The Achieve Podcast - Shan Padda (Harvard MedTech)

Welcome to the Achieve Podcast, the show where we highlight the leaders, creators, and entrepreneurs who are building meaningful businesses and shaping their industries. My name is Jesse Warner. I'll be your host today. I'm ex— we're excited to have Shane Pata on our podcast today. He is the founder, uh, chief executive officer for Harvard MedTech, one of the founders Shane, it's a pleasure to have you on the show.

Ah, thank you very much. Thanks for inviting me.

So our audience can get to know you a little bit, give us the quick backstory of your business. What do you do? How did that all get started?

Yeah, so this is my, actually my 6th business, and I thought I was retired, but I got really bored after 6 months. And so I tend to be very mission-driven in the companies that I start. As my life progresses, I didn't have a whole lot of choices when I was 23. You gotta cover the rent and the food. But now that you have more of a luxury, you can pick and choose. And so in this particular case, the problem that I started off trying to solve was opioids and the huge amount of addiction that's happened in our country. And as I looked at it and followed the upward stream, Patients who have suffered from trauma— trauma can be a car accident, it can be a physical assault, it can be a construction injury, any of those things— those victims or those patients have both physical symptoms like chronic pain. That's why they take the opioids. But they also have behavioral health issues such as PTSD, depression, anxiety, poor sleep architecture. And my belief is that if, you know, you really have to treat the whole person holistically. And so by just tackling one of those things, you know, giving opioids, it doesn't solve the depression or the anxiety or, you know, the PTSD or the sleep challenges. And so came up with a program that my only kind of parameters were, we had to provide as much pain relief as narcotics without using narcotics or any other pharmaceuticals. And the other parts of it are all behavioral health related and oftentimes that are created by the traumatic incident. Because of that, the military— we serve the VA. Our biggest customer. A lot of that population has PTSD, as you can expect, you know, 40 years later from, you know, Vietnam or as recently as the Iraq-Afghanistan wars. And so when we came up with a solution that's a combination of virtual reality, proprietary content, about 20 hours worth, broken up into 89 different experiences, each of which is designed to derive a different effect per patient. The patients tend to use it for about half an hour to 1 hour at the beginning, but by month 3, it's a 3-month program, they're using it for 3 or 4. And really what we are doing is by the fact that a VR headset is very immersive, we control what the patient sees and what they hear. That gives us the ability to help the patient reprogram their brain if you wanna think about it that way, but build more resilience is probably a better way of thinking about it. Their pain tolerance goes up tremendously. And then also like you said, for example, our outcomes are we are able to reduce pain by 50% in 15 minutes versus 45 minutes for an OxyContin or an oxycodone. In addition to the patient using the VR headset every day, they also have a once-a-week call with one of our master's level clinicians, and they all have degrees in the behavioral sciences, psychology, addiction counseling, and similar. But in this case, they perform a coaching, a behavioral health coaching function, not a therapist, because the patient may already have a therapist and we don't want to compete with that. We've been able to drive down anxiety by about 40%. We have driven down depression by 60%. We have reduced PTSD by 30%. In terms of sleep, most of our patients come into us sleeping about 4 hours a night, maybe 5. We've given them an extra couple of hours of sleep. And equally, if not more importantly, the sleep is uninterrupted. So you're not waking up 3 times over the course of the night. And it's really fit a need in the marketplace for people who don't want to take narcotics and who would generally like to wean off of other pharmaceuticals they have. Because we've treated 5,000+ patients. We started in 2020. The VA, our biggest customer, we've treated 2,200 patients. And, you know, as we studied them later on, there's no recidivism. You know, it's kind of like a stroke victim. You know, they lose electrical charge, fries millions of brain cells. They lose the ability to maybe use their right arm or they have trouble walking, you know, whatever it may be. And we've shown that through physical therapy and repetitive motions, that those patients can regain some or all of the capabilities they lost because of the stroke, and they don't lose them in the future because it's now on the basis of we built new neural networks in the brain. It's a concept called neuroplasticity. Our brain is the most adaptable organ in our body, liver coming in as a close second. And so what we are really doing is we are helping the patient lack of a better term, rewire their neural networks so that they're more friendly towards the patient and are no longer as a result of dysfunction.

Well, Shane, congratulations on the success of your company. I mean, it sounds like it's solving real problems, helping people as they do it. You mentioned starting in 2020, is that right?

That's correct.

How has business changed since 2020? How big is your team now versus when you started? What does that look like today?

Yeah, so in 2020, first of all, it was the worst time ever in history, you know, my fault to start a medical device company. Of course, in January, I didn't know we were going to have a pandemic in March. And so we had a really tough first couple of years because it was hard to get in front of docs. Hospitals were shut down, clinics were shut down, and you can't convince a doc to try a new modality of treatment unless they can actually see it, feel it, all that stuff. We try to compensate with a lot of webinars, CEU webinars, and we, we educated about 14,000 people a year for those two years. Those are doctors, nurses, case managers and adjusters from the insurance companies. And it really helped educate the marketplace about our product. Then our next big break was in— we got the contract with the VA in 2003, and we were able to use the outcomes we had achieved in the first space that we were in. And that, by the way, was workers' compensation. That covers injuries on the job, which most of them are traumatic. So it was a very target-rich environment for us. We got the VA at the end of '23. We took off and then we crossed the $11 million annualized run rate in January. We've had a number of years of about 100% growth from this year to next year. I like to say that, you know, we're gonna have about 50% growth is my aspirational goal. You know, that doesn't mean we're gonna hit it, but that's what I'm, that's what we're shooting for.

When you look at sales, marketing, outreach, where are you seeing traction today? What's working for you?

