#25 - Anatomy of a Startup - Q&A with Marty WynKoop, co-founder of OrthoHelix (58 mins)

Brought to you by Tiger Buford.

Hello, orthopedics friends. Welcome to Inside Orthopedics. My name is Tiger. I'm an orthopedic industry insider and retained recruiter for early-stage orthopedic companies. This is episode number 25. Titled Anatomy of a Startup: Q&A with Marty Winecoop, co-founder of OrthoHelix. This one is a real treat. You're going to enjoy this one. You'll get a sneak peek into a successful orthopedic startup from inception to being acquired, as told by the co-founder, head of operations, sales, and marketing, Marty shares lots of nuggets of wisdom on how to build value in orthopedic startups. Marty and I are old friends, but this is the first time I've heard the OrthoHelix story from start to finish. Enjoy.

Okay, we're live, Marty. Are you there?

Well, yeah, I am, Tiger. It's good to talk to you.

Yeah, great to talk to you. Thanks for your time. So let's just jump right in about the history of Ortho Helix and from day one to the exit. So what was the inception of Ortho Helix? How did it all— where did the idea come from? How did it begin?

Well, a lot of it began with a need, and the need, of course, was when we first came out with small bone, there wasn't a whole lot of companies that were focused on small bone. Richard Allen, who was one of the founders of Regeneration Technologies, had— he and his team had recruited me in before they had gone public. And one thing— so different things changed, and as the company, as Regeneration grew and got larger, both he and I exited from RTI. And one of their customers was a guy by the name of Dr. David Kaye. And one time Richard and I were sitting down and we were discussing, well, what can we do next? There's something that we should be able to do that we can be enthusiastic about. And Richard says to me, I know this doctor who's got some ideas. And I'm thinking in my head, I wonder who he is. But before I tell you who he is, let me talk to him. And interestingly enough, I was also thinking of a doctor, Dr. David Kaye, but didn't mention that to Richard. So Richard calls David Kaye and David says, oh, I know Marty. Marty would be a great guy for us to get together. And so without us knowing each other and knowing our desire, we, uh, I guess serendipitously just blended all together. And once we let everybody know that, hey, we were thinking about you and this is what we did, we decided we can form something and fill a need in small bone. Uh, Dr. Kaye, of course, is a foot surgeon.

Yeah. What year is this, Marty?

Uh, this is 2002.

Okay.

When we first started talking. So we had a couple of different conversations. Richard had, of course, with Regeneration Technologies and University of Florida Tissue Bank, had gone through this process before at a structure level, and I had gone through it slightly, but not at the level that he did. So Richard brought a lot of knowledge and experience here, and we sat down and started to think, okay, how can we do this? So needless to say, Richard was kind of the finance and the higher corporate guy. David was kind of the idea guy, and I was more the operations guy than anything else. I was the guy who was going to get it done. So I started to put together a business plan for us to focus on how can we grow this and where can we go with this.

And what was the idea? What was the concept?

What was the unmet clinical need that was driving this? Well, at this point, in 2002, 2003, there was virtually no companies that focused solely on small bone. You had Synthes who was doing a lot of things, but theirs was a very fundamental product. It wasn't designed specifically anatomically or to the surgeon and the surgeon's needs. It was Basically said, well, here's a plate. And if you can remember, and some of the listeners remember, it was basically a metal plate with holes in it, and it didn't— you had to manually contour it to the bone while you were in surgery. And that was really the extent of it. You had to do all the work right there to contour it to the bone, make it fit. And we said— and David, Dr. K, continued to say, we really have a need. And through that, I met a number of his cohorts, and I had known a number of small bone, either foot and ankle or hand surgeons, and had seen the lack of effective tools that they had, not only the implants, but actually even the tools that they used to implant the device. And we thought that there was a pretty significant need there, and how can we address it? And as I said, of course, at that point, there was really nobody who was going after that specific market. Got it, got it.

Yeah, I've been in those cases where they trim plates and cut off screw holes and bend. It was crazy. The Synthes plating systems were kind of universal for any bone. They weren't specific. Where did the name come from, Ortho Helix?

Well, it was actually a name that David Kaye had thought of, and really where it came from was the first product that David had been working on in his mind. David is a consummate inventor. He continues to think of things to come up with, and so he had come up with a helical bone screw to be able to use for fixation. And because of this helical screw, and because he had actually already had filed the patents work for it— it had not been issued, but the patents had been filed for. We took that as our name because we were thinking that that potentially would be our first product that we brought to market. So Ortho, of course, for orthopedics, and Helix because of this helical screw. And it was also a unique name that kind of caught people's attention. So me, from coming from a marketing and sales point of view, really appreciated that, and we thought we'd go with that. Interestingly enough, we never commercialized that screw because we could design it, but we couldn't manufacture it. It was just never stable enough to actually bite into bone and to hold bone without cracking or failing. But it was a great idea, and it was our— it ultimately ended up being our first patent.

