in the eyes of investors, and it's a good topic, because we're going to cover, you know, how is this viewed in the eyes of investors, and to make sure that who you have at the table with you to develop in that early stage is the right person. So there's always, there's different ways to structure it, cash, equity. But, you know, my preferred is, you know, there's got to be some execution and milestones that are not going to put the founder in a bad situation come six months later and in, the dial has not been moved. So again, that's the part where we're trying to, you know, in a model, and especially in capital constrained times, it's you have to be very smart, because the perseverance and the longevity of somebody to hang with you. And if you're turning over a CEO to another that starts to have a bad reflection, Oh, geez. Is it the technology? Is it the founder? Is it this? It starts to create a lot of questions for investors. So I would just say there's, there's a lot of effort in verifying you have the right the right person, and then how to compensate anybody else want to comment on that? Must have another question.

Audience Question 2  29:58  
So this. Somewhat along these lines, is there is another option. It's a little off topic, but when you find that C suite executive, we really want this person, we can't pay them until we raise capital. What do you do in terms of the amount of equity you give them as compared to a fractional person? What do you give a fractional person on equity compared to someone who's working for, you know, working until a capital raise to come on full time.

Christine Horton  30:31  
I don't have that direct experience that you're describing. I know that from what we do, just for our fractional people, we give them significantly left, less than FTEs, right? So just more of a token of of what advisor we get or something. Yeah, we just, you know, just like our FTES get substantially more than what our

Audience Question 2  30:54  
our so they're getting K some cash because they're on a part time basis. And this is a topping that says you appreciate it. You're part of the TV. You 

Christine Horton  31:03  
recognize 

Audience Question 2  31:04  
If they're working for five companies with one of them hit right? Could be,

Christine Horton  31:07  
it could be exactly. And it's, it's more of a incentive to, you know, we recognize what you're doing now, you need to recognize that. Like, if I ask you, and you got five companies that you're working for. I do want a little bit more. I want to be prioritized. Because I, you know, this is what I'm giving you, too. So there is a little bit more of that, right? I am asking for something. So, yeah, that's our experience. It's not on the CEO side. Just

Heath Naquin  31:39  
to be really clear, clarifying question you're saying pre first round investment, that's what you're talking about, right? All right. So first statement I want to say is, and just to put some ranges in here, you know, when we talk about an advisor, like a true Not, not one of the fake ones I mentioned earlier, but a true advisor, you know you're usually from like half to up to 3% depending on what they're giving to you. And that's like, free is a little crazy, honestly, at this point, one of the key components of that, which we haven't really talked about, is that still has to be inked, that still has to have a vesting schedule, that still has to be earned. It's not just you just you just give away your stocks to say, ta, da, there has to be all the corporate governance elements in place for that. And I just want to make sure that's very clear. And this is why it's very important we talk about these fractional roles, that you as a company are able to a know that you need to do that. To your point two, are working with a group that ideal, like, hey, you need to make sure that you have your stuff in order and all that sort of thing. We got some Nik pizza. We have vestings. Get all those sorts of things on that right? So just wanted to raise that point, because that is a key thing. So

George Makhoul  32:56  
I will beat the topic up too much, but do it. There's not really a cookie cutter answer to this question, because there's so many different variables that would have to go into place for that, even for your own company, your own structure, right? So again, how much equity your investors want to give away? That's a big part of that. And then if you're the fractional individual, or the person who wants to be working for you full time, how much of that will get diluted over time, right? So there's so many different ways to to slice that. And then also, what type of talent are you getting if someone's willing to work just for equity, right? You have to figure out that's a that's a much smaller profile you're gonna find, because you're gonna have to find someone who's probably been there, done that, and financially, they're probably not needing to have a regular, steady income. So there's just so many different variables that you're not gonna have a hard time finding one standard answer for but we'll

Heath Naquin  33:47  
build on this. You get what you pay for. So paying in equity, that's cool. This is like legal. I see people go in the cheap all the time. It always costs twice as much to fix the damn problem later, always. And there's not say it can't happen, but it's just a thing. Yeah,

