Dr. Pitou Devgon, Co-Founder of Velano Vascular, on Creating Value in a Commoditized Device Market

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Pitamber “Pitou” Devgon, M.D., Co-Founder of Velano Vascular

In the sixth episode of our second season, we spoke with Dr. Pitamber “Pitou” Devgon, co-founder of Velano Vascular, active angel investor, and Lecturer at the Wharton School of Business.

Pitou co-founded Velano Vascular in 2012 after inventing the PIVO™ needle-free blood collection device, and led the company’s growth through eventual acquisition by BD in 2021. Prior to starting Velano Vascular, he practiced as a hospitalist physician in the intensive care unit at the Philadelphia VA Medical Center, while also working at Safeguard Scientifics as a member of the healthcare venture capital team. Pitou earned a BA in biological psychology from the College of William & Mary, an MD from Eastern Virginia Medical School, and an MBA from the Wharton School of Business.

In our conversation, Pitou and I covered:

• The origins of his invention: unlikely inspiration, evaluating unmet need, and moving from idea to product
• How a diverse network enabled the creation of a cross-functional founding team that was primed to endure the start-up journey
• The importance of collecting insightful data to de-risk and facilitate iterative improvement across both product and business model
• The dynamic between large and small medical device players, and the process of innovation through acquisition

3:02 to 9:49: Creating the PIVO™ device

• On hypothesizing a straight-forward solution to a big problem: Pitou tells the story of encountering a hospitalized patient with challenging venous access, meaning she was left bruised and bleeding from numerous failed blood draws. She challenged Pitou, asking why blood could not be suctioned through the peripheral IV catheter (an indwelling plastic tube often used to infuse medications) in her arm. While Pitou understood that these catheters could not reliably offer blood beyond the first day or two after placement, he had not fully framed this circumstance as a problem in need of solving. He eventually hypothesized that tube kinking and obstruction from clotted blood or winding vessel walls had a part to play (among other factors that his company would eventually elucidate), and perhaps threading a smaller tube through the IV catheter system could serve as a solution.
• On recognizing a market opportunity: Surely, thought Pitou, someone had tried to solve this problem. But a literature search proved him wrong, and he realized that peripheral IVs had seen no major innovation going back decades. Vascular access was an oligopoly — dominated by a few big players who could sell both IV catheters and blood draw kits at massive scale. The result was a broad lack of incentive to improve an inefficient vascular access standard, and a massive opportunity for Pitou to turn his idea into a novel product.

“After four years of medical school, three years of residency, and then a patient, a wonderful 80-year old woman just says, ‘why can’t we do this?’ and I have no idea. That doesn’t happen every day. It really, pardon the pun, stuck with me.”

9:50 to 15:10: Leveraging network to find a co-founder and early capital

• On how investing experience can empower entrepreneurs: Pitou attributes much of Velano’s early success to skills and experience he gained as a healthcare venture capitalist at Safeguard Scientifics. He was able to create a strong network of potential future investors, learn the mechanics of financing young companies, and observe the traits of successful, serial entrepreneurs.
• On finding a complementary co-founder with a compatible mission: A warm introduction from Jeff Marrazzo, the soon-to-be co-founder/CEO of Spark Therapeutics, led to Pitou meeting Eric Stone. A fellow Wharton alum, Eric would soon join Velano as a co-founder. He brought a sales and marketing background, and was able to leverage a deep network of healthcare operators that paired seamlessly with Pitou’s investing and academic connections.

“You get to have a huge network of other venture capitalists…where they now know that you’re not crazy. They’ve met with you, they’ve worked with you on deals before. You have that semi-credibility that you know how to manage money.”

15:11 to 22:37: Building a Product Worthy of Launch

• On validating product potential through key milestones: Velano’s angel round was used to finance early de-risking efforts. During this time of uncertainty, Pitou and Eric kept their full-time jobs, working on Velano during off-hours and aggressively outsourcing to consultants. Three critical steps were 1) protecting their relatively simple IP in order to create a long-lived asset in the business 2) proving that manufacture and clinical testing of the PIVO device was feasible and 3) showing that consumers would perceive new value in the largely commoditized market of peripheral venous access devices. While the team was ultimately successful in each step, some creativity was channeled to reach the third milestone. Pitou explains how, with help from a Wharton professor specializing in pricing and value analysis, he built a quantitative survey and elicited responses from an ad hoc cohort of hospital purchase decision leaders. The result: these customers reported willingness to buy PIVO at 5 times the price of existing blood draw devices.

“I think far too many entrepreneurs don’t sit down and think about what are the key things that could go wrong, or that are flaws in your idea, and steer into those problems…Too many people get excited about the engineering, prototyping, all the sexy stuff of building something, but they don’t really think about what could go wrong enough. If you’re going to fail eventually — and most start-ups fail, unfortunately — you want to fail cheap and you want to fail fast, and get on with your life.”

