One of Innovatrs‘ top entrepreneurs, Thomas Loarie, gives us an insightful look at the highs and lows that he has encountered on his exciting career path, which has seen him work alongside a wide variety of successful companies across the globe.
Innovatrs: What made you do it? Why did you take the plunge, became an entrepreneur and give up that cozy corporate job?
Thomas: I had a great career with American Hospital Supply Corporation (AHSC). I started in manufacturing in the US then moved on to lead the turn-around of multiple manufacturing operations in Europe and South America at the age of 28. Following this assignment, I was asked to take on a broader operational role, including marketing & sales, in a small Division in Northern California that had fallen into trouble. It was there that I became familiar with Silicon Valley and the world of venture capital.
At age 32, I was asked to assume the role of President at the American Heyer-Schulte Division in Santa Barbara. This Division was a surgical solutions company specializing in materials technology applied to US FDA Class II to III devices across six surgical specialties.
When I left for Silicon Valley, AH-SC was growing the top line at 37% per year with an after tax earnings rate of 23%.
I had great autonomy in each and every job at AHSC, and enough rope to take short and long-term business risks. The “learnings” were deep and broad. But as the corporation grew, it became more bureaucratic and “top down” rather than its traditional “bottoms up” business model. I chose to leave during a consolidation process which was destined to destroy the entrepreneurial spirit I had enjoyed over the 13 years at AHSC. American had grown to $3.5 billion in revenue so it was a natural evolution.
American Heyer-Shulte gave me an opportunity to lead what I still consider a very entrepreneurial-like opportunity in a large corporation. We pioneered interventional neuroradiology, the use of embedded silver salts as an anti-bacterial barrier, the tissue expander, low-profile neuro shunts, as well as innovative devices in surgical oncology and reflux esophagitis.
Coincidentally, at the time I wanted out, Tom Perkins, Kleiner Perkins Caufield & Byers, was looking for a COO to head the their first investment in a medical device company, Novacor, Inc, which was developing a left-ventricular assist device for heart failure. The board and investor group included Tom, Gene Kleiner, Reid Dennis, IVP, Tom Unterberg, Unterberg Towbin, Moshe Alafi, Bill Hambrecht, Sandy Robertson, and others who pioneered venture capital in the early 80s. While the company had significant challenges, the opportunity to work with this elite class of VCs was too great to pass up.
Innovatrs: Where does your expertise lie?
Thomas: I am one of those creative and entrepreneurial corporate escapees that has a knack for building young companies. Typically, VCs hire me to come in to work with brilliant engineers or doctors who have a great idea. They look to me to turn it into a commercial success. Lately, I have been blessed with a number of brilliant engineers and doctors who have brought their ideas directly to me, bypassing the VCS, allowing me to get in on the ground floor to turn concepts into companies with defined markets and financing. The burden on me throughout my venture experience is discernment – what vision/technology do I want to commit my time to, which inventors and investors do I want to work with, what strategy makes the most sense, and which markets piqued my interest.
Today, I have global experience in both the corporate and venture domain. I understand value creation and disruption, and have a hands-on knowledge of people, visionary management, investors, regulators, markets, technology, and organization…and an enviable rolodex to boot.
Innovatrs: What inspired you to devote your career in start-ups ? Does it get you through those inevitable crises?
Thomas: I have had an inspiration to change the world, in particular, the world of healthcare. Projects that whet my appetite are those that are “first-in-class,” those without a predicate. These are the most challenging and most difficult to get funded since they truly require vision and an intuitive knowledge of forces changing the landscape. Typically, few people can see beyond their nose and fall victim to conventional wisdom and reject truly innovative ideas. Both “venture” capitalists and some entrepreneurs fall victim to this as well since they generally belong to a tribe and talk among themselves.
It is important to be an independent thinker and remain outside of any tribe. And fortunately for those who are resilient and resourceful, the world of investors is large. A truly great idea should be able to find a financial patron.