Dan Sands  34:03  
there's, you know, generally, some pretty acceptable ranges that early stage, especially early stage, pre revenue, you got a founder that maybe, actively, maybe is a clinician, and you're coming in basically to take that on. So, you know, in that scenario, there just has to be a justification for that commitment as literally almost as a co founder coming in. So those equity ratios are going to probably be particularly higher in that situation milestone and hitting key things. But in structuring those you obviously have to be careful if, okay, what happens if that person leaves or they don't hit milestones in transition? So it's good to have that everything documented, of course, legal review, and then, you know, just having a capital pro forma in terms of how much is. Going to be set aside and allocated for as an equity incentive pool in total, just in on the total cap table, it's really good to plan that out. It's good for the founders. It's good for the investors, because they see it's like, they know they need good people. They want good people. There's, it's not a mystery that, hey, you know, it's we're not going to incentivize it. We absolutely have to incentivize, especially in the degree of risk that's involved in some of the technology and getting it to market. So there's a wide swath, there's a lot of variables, risk, tenure, you know, key milestones, all those things have to come into play. Good question. Any, any other questions? So, so anecdotally, one, one thing that I've run into, and it's one of those catch 20 twos. See the pitch deck? You see this? All these advisors, you know that could be to your advantage. Hey, it's building credibility. But on the flip side, surprisingly, I've had investors on a couple examples. Well, stack team, they're not all actively engaged, but the perception is, wow, that's an expensive how much capital are you giving away? This is expensive. Why are you asking for so much money? Are these people getting paid? So I would just say, Hey, be careful on who you put on that. Make sure they're in agreement to be referenced on your slide deck as well. So any, any other comments on that,

Heath Naquin  36:40  
I can always make up a comment, yeah. And I mean, what were you going to say

Christine Horton  36:43  
No, go ahead. Go ahead.

Heath Naquin  36:47  
Actually, you raised a point. So just for the startups in the room, who's a full blown out waterfall on their cap table built out. Womp, womp, womp, womp. So I literally just talked to your point. Had a conversation with one of our partners, who's a major PE firm, and they're sitting there looking acquire, you know, do writing the 20, $30 million check. They asked the founder for a nice little waterfall analysis of everybody on their cap table when they're like, What? There is an element of this about good corporate hygiene that we preach at the Science Center all the time. And this ties all into that. So in the case you made, if you're able to say, I have this fractional team, this the specific expertise and milestones and costs, and this is what it buys me. This is how it makes your capital that much more efficient when you give it to me. That's a different story than saying, look at our team and just give me $20 million so be thinking about those specific milestones and cat and this is about capital efficiency, how you deploy capital efficiently with a team utilizing scarce resources and expertise in an efficient manner? And that's really the purpose of all this.

Christine Horton  38:02  
Hey, Dan, can we do a quick survey of, like, the areas that people use fractional talent and just through like, great question. It would just be, I'd be curious to see where most of it lies like. So in the like, the finance area, CF mostly, okay, so CFO finance. How about regulatory? Okay, so a lot of regulatory, clinical, what am I miss? Quality, quality, and then biz dev and sales, biz dev, sales, marketing, commercial

Dan Sands  38:38  
reimbursement, date, what's a big one.

Christine Horton  38:41  
So what was the reg? Was oh and R D, sorry, R D, almost nobody. So ever is R D mostly in house, and for everybody, primarily, it's to some level R D is in house, yeah. I mean, that makes perfect sense. Yes. Are there so regulatory was the most. I think that I saw regulatory and finance. Regulatory and finance, it's, does that surprise you, that that was the most, not necessarily Okay, pretty on par with the

Dan Sands  39:14  
reimbursement. More and more is just Morris reimburse. How do you get the commercial uptick, and having a compelling story on commercial, not just, Hey, here's my hockey stick forecast, you know, fortify it. What's your assumption? What's your coding that anymore is more on point with asking about the regulatory path, who's going to buy it? Who's going to pay for it? Is it reimbursed? And if that's a, if you can't demonstrate proficiency there, it's a non starter. For for investors,

George Makhoul  39:47  
Well, her reimbursement, one's a big one. For fractional because you're, you're paying for someone who's got relationships and experience, and they know those panels, they know what to expect. So it's, you're, you're really buying some some work and expert. T's in an area that they can help you predictable, if predictive, if you're going to be successful or not,

Dan Sands  40:05  
okay, we're at time. Thank you everybody. Thanks, LSI. Thank you panel members, thanks for coming 

George Makhoul  40:11  
Thanks Paul

Christine Horton  40:14  
Thank you.