Non-Dilutive Funding, MTEC and the U.S. Military - Interview with David Hood and Scott Pantel

Scott Pantel  0:00  
I am here today with Dave hood. Dave hood has been in the med tech industry for as long as I can remember. In fact, Dave, you were one of the, one of the, the early thought leaders, industry insiders that I can remember meeting many, many years ago, and so I want to thank you for spending some time with me here today and welcome you to this call.

Dave Hood  0:28  
Wow. Thank you. Thank you, Scott. I really appreciate you inviting me to talk with you today. I'm looking forward to having a good conversation, and I want to start by yes, we've known each other for a number of years, and congratulations to you and all your accomplishments and building LSI, it's, it's really a great organization. Lots of kudos to you.

Scott Pantel  0:51  
Thank you, Dave and we, we wouldn't be here without the support again of industry insiders and leaders in the med tech space who are doing the doing the doing the real work out there. So I want to so I want to thank you for being such a critical part of our community, and actually that that is, I think, a good starting point for those that don't know all that you do, because you do so much. Could you maybe give our audience just an update on the various hats you wear and what you're what, what's most important to you, maybe today, some of the priorities that you're working on today. We'd love to hear that

Dave Hood  1:33  
sure indeed, start briefly, I guess, with a little bit of my background, just so you know, the perspective I bring to the industry. I think so I'm I'm actually a double A engineering background, MS, MBA, PMP, project management, and then I've also had subsequent executive training at MIT and Stanford and Harvard now. So good, good basis there. I've had some clinical training thanks to one of your industry partners, and Johnson Johnson, so I've had a good deal of insights there as well. So most of my my backgrounds has always been high tech, you know, and spent a lot of years with the company called Northrop Grumman, and worked on a lot of missile technology, satellite technology, stealth technology, and it brought me to the medical the Integrated Medical tech. And we had the opportunity to invent and create and develop something called lstat, and it was a life support for trauma and transport system. Turned out to be a very innovative system, one that was used actually by the White House medical team served several presidents. Was in Air Force One, and it really brought us into the whole high tech medical industry. And at that point, you know, I was asked to spin out a company, actually from the fortune 100 from Northrop Grumman, and it was new company called integrated medical systems so that we could address this need. And that really brought us in focus to the to the medical community, and then subsequently focused on the consulting business for the last 15 plus years, I'm pretty frequently invited subject matter expert, Speaker You know, for you and other organizations, principally talking About non dilutive funding, non dilutive investments, and how CEOs have to look at leveraging those to help de risk their technology and grow their tech development, product development and business development. So over the years, I've worked now with NIH and NSF and many advocacy and foundation groups and accelerators as well. You know, as you know, I work also with MedTech Innovator, and then I think what people overlook a lot of times is the DOD, and the DOD does a lot of work in medical certainly, you can quickly identify with some of those areas, and we can talk about it more, but emergency and trauma, but DOD does several billion dollars a year extramurally, and that's that's significant resource, and that was one that we understood, and we ended up working with quite a bit. And actually, when I was running the company, the product company, we raised over $40 million in non diluted funding. It was tremendously enabling for us. So today, I work with private clients, but I also have the privilege of serving as this Senior Advisor for AMTech, and I'm looking forward to talking with you a little about AMTech, the Medical Technology Enterprise Consortium. Is this has been a true innovation in the area of non dilutive investment and funding in the last few years, and it really has a lot of traction. And I think companies have to look at it now.

Scott Pantel  4:53  
That's terrific. We're looking forward to having a portfolio of your M tech companies at LSI data point and. LSI, USA, 24 and Dana Point in just a, gosh, just a little over a month. And we want to hear more about those companies, but I want to go back to something you said about the work you're doing with companies to get access to non dilutive funding. How I know you've been working on that for some time now, and you've helped quite a few companies, is the awareness penetrated now? Are people aware? Or would you say that there's still a challenge of simply people understanding what's available? How far along are we with that?

