Editorial
2019
:10;
175
doi:
10.25259/SNI_422_2019

# Neurovista: Concept to first-in-man: The war story behind launching a venture to treat epilepsy

Departments of Neurosurgery and Biomedical Sciences, Loma Linda University, Loma Linda, CA, USA.
Corresponding author: Daniel J. DiLorenzo, MD, PhD, MBA, Departments of Neurosurgery and Biomedical Sciences, Loma Linda University, Loma Linda, CA, USA. djdilore@alum.mit.edu
Licence
This is an open-access article distributed under the terms of the Creative Commons Attribution-Non Commercial-Share Alike 4.0 License, which allows others to remix, tweak, and build upon the work non-commercially, as long as the author is credited and the new creations are licensed under the identical terms.
How to cite this article: DiLorenzo DJ. Neurovista: Concept to first-in- man: The war story behind launching a venture to treat epilepsy. Surg Neurol Int 2019;10:175.

## Abstract

Many medical (and nonmedical) technologies are the fruit of years and even decades of work by dedicated members of startup companies and commitment of capital by their investors. The launching of a medical device venture is fraught with many risks, but the personal, societal, and potential financial rewards of developing therapies that improve the lives of others makes the risk and sacrifice worthwhile. The litany of risks and challenges can be daunting, and persistence is the key ingredient to every incremental iota of success achieved. This is a personal war story behind the launching of a medical device venture that developed an implanted seizure prediction system (NCT01043406). The intent is to share the experience so that others with interest in the field may learn from the experience and also decide whether such an endeavor is something that they want to undertake.

Entrepreneurship
Epilepsy
Innovation
NeuroVista
War story

## INTRODUCTION

I was asked to write this manuscript by Dr. James Ausman after giving a talk at a Loma Linda University Department of Neurosurgery research symposium. This talk evolved from a series of talks I was asked to give in a variety of clinical, engineering, and industry venues on the founding of what became NeuroVista. In giving similar presentations on the topic of NeuroEngineering and NeuroVentures in a number of contexts, the hope has been that it will have both entertainment and educational value for those who have interest in launching entrepreneurial ventures or developing technologies with medical applications. It is my goal to present as realistic of a picture as possible, within the although brief scope of a manuscript, to the readers about the undertaking of developing a complex implantable medical device, the challenges the pitfalls, the inspiration, the insights, and pearls learned along the way in the hopes that this may have inspirational value to some and may also make the arduous road of innovation and entrepreneurialism just a bit easier for those about to undertake the journey…

## BACKGROUND AND MOTIVATION: GRADE SCHOOL AND HIGH SCHOOL

Realizing the importance and synergy of electrical and mechanical engineering, I studied both subjects, earning electrical engineering degrees at the bachelors and Masters level and mechanical engineering degree at the PhD level, all at MIT. Seeking to obtain a broad research experience relevant to developing useful technologies, I worked on four projects related to neural prostheses. These included (1) functional electrical stimulation for gait restoration for paralyzed patients, (2) development of an implanted peripheral nerve interface for providing sensory feedback from an artificial limb to the nerve in a stump of an amputee, (3) microfabricated electrode array design and development for retinal stimulation for blind patients, and (4) analyses of neural firing patterns during brain control of limb movement, relevant to current brain-computer interfaces. Because of my desire to develop technologies for clinical use and to bring them to the market and to patients, I earned an MBA (Masters of Science in the Management of Technology), at the MIT Sloan School of Business, concurrent with completing the MD and PhD.

## THE SEED AND VENTURE: NEUROMODULATION

The kernel of this venture really began when I was an undergrad studying electrical engineering, when I became convinced that neuromodulation would be a viable therapeutic modality for a variety of neurological conditions. Without dating myself, this was before the innovative Dr. Benabid published his seminal work on DBS. I incubated this thought through the remainder of my undergraduate studies into grad school and this motivated my selection of projects for my PhD. It played a significant role in my decision to switch from a relatively more straightforward project in noninvasive functional electrical stimulation to far more risky, challenging, and interesting project on implantable neural interface development. During this time, it struck me that Parkinson’s disease would be a good initial indication to investigate, and as far back as an undergraduate I was doing literature searches on animal models for Parkinson’s disease to gain a deeper understanding of how to develop such a technology. At that point, back at MIT, there were no projects in this area, but I read on the topic and did subsequently work on chronic neural interfaces in grad school.