Number one are the clinical outcomes. They blow people away. And to the point, so for example, it's so effective. That The Lancet, which is published out of England and is the world's preeminent medical journal, the New England Journal of Medicine is number 2 and so on. They studied our VR therapy and they just, and their research outcomes showed that for patients undergoing surgery, it was just as effective as the local anesthetics or sedatives that were given to patients. And so all of a sudden, you know, the patient's not exposed to opioids whatsoever. And the outcomes, you know, as well as on the anxiety, depression, the other things we talked about were also off the charts. No one, people were shocked at how effective the program was. That then gave us the ROIs and the data to go to the payers. And educate them about the program, oftentimes on an adjuster by adjuster office by adjuster office, you know, which generally hold 15 to 20 people. And so now our approval rate in that segment of the industry is, in the states we started at, it's 80% approval, which is huge for a new medical device, and nationwide 50%. Because we started really in the Northeast. We just got into the West starting last year. But we're really happy with that level of penetration. And then the third thing is, you know, sales is sort of challenging. I've run, like I said, 5 different companies and I've used a couple of different models. I've used a model of a direct salesperson. The problem with that is a direct salesperson will probably cost you, depending on the industry and stuff, somewhere between $200,000 to a quarter of a million before they pay for themselves. So if you're building a big sales force, that's a big use, big suck of capital. But the problem is that with a new product, you have to have salespeople because they need to be able to explain the science and convince the doctors that this is better than prescribing a pill. Or doing surgery. And that's how we started in terms of really getting traction in the market. But, you know, at that time we had a sales force of 4 people and our partner, our distributor, a partner in the VA, they had a sales force of 21 people. And so we basically said that, look, these guys can put provide much more coverage than we can, or, you know, I don't have the balance sheet or want to suffer the dilution of raising more money just for a sales force. And that's worked out beautifully. So we've gone from 4 sales reps to 21, and they're all— they've all been trained really well on our product. And, and that's what we're doing there. In the workers' compensation industry, it's a, it's a combination of, uh, direct salespeople and distributors.

Well, congratulations, congratulations again on that growth. Shane, as you look for the— over the next stage of growth for your company, what are you most excited about?

Um, I think we've hit the inflection point. You know, my last two companies went from under $10 million to high 8 figures in the span of 3 years once we hit the inflection point. Literally, my last two companies ago, we were doing $4 million. The next year we did $16 million. The next year we did $32 million. The next year we did $85 million. This company is hitting that inflection point. I don't know what the curve is going to be, but the dynamics have changed in the marketplace, in the markets that we're in. And we're also going to be moving into the commercial health plan market in Q2. These are the Blue Cross Blue Shield plans, the Aetnas and the Cignas. Uh, you know, that'll be a bit of a tougher sale because they're, they're not as progressive as some of the smaller plans are. Um, and, uh, I don't mean to insult anyone, but for the big HMOs, it's, it's just about the money. And, um, um, whereas, you know, and, and, and they want, you know, old, old, uh and tried and true methods that have been in place for who knows how long, whereas the smaller health plans are willing to try new ideas and to incorporate them if they work for them in a pilot.

Shane, let's look back for a minute. You've worked with multiple companies, building them, growing them.

Mm-hmm.

What advice would you give to leaders and entrepreneurs who are on a similar journey to you? What are some of the lessons you've learned?

The first lesson is really research the, the, your idea, whether it's a product or a service, and really pressure test it to see what level of market acceptance you're going to get. The second thing is that to be very realistic about how much money it will take to until you get to break even or above. Most entrepreneurs figure is about a third or a half of what's actually necessary, which can have an impact on the story you tell for future rounds, how much dilution you're going to get. The second thing is that you have to make sure that someone's willing to pay for the product or service. You can have the best product or best service in the world, but if no one wants to pay for it, you don't have a business. The third thing is also most entrepreneurs tend to underestimate how long it'll take for market adoption. It's usually about twice what they originally thought it would be, sometimes 3x, because especially in healthcare, markets are slow to move. It's not like cryptocurrency or AI where, you know, they kind of make the rules every day as they go along. And so in healthcare, you need to, you need to have enough data that patient safety is not an issue. And healthcare is about people's lives. It should be conservative, but the end result for an entrepreneur is it's a longer cycle to get to the finish line.

Any other final thoughts, Shane, as we wrap up the conversation?

I would say that if you're going to be an entrepreneur, one quality you have to have is perseverance. I have seen so many entrepreneurs who fold in the towel after year 2 or year 3, and I'm very empathetic because things haven't gone right. But, you know, I figured every business I go into will take at least 5 years to get to break even because they're all technology companies. And then after that, you know, our gross margins are about 85%. So we can, we can ramp EBITDA and, and revenue more aggressively. We turned EBITDA positive last fall, which was exactly about 5 years after we started. And so, you know, we kind of hit that market. You know, our EBITDA is now in the, in the 6 figures. 96% of patients and 97% of physicians love our program based on surveys. Our net promoter score from our patients is 85, which for folks who know what a net promoter score is, that's an astounding number. Especially in healthcare.

Yeah, and I think it's a testament to the effectiveness of the actual solution that you're providing, right?

Yeah, yeah, yeah.

Well, Shane, thank you again for sharing your story with us. Really enjoyed the conversation, your insights. For those listening, if you want to learn more about Harvard MedTech and what Shane and his team are doing, you can visit harvardmedtech.com. And that'll wrap up today's episode of the Achieve Podcast. A big thank you to our sponsor Achieve Fractional, which provides fractional executives for growing businesses. And if you enjoyed today's conversation, follow the show, share with other entrepreneurs who'd also find value in it. And again, thank you for listening. We'll see you on the next episode of the Achieve Podcast.