Got it. So we talked about this the other day. So there's different startups. There's surgeon founders, there's engineering founders, and what would you consider OrthoHelix as?

I would consider it as a market need.

Okay.

My background really wasn't in small bones at that point. I was a spine and mostly a spine guy is really where I spent a great deal of my career. Excuse me. So it really was that. And of course, Richard was, uh, from orthopedics. His orthopedic startup was more the finance aspect. And of course, David had some ideas bouncing around in his head. But really, after it's all said and done, we We saw that there was a need and we thought, well, let's see if we can address that need. So I would call it not really none of those, but one that we kind of listened to what the sounds were going on in the marketplace and the needs that were. And it really succeeded in addressing that.

Interesting. And it was kind of a team startup too, because you had multiple players on day one.

Exactly. So we had a surgeon who was very accomplished. Who is very accomplished. We have a successful startup guy who had started and had a very nice exit from a large company on acquisition. And then I had been in a couple startups at more of an operational level and structure level so that we each had a different area. David, Dr. K would bring us contacts with other guys within the industry. When I say other guys, other surgeons. And of course, Richard had that panache that would help us when we needed to raise money. And after it's all said and done, you need somebody to go out there and crack the whip to do it, and I was cheerful to be able to be a part of that.

Crack the whip. So what were the, what were the very first products and technology developed?

Well, of course, you know, we talked about that helical screw. That was, that was the very first, but we also knew, and as we continued to have discussions with foot surgeons, we found out that we needed to come up with a plate that was contoured. And so our first plate was a— it was a— again, it wasn't a universal plate, but it was the aspect of it being used on multiple levels was how long it was. But what made it unique, and ultimately what became our first commercial viable patent, was that we had offset screws at the end of the plate. So if you think of a melt zone, and as you shape— if you can envision that in your mind and how it has 2 ears on either end. At that point, there was a company or 2 that had ears on the end of their plate for stability and security. And I basically came in the room and said, well, how can we make this look different? And of course, the engineers at that point, we had a couple of engineers on board and we had a couple of surgeons Who would look at these things, and they kind of looked at me like I was crazy, but I just wanted something to look different. And I said, how about if we elongate one of those ears? Or if you— again, if you can imagine it's a dog bone, one of the ends of the dog bone, we push it out a little bit further. And the engineers looked at me and said, wow. That's a wonderful idea. That gives us phenomenal stability, because if you think about screws going in the bone or even screws in the wood, The farther away you can put the screws in, the less likely it is to compromise the bone, or if it's wood, to split the wood. And by moving those apart, it actually made the stability and strength of the plate and its fixation dramatically higher. So that was really our first product that we developed, and it did extremely well. I think one of the things that, as I started to track it, I think we were in excess of $1 million about 6 16 months after we first introduced that, just on that one plate, in varying lengths, of course.

But it was—

as I always laugh, I see my name on the patent and it's only because I wanted something to look different.

Excellent. So, and how— what was the development process like? I mean, you had a small team. Um, was it CAD, cadaver labs? What— how did you guys develop?

Well, we started out with To go through— we actually sat down with a number of surgeons. We were fortunate we had a good surgeon advisory committee that we were able to put together, a surgeon advisory board, and from diverse parts of the country. And again, most of these guys were all part of David Kaye's sphere of influence, if you can call it, friends and people that he's met over the years. So we were able to go to them and say, Almost developed, as it were, a homogenized device. Because we'd have one surgeon who would say, well, it needs to be this way. And then the next surgeon would say, well, yeah, but maybe a little bit more this way. And we would continue to validate that via drawings and quick prototyping, which was just now— just becoming possible. And I think it was about 2003, 2004. We were able to start being able to do quick prototyping and being able to put these products in the surgeons' hands after they gave us some feedback. So we would go through that process with the surgeons validating it, making sure, is this what you're looking for? Going back, how can we improve this? But again, I'm a firm believer, of course, that the enemy of best is better. So we wanted to come to a point where we could actually market the product. So once we finalized the design, and again, all of this was— we would do it through CAD, of course. We initially started out with one— our first employee was a brand new engineer right out of school, but we'd had a consultant engineer who I had worked with at EBI when I was at EBI and had worked with in other locations at other times. And he had been doing engineering work for about 16 years. So he was a consultant with us until we could— until we raised enough money to support him. So these 2 guys were basically our design guys, one who was very experienced who could kind of oversee the younger guy who was doing a lot of the work. And we'd do that fast prototyping, we'd send the samples out, and then what we would do is we would try to do some sort of cadaver lab or some sort of bone To be able to test it. But again, finite analysis would have given us really strong data back. So we were able to do on a number of procedures in the OR based on getting approval from the instrument review boards within these hospitals that these surgeons were very active. And we had a very Outstanding feedback, not only in the recovery of the patient, but also in the ease of use that the surgeons had. In addition to designing instruments, the implants, we also spent a fair amount of time doing instrument development, the hand tools. Again, most hand tools were— I think most people can't appreciate how bad they were for small bone, whether it was foot and ankle or whether it was— They were just either super small or very large. And my background in spine, we were using some very advanced hand tools, ratcheted screwdrivers, which no one in small bone was even familiar with that other outside than their garage at home. So we started to develop hand tools to put the implants in that were also ergonomically designed. And that combination of those 2 things That development process really brought us to the forefront of success with surgeons using it. They liked it. They didn't have to change their technique and it made it easier for them. And if you have an easier procedure, you, you're able to have reduced the stress and wear and tear on that surgeon, and he's going to have a better outcome, not only with him physically, but especially with his patient, because that patient is going to be able to recover quicker. if he has a better tool and he's becoming more efficient with what he's using.