## MEDICAL SCHOOL, PHD, BUSINESS SCHOOL, AND NEUROSURGICAL RESIDENCY

During those 1st years of training, this became a background project, relegated to late-night after getting home from the hospital. The passion for the venture to develop a closed-loop system to treat neurological disease remained alive, and I used the sparse available time to refine the technology and design, augment the IP, and build the network of potential team members, recruits, and investors. The product strategy was narrowed to focus initially on epilepsy, the largest unmet need at that time; and I evolved the design beyond pure feedback driven control to include prediction and control. The approach would involve monitoring brain activity using implanted electrodes, which offered higher signal to noise ratios and higher bandwidths than external electrodes, to sense neural signals, calculate neural states, and deliver modulation to maintain states in desired ranges. A simplified block diagram is shown in Figure 2. Such a device offered the potential for seizure prevention, a novel approach to the problem and one which I felt offered the potential for a much higher level of efficacy than existing and proposed therapies.

## NEUROSURGICAL RESIDENCY AND DEVELOPMENT OF PATENTED DEVICE AND COMPANY

Boston and MIT were epicenters of innovation, and during my “tenure” there, I met as many people in the entrepreneurial and technology fields as I possibly could. I had remained in touch with friends and colleagues in the medical device space and in the venture capital field, and the time seemed near for me to be able to raise capital to launch a venture to develop a closed-loop neuromodulation system. At that point (early 2000’s), I was a junior resident, working 120–130 h a week in neurosurgery, so my available time was severely limited. Despite this, I did work 2–3 h a night, about 10–15 h a week, on top of this neurosurgical workload. I won’t say I wasn’t sleep deprived, and I have a fair share of stories, better told in person, from the experience. I was able to make progress, nonetheless; and I put together a team and business plan, entered business plan competitions at Tulane and at MIT. We were finalists in both competitions and took second place at MIT, which historically was the place taken by the most successful companies to be launched so that was encouraging [Figure 3].

This was only a brief couple years following the internet bubble stock market crash, and the public market had not yet fully recovered; therefore, venture capital funds were still hesitant to invest in long-term capital-intensive risky ventures. This is somewhat counterintuitive since investment, and financial cycles are by definition cyclical and the value of the market at a given point of time does not necessarily correlate with the status of the market when a company is attempting to exit; however, this behavioral correlation was the reality. The year after that first patent issued, I had a research year during my neurosurgical residency, which afforded far more freedom of both time and schedule than I was accustomed to. Instead of 120 h/week, I could work 60 in the lab and 60 on the venture… and make progress. I used this flexibility to travel to meet with potential recruits to the company and to give presentations to potential investors. The resounding message was that this was a fascinating project; however, its risk, duration, and capital-intensive nature were beyond the appetites of investors at that point in time. The following year when I was back on the neurosurgical service as a junior resident, the stock market picked up considerably. Concurrently, some of the more active early-stage investors in the San Francisco Bay Area and the Boston area started to appreciate, as I had already, that the neuromodulation field would track along the cardiac modulation field and the neuromodulation might be a mainstay of therapy as pacemakers and defibrillators had become. Because of these two concurrent factors, I began getting calls and emails on a near weekly basis from the venture capital funds with whom I had met during the previous year. They each were requesting me to come and give a presentation on the venture that I had been discussing the previous year. It was beyond frustrating since now I was back in the figurative dungeon working a 120–130 h a week with virtually no control over my schedule and yet the recipient of a tantalizing stream of communication from investors interested in the project I had wanted to launch for over a decade. Each email and message was like one droplet of water in a session of Chinese water torture.

