Neal F. Kassell, MD, the Founder and Chairman of the Focused Ultrasound Foundation, recently sat down (albeit virtually) with Chase Koch, the President of Koch Disruptive Technologies, for an in-depth discussion about the field of focused ultrasound and how their organizations are working together to revolutionize therapy with this highly disruptive technology.
Below is the first in a three-part blog series edited and condensed from their conversation. Read on to learn more about KDT and Koch Industries, why they are excited about focused ultrasound, and their message to the community at large. The second article in the series will explore the state of the field as it transitions from research to commercialization, and KDT's relationship with the Foundation as they pursue their shared goal of improving the lives of millions around the world with focused ultrasound in the shortest time possible. And in the final installment, Dr. Kassell and Mr. Koch will discuss KDT's current position in the field, future investment plans, and how they feel about spawning the first focused ultrasound "unicorn" (a privately held company with a valuation of more than one billion dollars) via Israeli manufacturer Insightec.
Approximately two years ago, a pivotal milestone in the evolution of focused ultrasound occurred when Koch Disruptive Technologies (KDT), the venture capital arm of Koch Industries, began investing in the technology. The involvement of KDT was like an IV infusion of high-octane adrenaline, validating the field and creating the precedent for other strategic investors to come in off the sidelines, spurring additional investment. We asked KDT president Chase Koch about the revolution in therapy created by focused ultrasound – the noninvasive, game-changing, highly disruptive technology that is an alternative or supplement to traditional surgery, radiation, drug therapy, and immunotherapy – and also about how KDT was formed, why they got involved in the space, and what they hope their influence will achieve for focused ultrasound patients worldwide.
Dr. Kassell: Some of our audience may not be familiar with Koch Industries or KDT. What can you tell us about the two companies and the philosophy of Koch?
Mr. Koch: Thanks so much, Neal. So Koch Industries is a private company with 10 different industry business platforms that cut across the majority of the economy, with 130,000 employees and operations in over 60 countries. We endorse a philosophy of three core principles which I'll explain in more detail: 1) being "capability bounded" versus "industry bounded," 2) a belief in creative destruction, and 3) the concept of mutual benefit. KDT was launched from Koch Industries as an extension of these principles.
In terms of the first point, the majority of businesses think from a standpoint of, "How do I get in one industry and grow market share and demonstrate value there?" – which Koch does across all of our different industry platforms – but across Koch more broadly, we approach it first from, "What core capabilities do we have that are demonstrating value to customers and consumers in one industry?" and then we prove that out, which helps us then say, "What are the other industries that we can point those core capabilities at?"
The second principle that's been important for Koch is this idea of creative destruction, meaning you have to constantly destroy your old practices, your old procedures, and even your products that you've been successful with over time – because the market's going to do it to you if you don't do it yourself. So that requires a very open mindset versus a protectionist mindset and trying to guard what you've done historically because we believe that – and it's proven over time – that doesn't work.
And then the third idea is this concept of mutual benefit: "How do we help our customers win and how do we create value for them?" If we start with that mindset of creating value for our customers and for society, and we do that well, then we will earn margin in our products and be able to reinvest that over time. Starting with the customer requires much longer term thinking than, "How do we make money and capture returns?" And then if you do a good job there, you can earn those returns.
So we created Koch Disruptive Technologies about two years ago as an extension of those three ideas. We all know that technology is changing every single aspect of our lives, and we have to keep up or even be ahead of that pace of change. We feel like it's life or death, for not only the business units that we play in today, but Koch Industries overall. We've recognized with the pace of change in technology that we have to apply creative destruction more aggressively than ever, and we need more technology capabilities to do this.
Dr. Kassell: Can you tell us more about KDT specifically and how it relates to the highly disruptive technology of focused ultrasound?
Mr. Koch: We wanted to bring Koch Industries to the most disruptive and transformative founders in the world, and bring that platform as a laboratory for them to experiment in, and to be able to leverage and take our assets, and be able to unlock more value in their company than they otherwise would just taking capital from anyone. So this was the key thesis, this "Koch Laboratory," to bring it to founders in a way that no other large company had done.
