Startup Building Blocks, Challenges, and Pitfalls From Formation to Growth | Uri Greenwald | Lunch & Learn

DOC# 1
Startup Building Blocks, Challenges, and Pitfalls
From Formation to Growth
Presented By:
Uri Greenwald, MD, JD

DOC# 2
PAST EMPLOYMENT
• Co-Founder, Greenwald
Technologies, LLC
• PGY4 General Surgery Resident,
LSU Medical Center New
Orleans, LA
EDUCATION
• JD, UC Berkeley School of Law
• MD, NYU School of Medicine
URI GREENWALD
Associate
IP Counseling & Patents
Medical Device Patents
Life Sciences

DOC# 3
Disclaimers
The following is intended to be educational only and
should not necessarily be deemed to constitute my legal
opinion or legal advice

DOC# 5
What’s So Great About Startups?
• A startup is the most effective way for you to deliver
your innovation to society
• Licensing your innovation to a third party to develop
is not so simple
• While not impossible, it is believed that a very small
percentage of the patents available for license each year
are monetized, and fewer still are monetized as
individual patents rather than as part of a patent
portfolio
• Patent monetization is typically more common in the
software/electronics/IT space

DOC# 6
• You drive the innovation’s failure or success
• You will guide the development of your innovation
during prototype and validation stages (so that someone else
doesn’t screw it up)
• You will guide the delivery of the finished commercial
product to the targeted customer (so that someone else doesn’t
prevent it from rolling out in the way that you intend it to)

DOC# 7

DOC# 9
Building Blocks Overview
Innovation
Team
Company
License
Intellectual Property
FDA
Pitch*

DOC# 11
• The Innovative Spark: A
perceived need - a mismatch
between how UO was measured
vs. how other patient monitoring
was carried out
• Goals: Reliable and accurate
system that could be cheaply
manufactured and sold
The Automated Urine Output
Monitoring System

DOC# 12
The Automated Urine Output
Monitoring System
• Target Consumer: Hospitals and
Nursing homes (but really
physicians and healthcare staff)
• Potential Competitors:
Competing automated urine
output monitoring technology
priced at ~$2k compared to our
predicted $30-50 price tag (and it
did not work as well as our
technology)

DOC# 13
Every Single Investor We Pitched to Asked…
What would drive hospitals and insurers to pay $20-50
for your system when the old system seems to work
and can always undercut your lowest price?

DOC# 14
Pitfall #1
An innovation that does not
create a clear and simple
pathway to commercial success
is going to be very difficult to
launch

DOC# 15
Suggestions
• Develop a convincing story for how your innovation
will lead to commercial success
• One way for an innovation to do this is by providing
an overwhelming benefit to the target consumer (e.g. for
hospitals as the target consumer - reduced
morbidity/mortality, shorter hospital stays)
• Properly identify potential customers and competitors
• Cheap-and-better often loses to cheapest-and-adequate

DOC# 17
Function
One Example:
• Physician* = Innovator = CMO/CSO
• Engineer/Chemist = Builder and Developer = CTO
• MBA = Salesman = CEO
*Practically speaking - as a busy surgeon/healthcare provider/scienctis you will not
be able to carry out all of the demands of a growing company on your own due to
time constraints (i.e. let others help you with the heavy lifting)

DOC# 18
Form
• Much of the startup cycle is choreographed
• Early investment decisions are often made with little
real information to go by
• Thus having a “strong, qualified team” is perceived by
many to be a risk minimizing component of a startup,
and is often a necessary component for successfully
raising capital

DOC# 19
Pitfall #2
• Going it entirely alone or with a
very inexperienced team may
suggest a lack of understanding of
the working of the industry to
investors (especially investors in
the healthcare sector)
• The perceived lack of
understanding may further create
a presumption that the founder(s)
will be difficult to work with

DOC# 20
Suggestions
• Network like crazy to build a strong team
• Reach out to “big-name” colleagues to serve on your
company’s Medical Advisory Board
• Be selective

DOC# 21
The Company: It’s Easy, Valuable, and
Protects Your Interests

DOC# 22
Incorporate
• You can fill out the incorporation documents yourself (= Easy)
• Incorporation (at least to some degree) demonstrates an
understanding of the startup cycle and commitment to following
an innovation through (= Valuable)
• Incorporation can serve to clearly delineate the financial interests
of involved parties through ownership of shares (= Protects Your
Interests)
• Incorporation protects you from personal liability* (= Protects
Your Interests)
*With rare exception

DOC# 23
Pitfall #3
Carrying out company
transactions personally rather
than through a corporation
thereby potentially creating
personal liability for
transactions

DOC# 24
Suggestions
• Incorporate yourself
• Incorporate in the state of Delaware (or other
corporate friendly state)