## RAISING VENTURE CAPITAL FROM INVESTORS

When I got home after about 2 days of consecutive call on being up 48 h, I quickly packed and felt absolutely exhausted. In those wee hours of the morning, approximately 5:30 am, I somehow convinced myself that I could really go for a 15-min power nap, and then be able to get some work done on the plane. The bed looked irresistible. I set my two alarms, which are each loud enough to wake the dead, for 15 min from then and lay down expecting to be at least somewhat refreshed when I awoke. When I woke up, I did in fact feel refreshed; however, the refreshment immediately faded into a state of terror when I noticed that it was light outside. My flight left at dawn; it should not be light outside right now. I had slept for almost an hour. My heart raced, and I took the fastest shower I had ever taken, hopped into my Jeep and drove, as fast as the car could possibly go, to the airport. The flight had not taken off yet, but it was dangerously close. I called the airlines while driving, and they had two flights getting into San Francisco slightly before our scheduled meeting. I arrived at the airport ready to chase the plane down the runway. I had planned this so far in advance, the flight I got was around $200, barely affordable on a resident’s meager salary. The cutoff for check into that flight had closed although the flight was still at the airport. I negotiated, or perhaps more precisely begged, that I be given a chance to race through security to the gate in the hopes of making the flight. Not happening. Hence, I bought a ticket for the next flight, which on zero advance notice totaled$1100. The sympathetic nervous system was too revved up to allow any perception of pain to be felt from that outrageous price. I was simply thankful that I had a flight, took the boarding pass, and quickly got on the plane. Fortunately, I left some buffer time in the schedule, and given the sheer amount of time and effort that went into setting this up, the VC partner booked the entire afternoon for us. Meeting still on. Destiny preserved.

Finally, I had nothing between me and my big pitch, except for about 5 h. Between the 1-h power nap and the sheer adrenaline, having been up 48 h seemed irrelevant. I asked the stewardess for 2 cups of coffee and as many cups of ice, mixed them, chugged them, and got to work. The talk had been done but as for all early-stage ventures, it was a work in progress. There were a couple slides that needed some updating. And for the 1st time in months, there was no pager. The first slide update was the risks of the investment. The second was prospective executive candidates. I had accomplished much of this when the battery ran out. This could not be happening. Too much was at stake. It took about 5 s to come up with a solution. I hit the overhead call button, and the stewardess came to my seat. I politely asked if they could make an announcement on the overhead microphone and ask if anybody had Dell Inspiron 8100 computer, and if so, would the person be willing to loan the battery to me for the remainder of the flight. I asked him to offer $25 for the battery rental, and if there were no takers to repeat the offer in 5 min doubling to$50. Several minutes later that announcement came overhead and to my astonishment within a couple minutes somebody came up offering his battery. I thanked him and plugged the battery in to make sure it was compatible with my computer. It was. I reached into my wallet to take $25 out and noticed that the battery was only halfway charged. For a brief second, I considered half in jest to negotiate down to 12 and half dollars; but my gratitude far exceeded that temptation. Hence, I forked over$25, got another 1–2 h of work done, and completed the last two slides. Check.

We landed in San Francisco, met with the team, grabbed a rental car, and headed toward Sand Hill Road. We were seated around the table with the senior partners of one of the well- known active early-stage VC firms, DeNovo ventures. One of their senior partners, Richard Ferrari, opened the discussion with a quotation that I will never forget, “do you realize that sitting around this table represents over half a billion dollars of capital.” I wasn’t fazed and instead thought “good, then were not wasting each other’s time.”

I led off the pitch discussing the market and the unmet need, the pain felt by the customers who in this case were patients with untreated epilepsy, and the acute need for a solution that could offer seizure prediction and control. Each of the team members fielded certain aspects of the discussion, each a world expert in his respective area. We delved into the clinical need, the value and novelty of closed-loop neuromodulation, the challenges and feasibility of implementing the complex system in an implanted piece of battery-powered hardware, the competitive landscape, the uniqueness and strength of our intellectual property, the risks of the venture and the potential returns on the investment, and the capital requirements and timelines. This was an animated and high- energy conversation that lasted over 2 h culminating in a very high level of interest among the investors and request for a follow-up meeting in the very near future. In fact, they asked us to come back to meet with a syndicate that they would put together in 2 weeks. I was dumbfounded. The sheer pain that it took to make this meeting happen with about 5 months of preparation and the political capital that it took to wrestle 2 days off during December were extreme. There was no way I was going to be able to pull us off again in 2 weeks.