Got it. So you mentioned funding earlier, where you couldn't take on large payroll early. So walk me through the funding rounds and how it was funded and what were the sales milestones the first few years?

Sure. Funding right out of the beginning, Of course, you've always heard of the 3 Fs. We started out internally funding it ourselves, the 3 founders, and then we went to our 3 Fs, which are of course friends, family, and fools. And we were fortunate that we had a lot of those. And we used them. So we actually, when we did our first round of financing, we raised Just slightly. It was about $780,000. And we used virtually all of that for prototyping and for hiring people. And as I said, the first person we hired was that new engineer. Second person was the other engineer. I was actually the fourth person hired by the company, even though I was working full-time. And at that point, I'd been working full-time for the company, oh, probably it was about a year and a half, maybe close to 2 years at that point. And initially the company covered my expenses because I was commuting from Florida and we were based in Akron, Ohio. So a little bit of commute there and taking care of that, but spending time there. So we went through that round and we established— based on that, we actually started generating revenue off of that initial round. And then we went to a round that was about just shy of $2 million. Using, going to some of our existing investors. We were also very aggressive in getting our distributors to be investors. Our first 5 distributors all were investors in the company.

Hmm.

And we developed it that way. We also, our employees invested back into the company, not only their time but their money. So you get sweat equity, but that's always good. When you can get people to invest their money, you know they're committed to what we're doing. So we're very fortunate that we had a good group of funding. It was still a fair amount of burdensome at that point. We probably— I think we did one more round that was about $3.5 million that we— it took us probably about 8 months, 6 to 8 months to do that. And at that point, that's when we started to look at other, what I call structured funding methods. Based on, of course, our sales, you know, we had our first, you know, as I said, our first— we started, we were cash flow positive in 16 months. In our first full 12 months of sales, we did $1 million. Within about, I think it was about a year and a half, we were at about $6 million. Now I say $4 million, I'm sorry, about $4 million. After about a year and a half. And then after about 4 years, we were close to $7 million. And that was when it coincided with us bringing venture capital in. And that's a conversation under a separate question that we'll eventually get to.

Yeah, yeah. So was the goal to reach profitability as fast as possible, or was the goal to Profitability. Okay.

That has always been— you can, you know, a lot of these startups, you know, they're 10 years, 8 years down the road and they're still showing a loss. We really wanted to— one of the things that's really important when you do a startup is that you have to have very certain in your mind what your exit strategy is. What are you going to do? Is this a lifestyle business? Are you going to to sell it? Are you going to go public? What are you going to do? What's your goal? Because then that determines everything else that you're going to do to the company. What kind of investments you make, what kind of time you're going to make. And the 3 of us decided right from the beginning that we were going to exit a financially strong company as soon as possible. So everything we focused on is how could we get a good positive exit by being acquired, by being acquired by a larger company. And because of that, we really looked at that profitability because that's what a company's going to look for. Yes, they want to generate sales, but I worked for a company once upon a time, just a brief story, we had a— that I was responsible for, we had a $14 million product. And I started and they really didn't have true accounting on it because it was all part of the overhead. And I did a real specific accounting and I found out that that $14 million income product cost us $18 million to produce.

Wow.

And I, and I went to, yeah, I went to the executives and I said, you know, this is crazy, it's costing us $18 million, so we're losing $4 million a year. And the response is, well, but it keeps the lights on. Because it was something that we manufactured. And I'm thinking, but for $4 million, and this was back in the '80s. So it was a pretty dramatic amount of money to lose. And so I always— that made a permanent impression upon me that I want to— I'm going to be profitable in whatever I do. Interesting.

Interesting. So you mentioned venture capital. So when did you— when did you have that need and how did you go about it?

Well, I, I would say that what I have learned in hindsight, and of course I may come from this from the end rather than the beginning. What I've learned in hindsight with venture capitalists is you only take VC money if you don't need it. That may sound counterintuitive, but really what that means is you only take VC money to grow your business faster than what it was already growing.

So it's because it's growing fast at that point.

