[00:00:00] Rishi Sikka, M.D.: All right. I’m Rishi Ska and it’s my great privilege to be hosting the Day Zero Podcast. And we have as our guest here today Dr. Erik Kulstad, who is the founder and chief Medical Officer for Attune Medical. Erik, thank you so much for being here today, Erik. A dear friend somebody I’ve known. I think we’d just like to hear the viewers would just like to hear a little bit about what is your product and what it does particularly for folks who are not physicians or who don’t have a clinical background.

[00:00:31] Erik Kulstad, M.D.: So, you know, that was back 14 years ago was around the time that the data came out showing there was a benefit to cooling people after a cardiac arrest. And the idea being that if somebody had their heart stop and had limited or no perfusion to their brain even the best CPR doesn’t necessarily compensate for that lack of oxygen to the brain. And so people can have you know, cognitive insult from that that event and cooling turned out to be something that. Offered some benefit in terms of improving patient’s outcome, improving their neurologic function, allowing them to survive that catastrophic event and go home and theoretically go back to their day jobs. It occurred to me, I think we had a patient that was cardiac arrest patient, and all of a sudden it’s like, okay, the next step is get this patient cold. And I thought, you know, there’s a better way to do this , what we were doing. And what I came up with was doing it through the esophagus and basically taking the idea of gastric lavage, which was, you know, putting a tube in, but then putting liquid down into the stomach and then sucking back out, and then liquid back in and sucking it back out and repeating that, you know, Fine. But my idea was to take that concept, make it a closed loop system, use the existing water blanket chillers that were already ubiquitous in the hospital, and design something that would be easy to place. Nurses could place it. You wouldn’t have to get a physician with specialized training on how to place a central line into the hospital to place these and and leveraged the very robust heat transfer environment of the esophagus.

[00:02:13] Rishi Sikka, M.D.: Yeah. And it’s been an incredible journey and you know, you took that idea. Then to the next step of actually a concrete and tangible product. Talk a little bit about that early part of that journey from ideation to like, now I gotta, you, you took the step and you built the thing.

[00:02:32] Erik Kulstad, M.D.: Yeah, I mean, it’s, that’s the daunting part, right? Because most physicians, most clinicians, anyone in healthcare you know, has not, you know, bridged into that sort of realm. And so, there’s a lot of uncertainty. And there was, even to this day, right, 14 years later, I still don’t know what I’m doing. But back then I knew nothing and. So the thing that I think helped me the most was getting connected to the local incubator. Even though they don’t always like the term incubator, cuz they generally offer other resources, but the idea being that in, in most large cities now, these days, there’s at least one, oftentimes multiple you know, groups that you can go to that offer. Resources in the form of mentoring coaches, service providers even investors that can help walk you through the treacherous path of taking an idea from, you know, the back of an envelope or on a piece of paper as we were sketching it that day to, you know, something that’s being sold on the market. There’s an awful lot of steps in that, and it’s I think. Conventional wisdom before having gone through that sequence of steps is that the idea part is the hard part. Everything else flows down from there. But you know, the reality is the opposite. The idea is relatively abundant. It’s that those extra steps that are much harder and less well worn that that, you know, take most of the time and. Effort and energy. When I had the the idea to take it to that next step, you know, I had relied on a lot of really smart people that happened to be around the incubator in our city of Chicago at the time. And the the recommendation from a colleague to actually build a prototype, you know, not just, you know, take it to the next step, not just written down on a piece of paper. And I was fortunate. I was fortunate enough at that point in time, my, a good friend of mine who was a mechanical engineer and the automotive industry was unfortunate enough at that point in time to have been laid off from Detroit. And when, in 2008, when everybody half the city was laid off, and so he had some spare time and we. Got together over several days at his place in Detroit, in, in the winter of Detroit. And when they could barely afford to keep the heat on having both he and his wife been laid off. And we we threw hardware store parts going, Granger and Home Depot and aquarium stores built, you know, all the pieces of equipment needed to. Design the device, a prototype, and do the experiments in his daughter’s bathtub and and start collecting data to sort of measure out, you know, where are calculations correct and use that data then to actually bolster the first IP filing.