• On generating data that would fuel the development and launch of PIVO Generation 2: Pitou explains that in order to seek FDA clearance and enable commercial efforts, medical device design needs to be locked as long as a year before the planned launch date. Yet, even after that design was submitted, the engineering team did not slow down R&D efforts. PIVO Generation 1 had its shortcomings, and the team believed the blood draw success rate could be increased. Pitou recalls a critical ultrasound study during that time, one that shed light on a serious pitfall in the first generation device. The team visually observed the effects of one-way venous valves, small dynamic barriers that maintain flow back toward the heart, which were sequestering blood in a distant vessel location, away from PIVO’s tubing. Simply put, the device needed to be longer to open that valve door and access a sufficient stream of blood. The team replicated these findings in a larger study, pivoted engineering, received new FDA clearance, and a year later confidently launched the second generation of PIVO. They tracked the first 500 post-launch PIVO blood draws to reveal a 94.7% success rate, a number statistically indistinguishable from their 95% prediction. As Pitou put it, he had goosebumps. Presumably, because Velano had just changed the venous access landscape.

“It just worked better. It was easier to use, it was cheaper to make, it was everything you wanted Gen 2 to be. Science works. You can solve problems, it just takes time and money.”

22:38 to 25:54: Velano’s commercial growth

• On running commercial pilots across hospital systems: Pitou explains that paramount to acquiring new hospital customers was running successful pilot studies. Velano trialed the PIVO device across numerous hospital systems in an attempt to demonstrate its benefits and justify a premium price. Pitou knew hospitals would not receive additional reimbursement for PIVO, but rather that most of its value would flow from the patient and provider satisfaction of successful needle-less blood draws and reduced needlesticks. He also understood that most hospitals are notoriously subpar when it comes to running pilot studies. So, he and his team “lived” in these hospitals, ensuring that high-quality data was being generated to prove impactful outcomes.
• On demonstrating value to big medtech: Pitou argues that large medtech companies rely on smaller entities like Velano for groundbreaking innovation, and that it often takes concrete milestones to trigger deal discussions. Over years, Velano navigated countless conversations with leaders at these larger companies, and Pitou viewed these encounters as an opportunity to “check-in.” He would offer a snapshot of Velano’s progress and in return would seek insight regarding the internal gauge of these potential buyers. For example, some big incumbents wanted to see Velano gain market share before moving talks forward, while others placed higher importance on revenue. Armed with these details, Pitou was able to return to investors, tout a targeted growth plan to achieve these milestones, and secure additional funding.

“Most companies can get to the pilot phase. You can convince somebody to give you a small budget to prove some milestones for the hospital that are meaningful. The problem is that they’re good at saying yes to pilots, but most hospitals are really bad at running a pilot. So you have to set it up completely for them, run it for them, live in that hospital.”

25:55 to 32:59: Velano’s acquisition by BD

• On the serendipitous role of Covid in facilitating Velano’s purchase: Velano’s co-founder, Eric Stone, was able to develop a close relationship with the recently installed CEO of Becton Dickinson (BD), Tom Polen, over the course of a two day healthcare conference at the start of 2020. With the company now firmly on BD’s radar, a final fortuitous development brought about talks of Velano’s purchase: thanks to a robust diagnostics business, the Covid pandemic drove a significant increase in BD’s revenue. Holding an extra $1–2B in cash by the end of 2020, BD was actively look to expand its portfolio through acquisition and looked to Velano Vascular. Pitou explains the thrill of receiving that initial call from BD — how the team was not expecting such a big opportunity at that time, how an emergency Velano board meeting soon led to term sheet negotiations and then to closing, all in just three months.
• On the complex dynamics of integration: Pitou speaks about the multiple priorities surrounding the integration of two companies. He notes that the financial aspect is important, of course, but he also wanted to ensure that BD would continue to drive PIVO as a new standard of care. Pitou’s personal mission was to be able to walk into hospitals for which he had never been part of selling, and to see PIVO technology helping patients. After the sale, he spent a year helping BD to better understand this mission, while also distilling years of accumulated Velano insight. Ultimately, that transition offered Pitou an incredible closure to Velano Vascular’s story.
• On life after BD : Since departing BD, Pitou has focused on spending more time with his family. He is very vocal about the toll of the entrepreneur lifestyle, and feels that it ought to be discussed more often. He stays busy through roles as an active angel investor with Robinhood Ventures, an advisor and/or board member to six companies, and an adjunct professor at the Wharton School of Business, where he leads a healthcare entrepreneurship class alongside his old professor and mentor, Dr. Gary Kurtzman. True to his roots, Pitou is also on the look-out for his next start-up adventure.

“We had to believe that the leaders there really wanted to drive [PIVO] as a new standard of care…It’s great to make some money, but we were in this because we wanted to change medicine. I mean, that’s why I created the device. That’s why I worked so hard…It’s because I wanted to be able to walk into a hospital, or have my mom go into a hospital, and have a better experience.”

33:00 to End: Advice to aspiring entrepreneurs

• Most successful entrepreneurs will face failure, likely more than once: Pitou offers some parting advice for those looking to start and grow a company: be prepared for failure, but don’t give up. We are inundated by stories of young, massively successful founders, the Zuckerbergs as Pitou calls them. Yet, such cases are seldom the reality. He hopes listeners will remember that the path is never easy, and few will get it right the first time around. So keep trying.

“Most successful entrepreneurs that I have met, when you actually hear their real stories, the true story, not their story on LinkedIn, but the actual things they were working on in the grey zones — between jobs or during school, for example — that didn’t work out, there’s usually a few failed start-ups along the way. So don’t let people lie to you and say it’s super easy.”