Yeah, exactly. You never want to take it because you need it to survive. And we didn't take it initially to need it to survive, but through a set of circumstances, it ended up being that way. So after about 3, 4 years of that time period, both Richard and David felt pretty strongly that, as well as the— at that point, we had a 5-member board— that it became important that they wanted— it was more important for me to focus on the running of the company than the focus on the raising of capital and investment. And I was uncomfortable with that, but I also understood that we had some experienced people, not only on our board, but Richard had been through this and kind of deferred to them. And to this day, I wish I hadn't have, because through a set of circumstances, it became a point where we needed their money. money, and when you need their money, that's when they can dictate terms of how you manage it.

Yeah.

So we took— we did a fair amount of shopping for venture capital firms, and we ultimately found one that was local, which was one of the things that we liked. And we also— these were 2 younger guys. This was really their first time out as venture capitalists. They had worked together in other investment firms, but not really a venture capitalist. So they seemed to have a good passion about getting the company up and running and not interfering with its performance. And we did a round with them and we raised a fairly significant sum of money. But they did not have majority control either through their shares or through their ability to influence. And They wrote a pretty large check and they immediately decided that they were going to be intimately involved with the day-to-day management of the company, even though we were at that point, we were profitable and we were growing very effectively and very strongly. And I struggled a bit with that, to be candid.

Yeah.

I, you know, I not only am I in— I have an independent streak and I think if you're a successful of open entrepreneurship, you do. But I also knew that we had been successful doing what we're doing, and this was their first entree into medical, their first entree into surgical, and they were relatively new investors. So it was a— it was an interesting experience, to say the least.

Probably, yeah, probably a rookie move for VC. Um, just wanted to be real close to investment, and they were local. That makes sense.

So So what was interesting is, of course, through that process, and I knew, and I knew then that in 70— over 70% of the time, and there are statistics on this, which is crazy. I didn't know anybody did this kind of level of research. That over 70% of the time, within a year, the VC has moved out all senior management in a company that they come in and gain majority control over. So I knew at some point that I was going to be moved on, and I also understood it, and my career I had been kind of— probably the best way to describe it is a $40-50 million guy. And what I mean by that is once a company gets to be about $40 or $50 million, I'm ready to move to my next opportunity. One of the things that starts to happen when a company gets that big and bigger, probably close to $80 million, in that $50 to $80 million range, is that the process becomes more important than the product.

Hmm.

So I've really kind of honed what I enjoy doing and what I like doing to that size. And I knew once the VC came in, we'd have to grow. And we, you know, there's a place for venture capitalists, and by no means am I suggesting that there isn't. It's just that you gotta understand that, you know, if you're gonna do, as some people might say, you're gonna do a deal with the devil, you gotta understand what the devil wants you to do. So it's just that, You've got to understand that. And through that process, I knew eventually that I was going to be moved out. And I think that process happened probably about a year sooner than what was best for the company. And I'm trying to be objective about that. I knew I was going to be exited. It was probably within 8 months of the venture capitalists coming in that they made a decision that it was, you know, they wanted to bring in different management. During your time? Within 2 months of that decision, everybody who had a senior role was gone from the company as well as 2 board members.

Wow.

So they did a pretty dramatic cleaning and then they brought someone in who had no medical background, no surgical background— of course that'd be redundant— but he also had never run a company before. But he was somebody that the venture capitalists had used in other situations and unfortunately those next 2 years that he was in charge, our sales actually went backwards.

Wow.

We actually lost sales in 2 years. And lost valuation, yeah. Yeah, we did. And I don't know if we ever made that back. We were very successful in our exit, as we'll talk here in the future. But they made a wise decision and brought a gentleman in by the name of Denny Streit, and Denny did an excellent job in growing the company and developing it to where it ultimately Wow.

So how did the organization change? Let's go back to kind of 2002 to the VC days. How did the organization change over time?

Well, we probably— let's say our first 6 employees, 4 were engineers. Because we— I wanted us to do it fast, do it quick, and do it right. And the way you're going to do that is with good— a good engineering core. Beyond that, we had myself, who was one of the employees, I'd say, within that 2-year time period. And then we had a— and again, in addition to these employees, we had, like, we had a regulatory consultant. You know, we had legal consultants, we had different consultants that— and quality consultants that helped us. But then we also, we had a sales and marketing employee that we brought in that kind of wore both hats, but also was the— you know, I was getting tired of traveling all the time. So it was as much a personal decision as we got to bring somebody else in here to travel. go meet all these surgeons and talk to them. So we brought in a very well-qualified young woman who did an outstanding job for us within sales and marketing. And as we grew, she eventually focused completely on marketing as we were able to bring in somebody completely focused on sales.

Yeah, we talked about that in the past where people delay the sales and marketing key hire until It's probably too late in a startup.

Yes, yes. Well, and if you use your marketing the way it really is most effective, which is going out there and finding out what does the market want, and then how do we develop tools, support tools, but also how do we support products. Yes, we need a good advertising program, or we need a good web presence. Yeah, you do need that, but you also need somebody who's out there building relationships with your key customers, as well as your potential customers. And that marketing person and that salesperson can be real critical. And somebody, at least in the beginning, can wear both those hats. That's financially beneficial, but it's not long-term sustainable. Yeah, yeah.