Dave Hood  5:33  
Oh, that's a great question. So you're right. You know, I started in the consulting business, actually initially consulting with the government. The government asked me to come in, and they were like, how did you guys get this from idea all the way to deployment, and can you work with us to help us understand more of the industry perspective? So that was my first client. Was actually working with the government team, and it's since then, as you pointed out, I've worked with hundreds clients, and we've, you know, subsequently, those client, they raised hundreds of millions of dollars, you know, and it's great to see the success of a number of these CEOs and their companies. But how far have we gone? That's a terrific question. Because, you know, a decade plus ago, when we go into a conference, in conversation, in a conference, and very, very few people were leveraging non diluted funding, particularly, you know, you go back 10 or 20 years ago, you know, the whole investment area was really not very structured. And around the government, it was not very structured in terms of non dilutive. Most academic institutions understood National Institute of Health, and there were some opportunities there, but I'd go into a conference literally as a speaker, and you know, raise your hand. How many people you know, have tried, or how many people are going after? And it was very, very few. Um, nowadays, we've come a long ways, and I think it's a tribute to you and hopefully to myself and others that have really built the awareness that this is tremendously important, and it can be very efficient. And I think the perception was that, you know, in the emerging investment community, is that, oh, there could be a real distraction. Now, I sit alongside that investment community all the time, you know, and they want CEOs to understand how to look at non diluted funding, to de risk their activities, to make it more attractive for them. And I think that's become very, very important. And I think it's also does a little bit of their legwork. It does a little bit of their due diligence, right? There's a scientific validation, there's a credentialing, there's a clear when you work with the military medical community, it's very clinical due diligence, so your investor, as traditional, institutional and or strategic comes in and sees that even you've received investment and or awards from some of those sources, that gives them a little bit of good feeling, they're still going to do their own due diligence, which is primarily financially oriented, but it, I think it really helps them with the de risking and with The clinical and scientific validation.

Scott Pantel  8:21  
We've come a long way from 10 years ago. We still have more work to do, it sounds like but I'm also hearing that you're pleased that we're making progress and the awareness levels are increasing, and that's really good to hear. And also, I thought that the point about outside investors looking upon this path favorably. It makes all the sense in the world. Like you said, they want to de risk their investments. They want to make sure their CEOs know about access to this capital. So let's talk a little bit about the investment climate in general. You've seen many, many cycles. Obviously, we're in a challenging fundraising climate today, but I like to ask industry insiders like yourself what the perspective is on, say, the next 12 to 24 months. So have you seen this cycle before? Where do you see us headed? What's your outlook? Dave, for the next one to two years?

Dave Hood  9:18  
Scott, I appreciate the question, and yes, you know, those of us that run around the industry for a number of years, we see a lot of we've seen a number of cycles. Right? Interesting thing about that, that I the point I really want to bring out is non diluted funding. Some of this government funding, NIH, DOD, NSF, remains fairly steady state and fairly good growth with respect to life sciences and biotech. So I think it's a tremendous insulator on some of these cycles that we see with institutional and strategic investment. And I think that's another big, big plus for CEOs. It can bracket that a little bit and give you some legs and runway. During those difficult times. So I think in the non dilutive space, and particularly in DOD, NIH, NSF and and within various different advocacy organizations and foundations, we don't, we don't see those same cycles, yet, we do see some of the influences, but there's not as big of a dip. And really the trajectory, trend trajectory remains the same. It's pretty good growth overall, really. So I think it's you have to look at it nowadays. If you're a CEO with emerging tech, you have to look at all of these sources and how to leverage them to advance your tech development, product development and your business development. They're enablers for all the

Scott Pantel  10:42  
for first time founders and CEOs, or maybe CEOs that have been in the been in the space for many years, but just have never pursued this path. Where do they start

Dave Hood  10:54  
like so that's a good point. Overall. In the industry, we've built awareness, but like you know this industry, we see a lot of new players come in every year, and some of them don't know the opportunities as well as others know. Some of them are repeat entrepreneurs that we see nowadays and and they know what's worked for them and how to build and build them. But how's the pathway? Well, I think a tremendous pathway is getting in the mix in a venue like LSI, you've done a great job of pulling together this investment community, and I would say a lot of the emerging high tech companies as well. So this is a great opportunity to get face to face, and I think that's very important for investors of all kinds. They don't like to do it blindly. They like to look in the eyes of the entrepreneur and know that they're going to be able to get through all the uncertainties that are associated with high tech product development. So I think starting LSI is a really, really good place. I think what we've created with MTech is also a very, very good avenue. MTech was created to try and be more efficient at working alongside of industry and alongside the investment community. And we've had a number of things that's enabled the creation of M Tech, and I think that's a very good pathway, and we can talk more about that, but let's

Scott Pantel  12:19  
let's talk a little bit more about M Tech. I think that they're for it. For a subset of our community, there's a very clear awareness of the mission, and for a larger group, there's just just an unawareness. So what is M Tech's mission? If I'm a founder, a CEO, what should I be thinking about? And how do I get connected with MTech? MTech to benefit from