[00:05:11] Rishi Sikka, M.D.: I’d like for you to talk about each of those pivots. The pivots are around taking formal investment. The pivot around relinquishing the CEO role and bringing in management. And then in some ways, the most important pivot was this one about product market fit, which is so important for, you know, any CEO, founder of a company. I’d like to take each of those in turn. Let’s start with the first one about, you know, the decision. The challenges and the pitfalls with taking formal funding, not just the c the fam family and friends round that you did but really doing the series A, the series B, et cetera. Talk a little bit about that, that, that pivot.

[00:05:50] Erik Kulstad, M.D.: Yeah, that was, that’s a huge leap. You know, going from the idea to the concept of the, to the prototype to realizing, Oh, yikes, we gotta raise money. You know, you start off with the four Fs, so the friends family founds founders and fools you know, putting in money before any sort of formal structure is created. And and that’s, you know, that’s hard, but it’s not relative to what you have to do later. Relatively trivial. So, the hard part then is going to the markets with your hat out and saying, I’ve got this idea. It’s my baby. I think it’s beautiful. And having everyone tell you it’ll never work. Your baby is hideous , and we won’t love nothing to do with you. So, and the hard part about that, I think for. For everybody is that there’s a lot of rejection and you know, most people in healthcare have done very well in, in school and in everything they do. You know, they can take a test and get, you know, more than 70% right? More than 80%. Right. And so you just, you’re brought up that way to, to think that you know, anything less than a 70% success rate in things that you do is. Tragedy. And the reality for fundraising is that when you go out and start doing the road shows, going to different business plan competitions, investor meetings, pitches, angel groups, and spending days at a time, weeks at a time on the road, going to different meetings to give these presentations you’re dealing with rejection to the level of 98, 90 9% of the time. And especially early on in, in fundraising. And so that’s a, that’s a. It’s a hard interaction with reality that most people are not prepared to. I certainly wasn’t prepared for it. And and so you, you really have to rely on mentors to say, Look, this is okay. You’re not gonna get funded your first time around. And once you get that one or two, Did trusted folks you know, then you can start working with what you get, what you end up with. And we did when we got an S B I R grant relatively early on and that was helpful for non-dilutive funding, but it’s. You can’t run a company on S B I R. It gets you the, you know, the interest from potential investors. With the one that we received one of the requirements for the second phase of that funding was that we go out to the market and have. Strangers invest in the company and the NSF would match to a certain level. So, that really forced our hand and just said, Okay, you know what? We’re, if we’re gonna do this, we’re gonna do it and we’ve gotta go out and, you know, you know, three of us sometimes into a hotel room, you know, a 60 or $90 a nine hotel room. Cuz that’s all we could afford and. We couldn’t justify putting too much of our own money into it. Not that we were, you know, in a position to put in a lot of money. And and you know, as we got investor money, of course you don’t wanna spend investor money on anything but what you have to spend it on to get to the next milestone. And so we ended up doing. Series A, B, and C, a bridge round, a seed round first, and A, B, and C and a couple of bridge rounds in between. And you know, to date have now reached a point where we don’t have to raise money again. We are now cash flow positive, so,

[00:08:54] Rishi Sikka, M.D.: Con, congratulations on that. Certainly a lot of elements in that piece around perseverance, resilience and patience. So, so

[00:09:01] Erik Kulstad, M.D.: Or tolerance for pain, I think is maybe what it is.

[00:09:04] Rishi Sikka, M.D.: for,

[00:09:05] Erik Kulstad, M.D.: I dunno if I have the patience so much as the tolerance for pain.

[00:09:09] Rishi Sikka, M.D.: Let’s talk about the next sort of second, I think important transition in the organization. And that was you relinquishing the CEO role, bringing in formal management, not just the ceo, but I think the entire team. Talk a little bit about that piece as well.