And you can usually use consultants for quality, regulatory, clinical, Those kind of things for a longer period. But I think you need your sales and marketing hat earlier.

Yeah, I agree. And, and, and I think, you know, our successful endeavor at Ortho Helix just underscores that.

Yeah. So what were— what was the—

some of the biggest challenges?

So the hard decisions, the, the dark days, because all startups go through the valleys. Sure.

I would say in the very beginning is hiring the right people, either consultant or employee. That was one of the biggest challenges we had. In fact, I ultimately evolved into where I was using a psychological profile of every employee that we hired.

After I—

you know, initially you hire people you know and that you have experience with, and that was that. engineering consultant who became our director of development. But I had worked with him, I'd known him for close to 10 years at that point. So I had a big confidence. But everybody else, it's— you can't afford to have an error in who you hire. Because especially, you know, I always say a company is like a rowboat. And when it's a small rowboat, you can only have— let's say you just have 2 oars and you got 2 people. One of those people that's working that oar wrong just really frustrates the other person. Either he's not working at all or he's working too hard. Either way, you end up going around in circles.

Mm-hmm.

And so it's really important to get the right person on that oar. So we were very deliberate, not slow, but deliberate in who we picked for these roles, to the extent that I think that very focused effort continued until, at least with all senior people, even continued after, I know. But it probably, once we started to say, well, we need to hire somebody to package boxes, we still spent a lot of time saying, is this the right person? Is this person going to fit into our— The way we think, the way we do, our sense of urgency, are they going to fit into that? And you spend more time depending upon the amount of impact, but you've got to understand that if they're the wrong person or if they're just an average person, their impact to your organization is— could be potentially catastrophic or phenomenally positive. But you have to be careful and you have to pick that person. You've got to do well. I was very fortunate that who we built our team— one of the things I brag about is that they, you know, yes, when the VC came in, they got rid of all the upper management, but all the middle management, the folks that I had been part of hiring people, maintained, and the company's sense of urgency and development never wavered. It continued to grow. Sales struggled, but that was for other reasons. But the team, the personnel team continued to be strong. And that's, I think that's one of those things that, you know, you look back and say, what do I beam about? I beam about the team that we were able to build and develop there. So that was one of the hardest in the beginning things is, do we have the right people? I've always been comfortable being the person that gets, once you get your team in place, you get out of the way. I'm gonna screw up Theodore Roosevelt's quote, but his quote basically says that the toughest thing for an executive to do is hire the right people and then stay out of their way. And I'm a firm believer in that. You get the right people, then you stay out of the way and let them launch. So we were very fortunate. Go ahead.

So the challenge was it just took a lot of time and effort to sort of screen all the new employees. Or did you actually have turnover and fire people?

Uh, we did have some turnover, but we really didn't have a— in, I would say, the first 3 years, we, we had some turnover because people moved, but we didn't have anybody we had to terminate. Now, after that, we had, we had some people we needed to. And, and, but we, you know, again, we were running on a super fast pace, so you It's not necessarily that you could take a lot of that, which is why I started to do psychological profiles.

Right.

Because we developed for the individuals what we wanted them to do. It's funny, I know I've at least influenced at least 5 other companies, maybe more, who now do psychological profiles on everybody they hire because of how supportive and how much I think it's a key thing to be able to add. And I'm talking outside the medical device industry. I'm talking I've got a buddy of mine who runs a construction company and he does it to everybody. So even some of the guys out in the field, he runs them through it. So it's interesting because I think I'm a huge proponent of get the right person. You know, it's easy to correct— it's very hard to correct a mistake of people when you have a small organization. So you have to be You have to have your— increase your likelihood of success as much as you possibly can.

Right, right. The wine coop test is— you should get a royalty on it. Yeah. So, so why do you think, looking back, why do you think Ortho Helix was so successful? What—

and why didn't other companies were able to do that 16 years ago, 8 I think the biggest thing is that maybe the best thing is I can give you a quote that one of our new customers said to me. He said to me, he said, I have been waiting for this for years. And he was talking about the implant and the hand tools that were associated with it. And what we did is we listened to the market. We listened to what surgeons said they needed, and we were unbelievably aggressive in getting it out in a timely way. Because how many times has somebody said, well, we've been working on this for years. Okay, great. Next. They want to see, you know, they— surgeons want to see where any— anybody, anybody who's buying something or is looking for something new. They want to say, I like that, how soon can I get that? And because the kiss of death is showing somebody something revolutionary, something cool, something that they want, and then not being able to give it to them in a timely way. And I would say within the surgical medical world, I'd say it's less than a year. If you show some— if you show a surgeon a widget And you're not able to put it in his hands so he can use it in the OR in 6 to 8 months, then you shouldn't even show it to him. Wait till you know that you're 6 to 8 months away. If it's something that you're waiting for the regulatory process and it's not a pretty straightforward process, then don't show it to him. So we were able to listen to our customers, develop exactly— and again, in a homogeneous way— So it met a lot of those needs, and not just unique for Dr. Smith who wanted something that was right and everybody else used something that was less. And be able to bring it to market in a quick, effective time and way that worked. But we were also able to make improvements if it came out and they said, you know, this needs to be slightly smaller, slightly bigger, the hole needs to be this way, the hand tool The tool needs to be this way. We were able to make changes quickly and be able to impact the market. And there wasn't really a whole lot going on like that in this time period. Today you can say, I want a customized hip to a patient, and you can actually customize it whether it's male, female, whatever their height is, whatever their weight is, you can customize it uniquely to them. It was, you know, you have it our way. You can't have it your way, you can have it our way. And we were one of the first companies that said, no, we— you're the one spending the money, we're going to figure out how to make you happy. And because of that, we ended up with a lot of happy customers.

