Russ: Hi, I’m Russ Capper and this is HXTV, the show that champions Houston’s innovators and entrepreneurs. Coming to you today from TMCx, and I’m pleased to have as my guest, Dr. Erik Halvorsen, the Director of TMC Innovation Institute. Erik, welcome to the show.

Erik: Thanks for having me.

Russ: You bet. Tell us about the TMC Innovation Institute.

Erik: So, the TMC Innovation Institute has been around for a little over three years now. This was really, it came out of a strategic plan from the Texas Medical Center and a number of the C-Suite leaders of the member institutions, ones that we know: MD Anderson, Texas Children’s Hospital, Baylor College of Medicine, really a number of them that span the twenty-one hospitals that make up the Medical Center. They looked at what are some areas where we want to collaborate, research, translational, to really ultimately help our patients at the end of the day. Innovation was the one that scored the highest out of all of those.

Erik: We set forth on a path a little over three years ago to build the Innovation Institute. As you can see, that’s where we are today. The Innovation Institute is in a former Nabisco cookie factory here in Houston. The building itself is about seven hundred thousand square feet and we have just a little bit under half of that which is built out for innovation. We’ve got a great physical space in which we incubate companies, and we’ll talk more about that, and a great environment where we can really go from ideas and innovations all the way to trying to bring those into clinical practice and, again, benefitting those patients.

Russ: Cool, well I suspect you agree with this, but this is an innovation hotbed out here. For Houston, I think all of Houston is proud of it. Do you think they should be?

Erik: I think they absolutely should be. It’s funny, we still say, at times, it’s kind of the best kept secret in Houston in certain ways. Everybody, certainly within Houston, and I would argue within Texas, knows what the Texas Medical Center is, knows how amazing the healthcare is and if you’ve got something wrong with your kid or a loved one, this is the place you’re going to go to get that specialist and get that care. But, they my not realize, in terms of the amount of research that goes on here, two billion dollars a year of research going into these institutions, and that research is generating innovations and discoveries that could lead to the next cure, or treatment, or vaccine, or digital health, or devices, all of those kinds of things that are going on here.

Erik: The Innovation Institute is really set up to do two things; one, to capture the innovations coming out of the Texas Medical Center to try to bring those to patients; but also, we look all over the world to bring those companies here to Houston to test out their products and hopefully drive them into clinical practice. I think that’s the part when I say the secret. I don’t know that that part of it is as widely known. We’ve been doing it for two and a half years, gaining momentum and really attracting companies from all over the world to come here, and have been quite successful at it.

Russ: I know before the Innovation Institute was here, most people thought, and we had a reputation for developing some cool technology and it leaving town. It wasn’t just that we weren’t recruiting some in, we weren’t keeping anything here. It just feels like that has completely reversed.

Erik: I think that’s right. I think we’ve seen trends and I still consider myself relatively new to Houston. I’ve been here for almost three years now after spending fifteen years in Boston doing some form of this. What I’ve always said is that either the companies that start here or the companies that come here through our program, they’re going to stay here only if two things happen; one, are they able to raise capital in and around Houston, so I’ll say more broadly, in Texas; and, are those healthcare companies able to get traction while they’re here? Are they able to connect with subject matter experts, whether they’re clinicians, nurses, IT, other entrepreneurs, to get pilots for their product? Are they able to get sales for their product?

Erik: When you’ve got the biggest medical center in the country here; when you’ve got ten million patients a year visiting, coming through here; when you’ve got a hundred and sixteen thousand employees: doctors, nurses, whatever; all of that, that is such a rich training ground and a rich ground for these companies to try to get deployment for their products. Honestly, if they’re not able to do it here then they’re probably not able to do it anywhere. What we’ve seen is for the companies that do get that traction, and increasingly are able to raise money here, they stay. And that’s cool, that’s what we’re seeing.

Russ: Real impressive. Kind of describe how the calendar works here in TMCx. I know I’ve come out here before and it’s a beehive of activity and then it’s like school out and nobody’s here. So, how does that work?

Erik: The first thing is to understand that under the TMC Innovation Institute there’s several different programs. TMCx, which I’ll talk about in a second, is our accelerator program. That’s the one that’s kind of on a calendar rotating basis. The accelerator program is an application process. We run two cohorts per year. This is where companies, again, apply from all over the world to come in and that program is about a four-month program. We alternate the theme of that program between digital health and medical device, so the two main areas we focus on. We will get, you know in our last digital health class we had over three hundred applications, and the breakdown of those was really cool where we had 25% were from Silicon Valley, 25% international. We only accepted 24 companies, so again, it’s a tight funnel to get in here.

Erik: The great thing for companies if they’re accepted, they don’t give up any equity and we don’t charge them any money. It’s fully subsidized by us which is a nice benefit for them. That program; curricular, advisor, mentor, all of it is four months. When we’re in session and we’re going, it is a beehive. At the same time, we also have to give these companies because they’re international, because they’re not from Houston, a lot of them, we have to give them time to go back to San Francisco, or Denmark, or Boston to kind of continue working. We have on weeks and off weeks. On our co-working side, TMCx+, which is right across behind me here, that’s 24/7/365. We’ve got about 40 companies over there that are here all day, every day. On the accelerator side, like I said, we’ve got some that are here and then they’re not here depending on how that works.

Russ: On the co-working side, do they apply, and do you turn some down there, or is it anybody that wants to come in and hang out here and pay rent, you’ll bring them in?