Other large companies may have great assets and capabilities, but they struggle to overcome silos in their businesses – sometimes incentives aren't aligned, they can be slow and bureaucratic, and even try to tie the hands of the founder with exclusivities around the technology. So we said, "How can we create a business within Koch that actually does the opposite of all that and really provides a solution that the market hasn't seen before?" Then we started KDT in January of 2018 to originate these disruptive and transformative founders and companies, invest in them, and then connect them into Koch through this Koch Laboratory concept.
I'll just add too that with KDT we want to provide one-stop shopping across the economy with this white glove treatment, and we try to offer our capabilities and subject matter expertise to help companies grow. We can be a customer of these technologies, we can be a supplier in some cases, and also a validator as in the case with focused ultrasound, which we'll talk about more in a minute.
We also try to have a "founder first" mindset, back to that mutual benefit idea I described before. We help companies solve the problems that they're facing, whether it's a capital solution, or understanding the regulatory environment, or helping them with manufacturing or hiring processes.
We also bring highly flexible capital structuring to founders which is another key differentiator; we can enable founders to stay private and grow for decades into the company they want to be, or if they're interested in going public within two or three years, we can offer that flexibility as well. And we bring critical and strategic thinking to the table as well, to really help founders think about the future of their company.
Dr. Kassell: What captured your interest in focused ultrasound?
Mr. Koch: I didn't know anything about focused ultrasound until a call came in from a trusted source to Koch Equity Development, and we thought it was a better fit for KDT which had just launched, so the timing was perfect. We started our diligence process and started digging in, and pretty quickly we knew it was something that we wanted to be a part of.
Our team first saw the magic of focused ultrasound in a procedure up at Sunnybrook in Canada, with a patient who had essential tremor, and we saw the shaking that this patient had going in, and how within a couple hours this person came out after the procedure with almost no shaking and able to write clearly on a piece of paper and drink a cup of water without spilling it. It was like magic, right? And seeing is believing on some of these new technologies.
So when we saw that and met the team, we said, "How can we go from seeing that one patient at Sunnybrook to helping millions experience this groundbreaking technology? How can you take it from one disease, essential tremor, and apply this ultrasound technology to many?" And, of course, it's also safer, more cost-effective with much better outcomes, and much lower risk to the patient versus the alternatives like deep brain stimulation with ET for example. We knew this was something that we wanted to be a part of.
Dr. Kassell: What would you say most excites you about the technology?
Mr. Koch: Focused ultrasound is a foundational technology in a platform that has the potential to help millions of lives across so many different brain disorders. The "multiple shots on goal" kind of concept here: It can provide multiple therapy modes, so it has ablation capabilities, has the ability to open up the blood-brain barrier for targeted drug delivery, and the ability to hit so many different disorders – essential tremor, pain, epilepsy, oncology, addiction, Alzheimer's.
There are so many different disease states that can be treated with this, that's one of the main reasons we're so excited, and we're excited about Insightec and their leadership in this space. If they can do well, then that's going to inspire others to innovate and spawn a lot of different technology to help transform this space and help so many patients.
Dr. Kassell: What message would you like Koch Disruptive Technologies to communicate to the focused ultrasound community at large?
Mr. Koch: I appreciate the question, Neal. I think our involvement with focused ultrasound exemplifies our core values of whatever we do, we're trying to transform people's lives – that's a core vision of Koch Industries. How can we make people's lives better and do it in a way that's better than their alternatives and always consume fewer resources? That's one of the reasons we're so excited about focused ultrasound.
The other thing I would say is that we're always looking for opportunities to advance this field. So we encourage the community at large – the focused ultrasound community and the healthcare community broadly – to share their ideas with us in what role we can play to really drive change faster in transforming people's lives. And I can't overemphasize the role that the Focused Ultrasound Foundation plays in driving the field forward. I hope that all stakeholders in this space will continue to enthusiastically support and partner with the Foundation and also the industry across their various programs.
The next article in this blog series explores the state of the field as it transitions from research to commercialization, and KDT's relationship with the Foundation as we pursue our shared goal of improving the lives of millions around the world with focused ultrasound in the shortest time possible.