Customer focus, actually listening. That's great. We didn't, we didn't actually talk about sales and distribution, but I talked to lots of startups and they They have some early success and then they choke on covering the whole country or all the US and Europe. So what was the sales and distribution model?

How did you guys do it? We focused on surgeons. So we ended up with a surgeon advisory board and we were able to show them product they liked and product they wanted to use. So what that permitted us to do— and so we were very targeted in that way geographically. We didn't say we're going to do the Southeast or we're going to do the Northwest. We just targeted surgeons that we knew that would be our champions. And these were not surgeons that we were having to pay. These were guys that liked to be a part of this process.

Okay.

You know, we didn't have to pay for their research or anything like that. These were guys that wanted to be a part of it. And what's— just as a side note, almost every one of those surgeons invested. And that first 10 to 15 surgeons, I would say probably 8 to 10 of them invested, the actual users outside of, of course, the core group of surgeons. They all became investors at some level. And I maintain contact with a good deal of those guys in there. And ultimately they had a very good positive experience. So we developed it by the surgeon, and what that allowed us to do is to pick and choose the best rep in the area. I have a theory, and I started out my medical career, I sold handheld surgical instruments, microscopes, laparoscopy, endoscopy, arthroscopy tools. So I sold for about 8 years those types of equipment, so I— and I ultimately became a sales manager, so I understood that. Animal. And that's like I said, that's how I started my career. But I knew that you basically have 3 broad types of distributors. You have A-level, the guy who works for the really big company that's never going to sell anything else but the very big company. Well, if he's a distributor, we're talking typical distributors, he's going to sell small company products. And they're, you know, and those guys are They've probably become rarer and rarer because most of them have become employees. And then you have what I call the B-level, the guys who sold that second tier. So the A-level guy is working for a company that's probably $800, $900 million to $1 billion in sales. Then you have the second tier who's selling maybe the $100 to $300 million company that has probably 4 or 5 different products that he offers from his bag. He has one big one that, like I like to say, pays his house mortgage payment, and then he has a couple other payments that allows him to have granite countertops in his house and an extra car for his kids, or whatever the case may be. And then you have a C, and a C rep sells 60 different products from 70 different companies. And Typically, most startups only get seed guys, and it's unbelievably difficult to get quality time from those guys because they're going to go with whatever's hot right now. If they walk into a hospital, or they walk into a doctor's office, or they walk to a medical professional, and the medical professional says, well, you know what, I'm really looking for a hemostatic device, device that I can apply to my wound patient. Well, if this rep doesn't have it, he's going to say, I can get it, and he'll go out and find a company that has it so he can come back to them and supply it. And then he's going to sell that hemostatic pad for as long as he can get traction with it. And those sorts of reps work really They work really hard, but they also work very hard for a lot of companies. It's just so hard to get them to focus. I mean, they're good guys, but they just, they go where they can. And they aspire to be a B or an A guy. Well, the B guys, and my goal was to get the A- and the B guys. And because we would go to an area, we'd go to Dallas, and we would get one of the top foot surgeons in Dallas to use our product. We could ask that surgeon, who would you like to be your rep? And we'd also be able to contact the local key rep that maybe does— if he's an A rep that doesn't have a conflicting product. We were able to get some reps that did have conflicting products because they were able to go to their company, their corporation, and say, hey, my key docs— Yeah, we have, we have. And so they were able to say, okay, they'd carve out a dispensation, as it were, for that guy in that area. So we actually had that happen with 2 guys that were with very large corporations. And in the back of my mind, I wasn't thinking that would be a bad thing anyway, because they potentially could be acquirers of the company. So we were able to garnish our reputation— and garnish isn't the right word— but able to develop that reputation.

Leverage. Right.