Dave Hood  12:48  
from that network? Yes, yes. So, so MTech, let's talk a little bit about the changes. I think this is one of the most innovative things that's happened in non dilutive in the last few years, and I think it's really good for companies and the institutional investment community. So there were a number of regulatory provisions in place through what's called the Federal Acquisition Regulations that really restricted how government and a lot of non dilutive could work with industry and the investment the institutional investment community. So we, actually a number of us, worked very hard to get relief in those areas, and allowed us to create, to really leverage something that had been around for a while. It was OTA. It was called Other Transaction authority. This allowed us to create M Tech, medtech, Medical Technology Enterprise Consortium. We serve the military, medical community, largely so we have a number of agencies, Army, Air Force, Navy, special ops and others that come to AMTech and say, Can you help us address this area, address this need? In a sense, they're like limited partners to an investor, right? You know, they come in and they say, Hey, we have this need, we have this money. Can you guys go, you know, go find this. So that's what we're really focused on doing. And the traction has been and the results have been really, really good. And I want to talk and come back to how efficiently we can work alongside both the industry investor but just to let you know how this has grown, we now have 700 members in MTech, and those are all companies that have been vetted as having relevant technologies to the needs of the military medical community. Now think about that. The military medical community is pretty broad. I mean, we right away can identify with warfighter and, oh, that has a lot of impact. And over the years, it's really heavily, heavily influenced er and trauma. But it's much, much broader than that. We're interested in, before they, you know, an active duty, you know, personnel staying fit and staying ready for any kinds of deployments. We're interested in recovery, all. The clinical rehab that goes with recovery, whether it's orthopedic or psychological. And we're interested in all the things that can impact and along the way, infectious diseases and the like. And then we're interested in nowadays digital health. And I want to talk about that one a little bit more, because that's kind of a I want to give you some more specifics. But today, we have 700 members. We've now invested in 300 companies, over 300 companies. Over the last four years, we've invested a billion dollars, and we expect to invest another 250 million plus in 2024 and just a little bit more on that. Because it's we've said, it's attractive, right? It allows these companies to de risk. It allows them to get more data to validate, and it allows them to get more scientific and particularly in our case, clinical, validation. But we've already seen in those companies, they receive investment. They get a 1.4 return already, and the ones that actually that's of all of the all of the 300 there's a 1.4 return of all of those. But now, if you just take the ones that have received investment, there's almost a 5x 4.7 return, right in attracting more money into their into their company. And then the last thing I'll mention, and then I'll pause, is we've also started two other programs, and this is important for you and LSI. One is we've started an advanced commercialization subset, so a suite of companies that we've invested in. And as you pointed out, we are now partnering with LSI, and we're going to showcase five of those companies at LSI, we've invested in these companies and on those companies that we've invested in, there's a 17.5 return on the investment in them. So pretty, pretty good numbers emerging really, pretty quickly. I know LSI, you have some great numbers, you know also, but I think MTech has become a real enabler for these companies as well. Last mention that adds on to that is we've also started in MTech ventures, and this is a preferred list of venture people that we like to work with. As you know, we piloted and worked closely with Life Science angels, and that's worked out really good. We've invested, they've invested. They do their due diligence. It's gone very good, and that's important, because we come to places like LSI also looking for candidates that we want to put into our MTech ventures. As these are preferred institutional investors that you might want to look at and connect

Scott Pantel  17:41  
terrific. And those are, those are big numbers. Congratulations. Those are phenomenal numbers. And I'm sure that you have plans to to build on that. Let's talk a little bit about what LSI is, by the way, thrilled to be partnered with MTech. We're really looking forward to, you know, shining a light on the five. I think it's five portfolio companies that you're bringing to the event. I'm sure it was a challenge to figure out who got in to this round. But tell us a little bit about what's the objective for those companies. Is it awareness? Is it raise capital? Is it strategic partnerships? Is it all of the above? What's the objective for those five companies? If you have success, define that for us.