Crises come in many flavors – failed clinical trials, very slow trial enrollment which burns cash, periods of dead money while you are awaiting trial data or a regulatory agency action, the loss of a key member of the team, and much more. Many of a young company’s crises will come from forces over which one has no control or could not foresee. The current economic meltdown is a case in point. Others include legislative (health reform, Sarbanes-Oxley), regulatory (changes at the FDA, a new commissioner or reviewer or rulings), legal (tort issues, patent law), and global economics (asian flu, China’s determination to become a world leader in medical products). And more….
Entrepreneur teams must be resilient, flexible, and pay attention to the whole eco-system in which they operate. I have often said that one could be the greatest manager/leader with the greatest technology, market opportunity, and investors, and still fail. With one signature in Washington or other world capitals, your business can be squashed.
Innovatrs: What assets or traits have been more helpful to you in your career as an entrepreneur?
Thomas: There really is no fast route to gaining experience. It all takes time. My strong global background in manufacturing, sales/marketing across 10 medical specialties, and finance has been a major asset for me. In addition, having an engineering “problem solving” mind and being an oil painter has trained me to use both the right and left sides of my brain. None of this came easily, only with a lot of effort, and sacrifice.
Innovatrs: What big ol’ failures have you had in the past and how have they helped you get to where you are?
Thomas: Failure is a part of learning and building a strong foundation both personally and with companies. I have had plenty of failures – with people, ideas, bets on the future, underestimating the competitive landscape, not taking advantage of favorable financial markets, misreading the US FDA, moving too quickly into new markets, and moving too slowly into new markets – among many others.
One interesting observation follows a conversation I once had with Gene Kleiner . He told me after I joined Novacor that every great company he had been associated with was at one time at death’s doorstep. Greatness came from the struggle to survive the rough patches. Gene knew what he was talking about. The rough patches are a prelude to greatness. They sharpen one’s mind to the critical issues and can, if the culture is well established, bring disparate parties together to work as a team. In a storm, everyone is in it together and there are no safe harbors. It demands mental toughness.
Innovatrs: Please describe some of the exits related to companies you have been involved in.
Thomas: My career interest has been on creating important new companies, new domains, and new industries. These require a long-term focus, persistence, and creativity for success. For instance, I have been involved in many innovative products creating new markets, such as refractive surgery, site-specific drug delivery, and nano-diagnostics. Today, I am presently involved with wireless health (creating a whole new industry within healthcare), point-of-care diagnostics (creating a new diagnostic market), and generic Class III products for China, Europe, and emerging markets (creating new OUS business model).
For me, “exits” are important only as a path to liquidity for my private investors, not as a path to personal wealth. This is an important benchmark in the development of a company, domain, or industry but it is not the endgame.
Entrepreneurs who focus solely on the “exit” as an exit for themselves will often use poor judgment since their attention is on self and the short-term, and not the long-term value of the vision. I choose not to work with those who have “get rich quick” objective and are in it for a personal “exit.”
That being said, early exits can emerge as a strategic alternative, but it will be the result of a long-term vision, the potential for long-term value creation, good execution, and great results. When an “exit” emerges as a strategic alternative and not the endgame, the entrepreneur and his/her board will be in a strong position to decide whether it is the next right step or not.
I have been involved in numerous “exits” – initial public offering (IPO), acquisition by a larger company, and the sale of assets. An IPO is the most fulfilling because it allows your investors liquidation and the company team a continued opportunity to realize the original dream. Acquisitions, on the other hand, may provide liquidity for investors… and for the executive team, but quite often it is the end of the vision. Many entrepreneurs, seeing the end of the vision in the hands of the acquirer, create another venture (generation II) around the learnings gained from their first. The second time around they are much more reluctant to “sell out.”
I am writing a book on my learnings to share with others interested or doing entrepreneurial activities. I will advise you when it is done.