This is when it started to become crystal clear to me that simultaneously getting this venture launched and doing junior residency, despite doing 130–140-h work weeks with the consistent business time of 10–15 h/week tacked onto the standard 120–130-h clinical week, was just not realistic. And each month that went by was another month that the competition was out there filing more patents, making progress in their engineering technologies, and raising more money to fuel their ventures. I had to fish or cut bait.

So began the VC dating game. Several firms floated the notion of term sheets with very reasonable valuations. We began negotiating in earnest multiple term sheets, including valuations and other important features such as investment preferences, ratchet clauses, and other details that were important and many of which were new to me at that time. I tried to be a sponge for advice and reached out to friends and colleagues for mentorship in many of these areas, and all were very generous with their time and knowledge. (I would like to thank and acknowledge David Goodman, Shai Gozani, Ken Morse, the late Richard Norman, and the late Russ Olive for their mentorship and advice during this critical time). There are many strategic considerations involved in selecting term sheets and also subsequently adding potential investors to the syndicates. It is a delicate dance. It is best if investors have invested together previously, and is particularly helpful if they have synergistic philosophies, as I quickly appreciated. Very subtle differences in philosophy can place the syndicate at risk for disintegrating. If one investor pulls out unexpectedly, particularly at the last minute, that can not only kill a deal, but it can kill the funding prospects for a venture. Fortunately, I had developed good relationships and communication with many of the prospective investors, and many of them were forthright with me; and we were ultimately able to navigate these risks.

## POSSIBILITY OF FAILURE TO DEFEND POTENTIAL LAWSUIT ON PATENT; LAUNCH OF MEDICAL TECHNOLOGY VENTURE

In summing up the analyses, the senior partner said it is correct that Dan has good invalidity or noninfringement arguments for each one of the hundreds of the claims we discussed; however, if the venture gets sued, he probably still has a 50% chance of losing because only one of those claims has to hold up. I couldn’t believe what I was hearing. There was no way this was the end of the line. I quickly put together an argument for how several of the patents in my portfolio could be used in a potent countersuit against companies who could potentially threaten us. I bolstered this with some additional IP that I licensed into the company. These moves and their accompanying impassioned arguments seemed to keep the momentum alive, by a thread as I learned in retrospect; and then we progressed from the term sheet to the closing documents. This went rather quickly, and before I knew it, we had a deadline and a timeline for closing.

The launching of my first real medical technology venture, a goal I had been working toward for well over a decade, was finally happening. After some extremely last-minute haggling by the VC attorneys about some IP ownership details, which potentially threatened the deal, they signed off on the closing documents less than an hour before the deadline. We all quickly signed and faxed the documents, and the money was wired to our company bank account, $3 million from the East Coast from Canaan Partners and$3 million from the West Coast from Three Arch Partners; and the deal was done! I was fried. That was on par with the stress from my PhD defense. I had recruited John Harris and Kent Leyde to join the venture, and after closing, we all celebrated over several drinks in Seattle.

This was a big milestone. Most prominent VC firms see several thousand business plans each year, and they only fund a handful, on the order of 0.1% of the deals screened. Once funded, the likelihood of subsequent funding is well into the double digits, provided milestones are met. Hence, with closing of the Series A financing, the likelihood of success increased from about 0.1% to potentially tens of percentage points, arguably increasing this probability a hundred-fold.

## BUILDING THE MEDICAL TECHNOLOGY VENTURE

We quickly set out to build and launch the venture. The infrastructure for gathering and analyzing electroencephalography (EEG) data was designed and built. We designed clinical studies in recruited many terrific centers to generate high-quality data. We then interviewed and hired experienced epilepsy neurologists to annotate that data. Our engineering team built a massively parallel supercomputer optimized to test features against EEG datasets, a critical step in algorithm development [Figure 4].