To that good high-end rep that he didn't have a lot of products and had a lot of focus and he wanted to keep Dr. Smith happy because Dr. Smith was one of his big docs in some of his other areas. So that was the way our model worked. We also, because I knew that most of these guys understood what a startup was going to do, this startup was either going to get bought and they'd lose it out of their bag, or they— the company would go away for any number of reasons, just go out of business, so they'd lose the product. So to get them to be committed to the company and the product, we also offered an incentive of stock, and stock based on performance. So not only could they invest in the company, but they could also— they would also be recognized for performance by stock in the company. So typically XYZ company gets sold and A rep or B rep who had a distributorship or they sold that product— excuse me— they would get nothing when the company sold. Maybe they would invest a little bit, they might get it, but they wouldn't get anything. And what we were able to do is each one of our distributors who participated and did well got a very nice check. And they knew they would. And so they were working with us, not just for us, for our success.

Brilliant.

Well, I love the alignment. That's great. So, so can you kind of walk us down the, uh, the exits, uh, and what year and, and how did it happen?

Well, in one One of the things that has happened, of course, you know, and now I'm a little bit from arm's length away because the VC came in really at the end of 2000— actually beginning of 2006, and by the beginning of 2007, I was no longer an active participant. I still supported, still preached the good word, but really wasn't an active participant. The venture capitalists really didn't want me to be one anyway, even though I was— I understood that that was the way business was. I didn't, you know, I knew that that was gonna happen and there was an animosity for that happening. They might have done it a little more professionally, but again, that's— it is what it is. So I had been talking and I've been talking to even a guy named Tiger. He was— I can't remember what company it was, but I think that's actually how you and I initially might have met. Right.

Right.

Just having general conversations.

Yep.

When you were at Wright Medical, and we started some conversations there. And I, of course, had been in the orthopedic business at that point, you know, close to 20 years. And so I knew a lot of guys within the industry. So I just started talking and finding out what they knew. I knew that we needed to have a footprint of about $30 to $40 million orthopedic. He has to have a footprint of about, you know, maybe at the least $25 million, but preferably $30 to $40 million. And I think that footprint is still pretty— today, to get recognition from a company, because what a company is going to buy when they buy you is intellectual property and customers. And they know that they're going to get the revenue, but they— you've got to have that revenue before they even start to recognize who you are. And that's, of course, that's a correlation to your customers as well as your IP, but really to your customers. And so we, at that point, we were probably— when I became more of an ancillary product to the corporation, we were just a tad over $10 million. So I knew that we needed to grow to at least $25 million. And so as we continued to grow, of course, the venture capitalists continued to have rounds of investment. And everybody knows that that, of course, caused a significant amount of dilution, but it also increased their percentage, which was, which was their goal all along.

But that we could—

we'd have to have a different, uh, podcast on, on Marty's experiences with how to manage a VC and what he's learned over that. We'll save that one for another day.

We'll do that.

Once Denny joined the company, Denny Stryke, he became very active in looking for qualified companies that fit what they did because you didn't want to be bought by a company, and you wouldn't be bought by a company that already had what they thought was a full line of foot and ankle and some hand products. And we were really primarily a foot and ankle company. We did have distal radial plate, but really where our general— our growth all was coming from was foot and ankle.

Mm-hmm.

So we really started, and I actually started to talk to companies. I know quite a few people within some of the larger companies, and I'd have conversations with them and try to connect them with, because that would, you know, it benefited everyone, but, you know, as being a little bit personal, it really benefited me too. So Again, continued and started conversations, and ultimately, of course, Tournai acquired Ortho Helix. The conversations— and that was in 2012— and conversations with them started probably in mid-2011, and the sale happened mid— I think it was May is when they announced the sale. So the conversations and the due diligence went on for almost a year before they made the announcement. And I had heard with some of my contacts within the company that that was ongoing. And of course, you know, at that point you just keep quiet. You don't tell nobody nothing and you keep your fingers crossed.

Right, right. And Tornier had been on a rant. They had bought a few small extremities companies, Nexa, I forgot the others.

Yep, and they were really building that small bone business in there. I actually have it down too, but I don't remember off the top of my head. And it fit their portfolio, their lacking of their portfolio quite well. So, and then they came in and they, it was basically 5 times sales, just slightly less than 5 times sales that they came in and acquired Oak Hills.

And were there earnouts also on top of that? Yes.

Yes, yes, there were. And that 5 times includes those earnouts that were— and we did earn, we earned everything and plus some. So we actually got a little bit of stip on top of our earnouts.

Wow.

And a lot of that I attribute to the way the company was set up. We had a really set idea that we knew if we were going to be acquired, we were going to be acquired probably by a Delaware LLC and probably publicly traded. So one of the things that we set out to do is to try to run the company as close to a publicly traded company that was reasonable for a small company. Because I know, I know at least 3 or 4 other companies that they didn't get any of their earnout, and the big number that they were quoted ended up being about half because they had things like missing inventory sets. They had questionable sampling budgets. They had questionable marketing budgets. They just, you know, they kind of ran things by the seat of their pants. And these are some pretty larger companies that you thought made big bucks, but ultimately didn't because they just had some practices that were— might be okay for the mom-and-pop shop, but not okay for a large regulatory SEC-managed company. And, you know, the small mom-and-pop shop is not going to be sued if they do something that's questionable. It's the big guy with the deep pockets. So I knew that the way we were going to get a big multiple was to be able to not only have the right products for the right customers and protect them, but also set up the corporation in a way that there weren't going to be any skeletons in the closet.