Dave Hood  18:27  
Yes, that's a good point. So we do have five companies, five different areas, so we have sense technologies that's coming. And you know them well. They work in TBI, and I think Lawrence Taylor, rather famous football player who works alongside them as well. We have another company called perceptive. They're working in the impacts of blood pressure, and actually low blood pressure, we always think about high blood pressure, but low blood pressure and the impacts of that and trauma. Magnetics is working on wound care, wound really innovative, wound fabrics. Limax is coming out, another one in wound care, and sonagen, another good company that I think you're enjoying seeing as well. All of these companies have worked hard to prepare, really, to be able to talk to the investor community. So this is opportunity for them to be engaged with their investor community. Now, many of them have raised additional money, like we just talked about. In addition to the awards that we have, they've also been successful at bringing in some more but they're seeking additional funds. So number one, seeking additional funds for us at Emtech, we're always trying to build awareness about Emtech and showcase some of these companies that we've invested in, we think it's a tremendous suite of companies with really good opportunities around them. And we have two senior execs that are going to be coming out into as well, Sean green, he's our Chief Strategy Officer. He's looking forward to spending a little bit time talking with you. He's very good. And and Rick Satcher, who's running our advanced commercialization program and working with these companies that we've awarded to try and help position them to be able to, you know, go further down that product development life cycle and raise funds. So yes, they're looking for additional funds, strategic and, or institutional investors on and that's what they're trying to attract for us. We're trying to build awareness. We're also looking for more companies that have innovative ideas, that can dress our things, that are relevant to our needs. And we're also looking for more interactions with institutional investors that may want to become part of our part of our cohort. There select group

Scott Pantel  20:41  
that's great and I and if we do, if we're able to do all those things successfully as a community, we'll be able to achieve the goal, which is to attract capital to really great companies, so that those really great companies can get that technology to a patient, to our servicemen and women to change the world, to make it a healthier, happier place. So it's it's just we're we fully support what it is that you're doing. And I'm looking forward to digging more deeply into the five companies you have and the and the broader portfolio,

Dave Hood  21:15  
to your to your point, getting the products to the patient, right? That's why we all do this, and it's tremendously rewarding when we see that. And that's one of the exciting things about being able to work with MTech and the military medical community, is this community is looking for not just advancing the tech or advancing the science. They're looking for solutions. Most of their customer community is very clinically oriented, and they're trying to get solutions that they can use, whether it's in the field or in their clinics or in the bricks and mortar hospital. They have this very challenging continuum of care, which could be five to 10 days pre hospital, and to them, it's got to all be continuous and careful patient, and that's why we expanded our interest in, I'm going to call it digital health, but just a little bit more on that. We, as you know, we helped create massive electronic health records, you know, Serna and and like you know, so now we're trying to take better advantage of all of that data and get the smart decision support systems in there that can help reduce admin loads and help with clinical decisions. But in addition to that, we're trying to take that out of the hospital. Can we make those pre hospital people smarter and help them so that here they can make their urgent decisions with more informed information, so better sensors, better decision support systems for that entire pre hospital scenario as well. And that's where robotics are exciting to us. I mean, we, the military medical community, helped start intuitive years ago, and now we look at robotics is, how can we do that remote care better? How can we do extraction without, you know, jeopardizing people? So those are important additional areas for us. And we're really excited about working with you and being there this time.

Scott Pantel  23:06  
That's great. And you just mentioned robotics as an area that you're really excited about. You know, this industry of ours, the work that that all of the innovators are doing, and that we're all doing, it's not it's not easy, but it does matter a lot, right? What are some other areas outside of robotics, you mentioned digital health earlier, like, what are some other areas that you, Dave hood, are particularly excited about or interested in? I'm just curious kind of what? What are some areas that are, you know, catching your attention?

Dave Hood  23:44  
Well, I think the one that's leading the way right now is, is got to be the decision support systems, and migrating that to more ML and AI and machine language and artificial intelligence. And I think the big enabler last year is, is with the things like the chat, GPT, this, you know, this is going to make, I think, a lot of those things more feasible and have broader applications. So I think we're really looking at that any device, LSI, and we're agnostic. We don't care whether it's a device or a pharma or biotech, we're looking for a solution for these challenges. But med devices now, they have to be able to collect information, they have to be able to store it and do data analytics, and ideally be moved toward more predictive nature, utilizing ML and AI and I think the FDA, the regulatory bodies, have been really trying to help in that and enable that a little more. I think those are the exciting areas for us is, you know, just smarter and smarter devices. I mean, we even see it in orthopedics. Our ideal orthopedics, I was just speaking in an orthopedics conference, and our ideal would be that, you know, it would be. Uh, anti infection. It would be, you know, it would be smart in terms of monitoring the recovery and so forth. So I think I'm really excited to see how this generative AI may affect some of these areas and really enable them to be even more and more useful.