Erik: They also have to apply. We’re also 100% full and have been since day one. We literally have a waiting list to get in here, so there is a selection process there. All the companies on that side, obviously, the only thing we do here is healthcare, so they’re all healthcare related. We’re still looking to identify the best companies, the most innovative, and the ones that we want to be part of this ecosystem. We use that word because whether it’s our bio design fellows, the team I’ve assembled, the accelerator companies, the co-working companies, Johnson & Johnson, AT&T, the other big corporate partners we have, that ecosystem is all about those interactions and those collisions within that ecosystem. We want companies in our co-working space that are going to interact with our accelerator companies, that are going to interact with our bio design. All together it elevates the whole group.

Russ: You’ve already mentioned you came here from fifteen years of experience in another healthcare innovation hotbed, Boston. Are you glad you came here?

Erik: The resources that are available here, and again, the medical center. I’ve said this before, if you look at all the hospitals in Boston, if you were able to link them together, which believe me, you can’t, but if you were able to that would be one half the size of the Texas Medical Center. I could make a really bad size matters joke, but I think when it comes to research innovation, clinical care, and translating ideas into practice, it really does make an impact. I saw that when I was being recruited, and then the resources that they’re puting into the Innovation Institute too. I think it’s amazing. I think if you look at where we were two and a half years ago to where we are now, what we’ve done, we’ve had over 225 companies come through our program now. We’ve got over 140 that are here under our roof just today between JLABS, X, and X+. What we’re building here, and the direction we’re continuing to go, it’s super exciting.

Russ: What about exits? Have you had any exits?

Erik: We have. Three of our portfolio companies, three of the companies that have come through our accelerator have already exited. They are Vios, which is a telemetry company; Adhesys, which was out of our X1 class, which is a medical adhesive for surgical as well as topical; and the third one is a blockchain company called Healthcoin, a blockchain diabetes company. Each of those companies, I mean some of them were published some of them not, but they were all over 10x exits. Three exits in the first two and a half years of running the program is pretty impressive. Again, the bar in terms of which companies get into our program has just gotten higher and higher to get in. Honestly, I think we’re looking at one to two exits per year on the current track we’re on, and if you compare that to anybody else’s investment portfolio, I think we’ll doing quite well. Now with the launch of our venture fund, now we actually have the ability to invest in these companies as well.

Russ: Fantastic. The whole world of health tech and healthcare is just mind boggling, the evolution and the development. If you look at your classes and what’s happened here in the last year, tell me two or three of them that really caught your attention.

Erik: It’s hard to answer that question. It’s kind of like you’re asking me to pick out which one of my kids I love the most.

Russ: That’s exactly it.

Erik: And you’re asking me to do it on camera so they play it back and my kids are going to see this, so it’s a little bit challenging. I’ll tell you some of the ones that I think are, again, kind of at the hottest areas but are transitioning, they’re not just a buzzword. What I mean by that is, we see a lot of things that are AI, things that are blockchain, things that are machine learning, and sifting through what’s a buzzword and what’s actual, truly a product that can have impact, that’s kind of what we do here and figure that out. In that vein, if I look at an AI company, for example, we had a company that just finished up our digital health called Deep 6 AI. They use artificial intelligence to go into clinical protocols. This is when drug companies are trying to do clinical trials to develop and get their drugs out there and they have to identify patients and recruit them to those clinical trials. They use AI to both analyze a protocol to identify patients and then run that against a medical record to match the right patients to the right trial.

Erik: It sounds kind of trivial but it’s not at all. In fact, when they’ve done that in trials to try it out, they were able to identify enough patients for a trial in six hours that normally would take six months to do. When you think about what that means to a pharmaceutical company, that means faster recruitment for trials, faster approval of drugs, which is great for all of us, right? And it decreases the cost of drugs too. So, that is really one that is super exciting that we’ve seen lately.

Erik: Something else, we talk about AI, but then you’ve got the more traditional kinds of things, right? The less sexy kinds of technologies. We had a company, one of the trends, or one of the things in healthcare that has been a challenge is nursing, nurse staffing. People talk about shortages of nurses, high turnover rates, difficult retention. We had a company called Trusted Health that really has a recruitment platform for nursing. We’ve seen a lot of these recruitment platforms. Their business model was extremely novel, the platform had some novelty to it, but ultimately their execution as they went to market and their ability to connect the nurses to the jobs around the country and get those filled in a very efficient and economic way is sort of taking off. That’s been one that we’ve been very excited about as well.

Russ: Before I let you go, you know I’m championing the whole Houston ecosystem these days, what is it about Houston that helps you do your job?

Erik: That helps me do my job? It was interesting, I joke around, the first couple of days that I was in Houston and after I got off the plane from Boston, I tell this story about standing in line at Starbucks and I heard a bunch of, ‘Thank you, ma’am,’ and ‘Yes, sir,’ and that kind of stuff, and I don’t think I had heard it in fifteen years in Boston. So, there’s that, that southern politeness, which I like. All the people I meet and a of what, building my network down here and meeting people just constantly, right? When they ask me what I do and I explain the TMC and the Innovation Institute and all that, the next thing that usually comes out of their mouth, they say, ‘wow, that’s amazing.’ And then the next thing is, ‘How can I help you?’

Erik: They want to connect me to other people in their network who can help us achieve the mission. And that’s just Houston, as far as I can tell. People wanting to help people achieve their goal for the betterment of Houston, for the betterment of people who live here, and not just the people who are fourth generation but the people who just came here as well. I love that and to me it’s that kind of support, it’s that kind of attitude that’s really going to be pivotal for us achieving what we’re trying to do here at the Innovation Institute.

Russ: Erik, I really appreciate you sharing your story and keep doing what you do, ok?

Erik: Thank you. I appreciate you.

Russ: And that wraps up my discussion with Dr. Erik Halvorsen, the Director of the TMC Innovation Institute. And this is HXTV.