[00:09:25] Erik Kulstad, M.D.: Yeah, I was in a unique position in maybe in one sense that I still had a full-time job as an ER physician and you know, was reluctant to take on a leadership role at the company. I. Sort of have the ideas, you know, be the medical mind, but did not want to suddenly find myself managing, you know, people and, you know, regulatory affairs and, you know, the, all the things that you do. I mean, it’s hard enough managing investors. And so, we, despite my reluctance to be a ceo, you know, I served as. CEO for many years as we sort of, you know, looked for somebody to, to take, come in on, take that role and. You know, part of it is you, at the early stages, you can’t afford to pay a CEO you need somebody good and nobody good’s gonna work for free. And so, so you’re in a bit of a quandary cuz there’s not much else you can do at the early stages. And you know, once you get to a level where, okay, this looks real, this is something that’s getting some traction in the market it makes it easier to bring. You know, a professional, somebody who’s really focused on, on, you know, performing the duties of a ceo and you know, some of them are really fun and some of them are just horrendous . So, you know, it takes a unique person to take that sort of that has that skillset and that capability and the willingness to.

[00:10:50] Rishi Sikka, M.D.: And I think the third major transition or pivot which in my mind when I look at the course of. Company is the one that really now kind of turbocharged everything and it’s this issue of product market fit. Do you have a, you know, you started off in temperature cooling for cardiac arrest. And just to frame this part, there’s a pretty big pivot that happened in the company a couple years ago. Was that accidental?

[00:11:16] Erik Kulstad, M.D.: I at one point I got a phone call from one of these service providers of market research asking me questions about what I thought the market looked like, and then I realized, Oh, wait a minute, . So if you’re getting your information, From me, there’s a problem. , there’s, that’s the flaw. So, the, I think what we were really lucky because, you know, we had a few different areas that we thought might be interesting for for the device and early on when we were cooling patients, primarily we saw people wanted to use it for warming in the operating room, particularly for burn patients and trauma. To avoid inadvertent perioperative hypothermia. And so, so that provided the impetus to, to expand the name from Advanced Cooling Therapy into Attuned Medical so that we didn’t, you know, sort of pigeonhole ourselves into cooling. But then about five years ago Maybe a little more than five years. Not right. About five years ago we got around the same time three electrophysiologist had read a paper on our device in the journal resuscitation. And so, For some reason they just saw it come across their desk and, you know, talking about esophageal cooling and and all at the same time, roughly thought, you know what, this would be interesting cuz I’ve always thought that if I could apply cooling in the esophagus during left atrial ablations, I could reduce the likelihood of injuring the esophagus when I’m. Causing the intended lesions on the posterior wall of the left atrium to treat atrial fibrillation. And so as we heard that, hey, there’s some physicians that are taking our device from the critical care unit down the hall into their EP lab, deploying it into the patients in the EP lab, and getting very interesting results that caused us to take a look and So, you know, we spent some time learning about the effect size that was being seen in these individual hospitals. Realized that it looked large enough that we should start investigating this on our own, or at least supporting some studies that would formally quantify the effect size. And as we saw the interest in this approach grow and more of our preclinical, you know, we did some animal studies to, to better examine the effect of the, of this approach. We did some mathematical models. Everything started pointing to this being potential game changer in the industry. And at the same time, physicians were telling their friends about this and friends and colleagues in the electrophysiology space. And so in, in short order being you like five years, , you went from you know, a critical care market growing. You know, 10% a year, maybe 15 or 20% on a good streak to the electrophysiology market, you know, growing at a hundred percent a year, you know, doubling a year yearly. And now working with FDA on a clinical study and to expand the indication specifically for this this benefit. And and seeing, you know, a very different end point than what we ever would. Gotten in critical care. And so, I mean, it really, it’s just a perfect example of first of all, the need to be able to pivot when the opportunity knocks. And and the importance of having product market fit that is really hard to determine. Riri, I mean, you really don’t know until you get into the.

[00:14:30] Rishi Sikka, M.D.: You know, it’s been a tough, There was the pandemic, but then there’s been a tough macroeconomic environment, obviously interest rates going up. The question of a recession. Tell us a little bit about how that has or has not impacted Attune and any actions you’re taking or have taken in response. I know that’s a big thing on everybody’s, you know, entrepreneur’s minds right now.