DOC# 25
University License: Don’t Let It Stop
You

DOC# 26
Your Company Needs
An Exclusive License
• For you to pursue your innovation through your
startup, your company will need to obtain an exclusive
license to the innovation from the UC
• For all practical purposes, an exclusive license
provides you with the essential rights that you would
have through an assignment (i.e. ownership), and it is
not typically a hindrance to future partnership and
acquisition

DOC# 27
Potential Sticking Point for Some
• If you are a UC employee, it is extremely likely that
your innovations are owned by the Board of Regents
under your employment agreement (and Bayh-Dole
Act)
• Furthermore, the Board of Regents is not likely to give
you ownership back of the innovation through
assignment to you or your company*, but rather may
provide your company with an exclusive license to use
the innovation
*With one very rare exception

DOC# 28
Pitfall #4
Not pursuing innovation
because of the workings of
the licensing process

DOC# 29
Suggestions
• Confirm that your innovation falls under an obligation
to assign
• If it does, make peace with it. There are some benefits
to having the UC as a partner

DOC# 30
Pitfall #5
Not obtaining terms
that fit your company’s
needs and strategic plan

DOC# 31
Suggestions
• If you intend to be an innovator and company founder, make
really good friends with the Technology Transfer Team
• Be empathetic to their position
• Understand, going in, what is negotiable and what is not
• Involvement of distinguished faculty and/or faculty with a
history of past commercialized innovations may influence the
agreement outcome*
• Really sell it!
*Notwithstanding potential conflicts of
interest

DOC# 33
Intellectual Property = A Patent
• Intellectual property traditionally encompasses Trademark,
Copyright, and Trade Secret, but for the purposes of the early
stage startup what we mean is a patent
• A patent is a government sanctioned monopoly granted to the
patent owner (or licensee) in exchange for the disclosure to
the public of a novel and non-obvious patentable teaching
• An issued patent provides the patent owner (or licensee) with
the exclusive rights to make, use, sell, offer to sell, and import
an invention as claimed for 20 years*
*Under certain circumstances patent term may actually be
either more or less than 20 years

DOC# 34
Don’t Sleep on Your IP
• The ability to exclude others from doing both exactly
what you plan to do as well as essentially what you
plan to do (i.e. commercially viable workarounds)
• Typically, startups in the healthcare space that do not
have the ability to exclude others are not successful
• Plan to file more than one patent application in order
to build a fence around your innovation

DOC# 35
You Needed to Patent
Your Innovation Yesterday
• You as an inventor will want to get a patent application on
file as soon as is possible but at the same time, you may
need to first collaborate with a co-inventor (e.g. an
engineer or programmer) in order to get your innovation
reduced to practice
• Once your innovation is ready to patent, you will need to
get an application for your innovation on file ASAP.
Needless delay and certain public uses of the innovation
may lead to a loss of rights under the America Invents Act

DOC# 36
A Patent Application vs. An Issued Patent
• A filed (and properly drafted) patent application does
prevent another party from patenting your innovation
as described in your patent application (i.e. prevents
them from stealing your idea) essentially anywhere in
the world
• A filed (and pending) patent application does not grant
exclusivity (i.e. the ability to enforce)
• Only an issued patent provides the ability to enforce
your innovation as claimed within the jurisdiction that
the patent was filed

DOC# 37
Pitfall #6
• Junk Patents
• Patents with claims that don’t cover your
commercial product
• Patents with claims that are easily worked
around
• Patents (and patent applications) with poor
or minimal description of your commercial
product so that no valuable claims can ever
be drawn out
• Junk Portfolios
• Haphazardly filed and incomplete
applications that become prior art for your
subsequently filed applications
• Inattention to proper filing formalities and
obligations

DOC# 38
Suggestion
• Get involved
• Read and revise every draft of the application making sure
that your innovation is properly and completely described in
the written description portion
• Help your patent drafter by identifying potential competitors
in the space
• Help your drafter by providing ample figures and data (as
appropriate)
• Engage with the drafted claims and insist that the drafter
walk you through the claims and explain to you the scope
that he or she believes the claims provide
• Have your patent drafter entirely explain their drafting
strategy to you and make sure you agree

DOC# 39
FDA: Plot an Early Course

DOC# 40
Recent Trend
• It is taking longer to clear products through the FDA
in the healthcare space, which means longer times to
launch
• The M&A climate currently is that you will likely be
expected to at least begin the FDA process, by
identifying an approval pathway with the FDA and if
required obtain clinical data

DOC# 41
What Does that Mean for Startups?
• It is strongly to your advantage to understand the
FDA process and have an FDA Story to provide to
potential early investors
• If you have the ability to obtain approval (e.g. through
the 510k process), it will be a huge asset in terms of
the valuation of your company by potential investors
and acquirers

DOC# 42
Pitfall #7
Going to the FDA
without a thought-out
strategy

DOC# 43
Suggestion
• Get help – To help make sure you get the best possible
clearance pathway

Startup Building Blocks, Challenges, and Pitfalls From Formation to Growth | Uri Greenwald | Lunch & Learn

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