We recruited several experts in algorithm development to join the team. We got a terrific deal at well below market rates for an office lease in Fisher Plaza which was literally in the shadow of the Space Needle, a beautiful area of Seattle. We proceeded to acquire several hundred EEG datasets had them annotated by expert neurologists and divided them into a development dataset in a testing dataset. The algorithm team came up with thousands of potential EEG features that may have predictive value and designed corresponding feature extractors as potential building blocks for the algorithm. These feature extractors were then vetted against the EEG data and narrowed down from many thousands to 288, from which a customized subset of a handful of feature extractors was selected for each patient. The development of the technology is described in more detail in DiLorenzo 2019,[2] and the pilot clinical study was described in Cook 2013.[1] Ultimately, the company went on to raise $71.2 million in predominantly venture financing with a small amount of strategic investment over an 11- year timeline following founding in 2002. An implanted device with embedded processing capability was developed and tested in humans. The first in man study, conducted on 15 patients with up to 2 years follow-up and published in 2013,[1] showed that (1) seizures can be forewarned with clinically very relevant advance time windows and that (2) low-risk states, when indicated by the device, portend a near zero likelihood of a patient having a seizure [Figure 5] (Clinical Trial ID: NCT01043406). ## BACK TO FINISH NEUROSURGERY RESIDENCY AND A SUCCESSFUL FIRST-IN-MAN STUDY By 2013, 11 years and$71 million after founding, the venture had strong first-in-man data in hand, as published in Cook 2013.[1] I had returned a number of years earlier to continue residency, and the team had secured a term sheet for a strategic investor for \$50MM to finance a pivotal study. Raising money at that point in time was extremely difficult for several reasons. The MedTech venture capital field had contracted to about 10% of what it had been when I started the venture, and this was due to a combination of at least 4 factors: (1) the financial stock market crash of 2008 had not rebounded and was having a dual effect of (1a) depressing valuations and inhibiting financing of capital intensive deals and (1b) impairing the raising of new funds by venture firms, (2) many investors and venture capital firms were very concerned about the risk of socialized medicine in the US and the effect that increased cost pressures and no payor competition would have on the reimbursement of new and innovative technologies, (3) a large amount of venture financing had been raised by funds and the returns had not been as high as expected; so some were not able to raise subsequent funds, resulting in a contraction in the field, and (4) a number of venture backed medical device companies had recently been denied approval by the FDA for devices, including some in the neuro space, generating great concern among investors about the increased regulatory uncertainty and risk.

The strategic deal that was going to fund the pivotal study ended up falling through, and the company and technology were acquired by Cyberonics, an early strategic investor. Much of the technology is being used in the next generation Cyberonics LivaNova devices, including multiple subsystems developed for the SAS, as well as my closed-loop IP covering closed-loop VNS systems. I retain 50% ownership in much of the NeuroVista IP, and 100% ownership of this IP in multiple other fields of use, including many applications for closed-loop neuromodulation.

## CONCLUSION AND PEARLS

The experience gleaned is not done justice by trying to summarize it in a paragraph or two, but I will attempt nonetheless. First: focus on important problems that impact people. This is good in and of itself, and ventures working on high impact solutions are easier to recruit bright people to join. Second: be a sponge for advice. Entrepreneurialism, like all fields, can and should be a lifelong learning experience. Particularly for first-time entrepreneurs, building a trusted set of seasoned advisors can be invaluable. Third: obtain robust patent coverage of the product, and understand the landscape. Fourth: recruit seasoned people, especially ones with backgrounds that round out relative weaknesses of the founder or the early team. Hire very bright people and people who know how to recruit more very bright people. Fifth: find investors with familiarity with space and its inherent risks and with sufficient capital to carry the project over the finish line. Find investors who have great reputations and who are founder friendly. I will share my mantra which applies not only to new projects and ventures but, I believe, to undertakings in general is: “(1) Pick a topic that you are passionate about and that will have impact, (2) assume that you will succeed, and (3) work like a dog to insure the first two assumptions hold.”

Nil.

### Conflicts of interest

There are no conflicts of interest.

### Disclaimer

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of the Journal or its management.

## REFERENCES

1. , , , , , , . Prediction of seizure likelihood with a long-term, implanted seizure advisory system in patients with drug-resistant epilepsy: A first-in-man study. Lancet Neurol. 2013;12:563-71.