Right. Yeah. People may not know that every time there's an acquisition, There's clauses in there that say everything is as you say it is or the price is lower.

Exactly. And we actually went above what was the quoted price. So that, that, you know, that was, you know, I attribute that to the team that I was able to build, but also to Denny. He did it. He did a good job. He had a good CFO that was a bit prickly, but he did a good job.

Excellent.

And that's ultimately, you know, it got back to being the right people in the right place doing the right thing.

Well, that's a great story. Is there— did I miss anything, Marty? Did we miss anything about the whole venture from 2002 to 2012?

I think if anything I'd say is that Be ready. You know, it's the old story. If you're ready when chance comes, you know, chance favors the prepared mind, as Pasteur said. We had 3 guys who were prepared, and chance brought us something, and we ran with it. And I think, you know, and I think I hope that message came through as we were talking, but that was, you know, that was Really what it is. And then we worked your plan. My dad always had a saying, plan your work and work your plan. One of our significant investors said something to me that I appreciated. He says, Marty, you effectively completed 98% of your business plan.

Wow.

So we were, you know, and that was, he was a regular investor in medical device companies. And I always took that as a high compliment because we did. We planned it and we worked it.

Huge compliment. And a lot of startups, their mission changes. You know, they start off to do A and then they get distracted by B and they end up doing C and they burn through cash.

Yeah, and I have a company that spoke to me about doing some consulting work and I I had— I basically told them no, um, because that's exactly what they did. You know, it still is a shell. And they had gone through— I think they had gone through about $3 million, and they were still probably 2 years away from marketing a $5,000-$10,000 device.

Same on that.

It's crazy.

They're already—

they're already 4 years in, they've written over $4 million, and they're still a couple of years away. And it just— and I, you know, I, I, you know, I liked the idea. It was a really cool device, but I— it was all the same people, you know. And as we know, the definition of insanity is, you know, doing the same thing and expecting a different outcome. And I didn't want to be a participant in that insanity.

Yeah, I wrote an article about how the idea is not nearly as important as execution. Uh, execution's everything. And—

Well, it is, it is. You know, if you think about Ortho Helix, what did we have that was— we didn't have anything that was crazy outstanding. I mean, first off, to, to know that I'm listed on a patent, I can guarantee you that it wasn't crazy outstanding. But we listened to our customer, and then we executed.

We did it.

We did it in an effective way with good people.

So it really was—

I mean, did we have a good product? Yes. Did we have a great product?

No.

Did we have a great team? Yes. Did we have an outstanding plan, a great plan? Yes, we did.

Excellent.

And that's what put us where we were and put me where I am today.

Well, thanks, thanks for your time. It's a great story. A lot of people— I think OrthoHelix is one of the gem startups in orthopedics that not a lot of people know about, so it's great to hear the story. So what are you doing now, Marty? Tell us what you're doing now and how somebody would reach out to you after hearing this.

Sure. I spend as much time as I can with my 9-year-old 9 grandkids. And then I spend as much time as I can resting after I've had any one of my 9 grandkids. I actually spend a lot of time mentoring and coaching small companies. I also teach an entrepreneurship class at the University of Florida. It is principally engineers, which is interesting. I do not have an engineering degree, but it's interesting that I'm within the School of Engineering. I had been the entrepreneur-in-residence at the University of Florida for a couple of years as well. So I spend as much time as I can directly with people who want to grow and develop. And I enjoy doing that. I enjoy working with small companies. And I actually work with a couple of nonprofits as well, just coaching them on how they can be more effective with limited resources. Nonprofits tend to be a lot like startups. It depends on how much money you got today, what you're going to be able to accomplish. So I enjoy being that. I enjoy being that part of that rowboat that I talked about earlier, where everything I do with my oar matters. And I try to get that sense of urgency with the people I work with and companies I coach with and consult with. And let them know that what you do with your war is important. It's consequential to your outcome. So I enjoyed being able to do that. Probably the best way to contact me is through my email address, and I'm sure you'll put that in the show notes, but it's mwynkoop, and that's W-Y-N-K-O-O-P, @koopco, and that's my company, K-O-O-P-C-O-O-P.

All right, great, Marty. Thanks. Well, this has been fun.

Yeah, I've enjoyed it too, Tiger. Yep, we'll talk again.

Maybe we'll do the VC, uh, podcast next.

That'll be a fun one. That's right, then we can put up the dartboard and start throwing darts.

Yeah, exactly. All right. Thanks, Marty. Have a great day. Appreciate it.

You too, Tiger. Thanks, buddy. Good talking to you.

Bye-bye. Bye.

Okay, that's a wrap. Hope you enjoyed the Ortho Helix story. As always, don't forget to subscribe. Thank Tiger Buford for your next key hire and keep innovating, my friends.