Medical Device Daily Executive Editor
SAN FRANCISCO - Tom Oliver's tips for building a start-up company tilt sharply toward focusing on the basics, keeping costs in check, executing on a well-considered plan and, perhaps most importantly, having a passion for what you're doing.
Oliver, who is CEO of CoolSystems (Berkeley, California), told a small audience in a Case Histories session during the 11th annual edition of the Frost & Sullivan Medical Technologies Executive MindXchange at the Grand Hyatt hotel that the key is to first “figure out how to build a great company and then worry about where you're going.“
In Coolsystems' case, it had an interesting product in a system that combines advanced cooling technologies with cyclical compression to speed the healing process for soft-tissue injuries such as those suffered in athletic activities or in rehabbing following orthopedic procedures.
What it didn't have was a lot of money behind it.
“We were a cash-constrained, small company that was fed by angel investors,“ Oliver said.
That shaped a cautious, measured approach where flamboyance was out, and intelligent, one-step-after-another decision-making was in.
A key question every start-up must answer, he said, is “What is your message?“
That message is formulated, Oliver said, by “getting out in the marketplace and figuring out the need, then coming up with an answer as to how the company's solution can benefit the consumer.“
For established companies or start-ups blessed with ample cash due to venture capitalists or other investor involvement, gathering such information might be as simple as contracting with a consultant provider of such services.
For start-ups without the ability to spend freely on such services, it's almost like the Nike “Just Do It“ slogan - as in, hit the road, Tom.
“We were an eight-employee company,“ Oliver said, “but we needed this kind of market information, so four of us became sales managers, dividing the country into four regions, while the other four stayed in to run the office.“
That office, by the way, was another reflection of Oliver's “whatever it takes“ philosophy. “I knew of companies that were on the verge of going out of business that still were clinging to their expensive office space, even though they were just about out of money.“
Given CoolSystems' budgetary constraints, he went out and found 75 cents - (yes, cents) a-square-foot space in an “old, decrepit warehouse.“ It wasn't pretty, but it met the fledgling company's needs - and fit its pocketbook, at least until the fire (more on that later).
Oliver's four-man market research crew found that the company's system had two natural initial markets: athletic trainers (ATs), whose bottom line is getting athletes back into action as quickly as possible, and physical therapists (PTs), who provide the emotional and physical prodding to help patients rehab from orthopedic procedures.
The road warriors also cast their lines out for distributors with expertise in those sectors who were “hungry for new products.“
However, identifying the market and getting ATs and PTs interested in the system was just one battle in a considerably longer war.
“Everyone wanted it [the company's system],“ Oliver said, “but at a lower price.“
Which leads to another of his beliefs: If you've priced your product fairly, don't give it away at a price that is untenable in the overall financial picture for your company. Rather, show the potential buyers why it is of value to them at your price point.
In CoolSystems' case, it was dealing either directly or indirectly via athletic trainers with, for example, pro athletes who are accustomed to being given all manner of things.
A piece of equipment to help them come back from injury would seem a logical extension of that “give it to me and you can use my name as a testimonial“ type of mentality.
But Oliver's company was in neither a financial nor philosophical position for such arrangements, so it didn't do any such giveaways. Today its customer base includes nearly 500 pro athletes, almost 90 pro teams, just over 150 colleges and universities and upwards of 1,000 physical therapy clinics, so it hasn't suffered from its lack of largesse.
Those customers are devout converts to CoolSystems' Game Ready Accelerated Recovery System, and there's a great story - maybe yet another lesson for start-ups - behind that name.
Oliver noted that regardless of the product, the brand “has to stand out,“ especially with the ultimate consumer. “We wanted a brand name that worked,“ he said. “It had to stick with the customer - get into their head and stay there.“
In order to come up with a name, he parted with some relatively substantial sums, given the company's tight financial condition, engaging three different outside consulting firms to come up with just the right brand name identity.
The result: Nada, zip, zilch.
Instead, Game Ready, which seems like the perfect description for CoolSystems' product, came from one of the regularly convened “talk things through“ sessions that Oliver believes are essential to growing a start-up.
“We were talking about how an athlete would let his coach know that he's ready to get back out on the field or court after recovering from being injured, and one of our staffers who is a basketball player said, 'Coach, I'm game-ready.'“
Voila! The Game Ready system was born. “We went online, found that the name was available, that the web site name was available,“ Oliver said. “In five minutes, we were in business.“
It's a business that now has grown to 33 employees and building on $6 million in annual revenues. And it follows Oliver's three-legged mantra of back to basics, execution and managing costs.
CoolSystems moves at a more deliberate pace than some other start-ups that might more readily embrace the “high flyer“ approach.
One market, or many? One of the most basic business questions, and one where pride sometimes makes for bad choices.
For Oliver, the decision to go slow was driven partially by financial considerations, but also by the belief that taking baby steps and doing them well may offer greater opportunity for success.
Its next market step is post-operative rehab facilities, served by durable medical equipment distributors (DMEs) who, he said, “make great partners.“
Beyond the post-op setting, the company's newest market is the equine sector. “A lot of device companies start in animals, then go to humans,“ Oliver joked. “We did the reverse.“
There's no joke about the market potential, however. He pegged it at $250 million, adding that CoolSystems had $1.2 million in equine sales last year in its initial foray into the sector.
Following the one-step-at-a-time approach, the company's next opportunity is in the consumer market, for which it is in the process of developing a lower-cost (likely retailing at $500-$750) model of the Game Ready system.
Still further down the road is a move to international markets. That's a potential $3 billion opportunity, but CoolSystems won't make such a move until it's comfortable with where it's at in all of the domestic markets where it now participates.
The company and its work force had to “get comfortable“ just with being able to maintain its existence after a fire destroyed CoolSystems' warehouse offices at the beginning of the 4th of July weekend last year.
“We were sitting around in chairs in the parking lot, trying to decide whether we were going to try to salvage the business or just begin updating our resumes,“ Oliver said.
He credited CoolSystems' corporate culture - rooted in individual accountability and caring passionately about what it and its employees do as a group - as the main reason it was able to come back from a disaster that might have driven many small start-ups out of business.