[00:14:53] Erik Kulstad, M.D.: Right, because you know, the MDM a just had their conference this afternoon had people addressing this very topic and especially, you know, what does the market look like for exits? You know, what are valuations doing, you know, what sort of deals are happening in the space? And and they broke it down by. Regulatory pathway between five 10 K and PMA. We’re in the middle of that. So we’re a Denovo device. And there just aren’t many Denovo approvals these days. So it’s a much. Less, you know, robust group from which to prognosticator or, you know, derived Aron. So, you know, broadly, I think everyone’s worried about what is, what’s happening and what will the impact be on you know, deals, acquisitions over the coming year. The consensus from the folks speaking at MDM a today was that there would be, there’s a little bit of a lull at the moment but it seems like it maybe is picking up a little bit. And and everyone expects 2023 to have a resurgence to make up for the little bit of a pause that there has been, you know, here sort of in. Second half of 2022. And so we haven’t really done anything differently other than just focused on, on growing the business you know, in all the metrics that we need. You know, getting label expansion through, through fda and you know, learning as much as we can about what ancillary benefits may exist with this approach.

[00:16:22] Rishi Sikka, M.D.: That’s great. That’s great. Building on this and sort of the two last questions. Any prognostication you can offer on what the future might hold short term, long term for a tune? Without giving away any company secrets or anything you could tease for us.

[00:16:37] Erik Kulstad, M.D.: Yeah, I mean, given the milestone that we hit you know, the beginning of this year of of reaching cash flow positivity, that increases our attractiveness, I think, to a lot of investors. A lot of acquires, I should say. And and so I, I think we, you know, we now offer, you know, some creative value to, to the right acquire. And so the timing window for an ideal transaction for us, you know, sort of begins sort of towards the end of this year and goes in through 2023.

[00:17:10] Rishi Sikka, M.D.: Any parting words of wisdom for. Physicians or anybody who’s clinical, who’s thinking of starting their own company or is in the midst of their own company earlier on. Any rules for the record? I mean, you’ve had great lessons throughout this entire podcast quite frankly but anything else you wanna sort of capstone on?

[00:17:27] Erik Kulstad, M.D.: Yeah, no, I’ve been lucky to have a lot of good lessons, none of them fatal. And always, you know, live to, to see another day despite, you know, any obstacles or mistakes that I’ve made. But the the, I think the key is if you know, for clinicians out there that are saying, Hey, I’ve got this idea. I keep wanting to do this, but I have no idea what to do, that it’s, the first part is to, you know, take it, you know, one step at a time and don’t get daunted by the complexity of tasks ahead. And then the next step is to get connected to the local incubator. Again, if you’re not in a city that has one, you’re probably not that far from a city that does. And they’re relatively easy to find, you know, Google Search for Healthcare incubator in your city. You know, will get you at least to the first person you can ask. And and that gives you, You know, the, it gives you the benefit of getting plugged into a system where they can figure out sort of where the biggest need is. You know, you might already have done an MBA, for example, and you’ve got some, you know, business plan capabilities, or you can, you know, build a spreadsheet on performance. But but wherever the biggest need is Incubators are generally the place to go because you’ve got a lot of people there that are willing to help, you know, many who’d like to invest in, in the right opportunity. And and that I think is, that gets you to the point where now you, you’ve got different directions to go, but with the right mentorship and again, I can’t emphasize enough, the right mentorship is key. Then you’ll at least be in the right pathway to just start taking the slings and arrows of the uncertainties of entrepreneurship.

[00:18:59] Rishi Sikka, M.D.: Yeah. Erik, that is great parting advice. Congratulations on all you’ve achieved and fingers crossed for the future and can’t wait to hear more good news from at. Erik, thank you so much for being here on Day Zero.

[00:19:10] Erik Kulstad, M.D.: Rishi, thank you very much. He honors all mine and appreciate the opportunity.