Scott Pantel  25:15  
There's opportunity everywhere. So we've talked about quite a bit. We've talked about M Tech, we've talked about non dilutive financing options, and I want to come back to the latter, because I know we're going to have a lot of interested CEOs and founders. They're going to follow up on this. So practically speaking, come to the LSI event, hook up with insiders like you to figure out what to do next. But outside of the LSI event, like today, for folks that are tuned in here, if they're very new to this concept, what are some basic things that they could do is it simply reach out to you with like, what are some resources they can go to to explore whether or not non dilutive financing is even an option for them. So,

Dave Hood  26:03  
so that's a great question for those for new I mean, to some degree, M Tech is new to almost everybody, because these, these OTAs, have emerged across a variety of the non dilutive sources of non diluted funding. M Tech is the one for the military medical community. There is one other that serves the military medical community, but it's mainly for biochem warfare. So how do you do it? Well, I think one way is nowadays, right? You see, you can start at the websites, and there's a lot of information on the websites, and you can certainly go there. But what we like is it's, it's it's real easy. The way we do our due diligence is we'll put it out there. We need something in TBI, or we need something in PTSD, post traumatic stress disorder, and we usually have a very efficient pathway for you to respond. It's, it's essentially an enhanced white paper format. So this is not a proposal that you put on, you know, pallets like I used to deliver. You know, this is, you know, 10 pages that has to be super sharp, because we're going to make our decision on those 10 pages. And sometimes we actually have make decisions on orals, particularly, obviously during covid, we did a lot of that to keep things moving during the time, so we have a lot of latitude on how efficiently we can make those decisions, which helps us do that quickly. And I think that's, that's, that's, that's a plus for industry. However, I don't want to underestimate face to face. That's really important, interacting at a place like LSI, it's very important, you know, the military medical community, MTech, we're investors. We want to look into your eyes and know that you have the what it takes to really move it along the product development life cycle. It's hard to get that from reading a paper, you know. So I think you look for those opportunities to do effective, collegial interactions, we do have a members only MTech annual meeting that I think is also it's coming up in May. It's a great opportunity for them to for interested companies to come and learn more about how to work with M Tech, and also how to hear from all of our limited partners, all the agencies that are working with us are usually there and able to interact with you and want to because they want you to be understand their needs. Military, medical community is very needs driven. So you can't just push your technology. You have to put it in context of how it's going to be used. How is it going to benefit? What's the clinical outcome benefit? Yeah, so I think that's should answer a little bit about, how do you get started? But I think you do a little bit of that build awareness. I think MTech is a good portal for a company that's in what I call TRL four through seven. You know, I help develop technology readiness levels, and they they help measure, you know, the maturity of a product. So we're looking for, we we're looking for technology that's in that prototype, preclinical stage, that's kind of around TRL four, maybe TRL three, and then we want to be able to help you take that forward. Ultimately, we'd really like to see that become a solution that's fieldable. So I think for the and that's a lot of the companies that come to LSI, they're, you know, they've got something to talk about. They understand the mechanisms of action, they understand the science, they've got some data, they've got some prototype. Those are the kind of companies that we're interested in. Those are the ones that we award and we invest in. So

Scott Pantel  29:44  
Dave, before we before we conclude this call, and I'm going to encourage people to track you down at Dana Point. Is there anything that you want to share with the audience, anything that else that's on your mind?

Dave Hood  29:57  
I think we did a great job of covering a lot of ground there. I hope. It helps people understand the opportunity. But I really want to encourage people always, whenever I'm speaking to groups, encourage people, you know, CEOs of these emerging high tech companies, they're wearing a lot of hats, as you and I are, you know, and they've got a lot of trade offs, but you got to make choices about what you're going to look at. And I think it's real important to look at something like M Tech. I think it's real important that if it, if it fits with the technologies that with what you're developing, you really should be reaching out to to us at M tech. So there's no substitute for, you know, getting out there and trying, you know, prepare accordingly, right? It's important to to prep, but, you know, just do it,

Scott Pantel  30:45  
that's right. Well, thank you, Dave. It's a small world, and it's ambassadors like you that keep our industry moving forward. So I want to take a minute on this call to to thank you for all that you've done for the med tech industry. I look forward to seeing you in Dana Point. Look forward to learning more about the portfolio companies that will be there, and look forward to continuing to build in our industry together. Thank you. Thank you, Scott, you.