(pictured above: The Company Founders in 2003, shown with Dr James Mah (top), Lea Ellermeier, Ruedger Rubbert, Thomas Weise, Dr. Dirk Wiechmann)
Lea A. Ellermeier 0:02
What does every startup company have in common? CHAOS! Welcome to “Don’t Freak Out Today, Freak Out Tomorrow!” I’m your host Lea Ellermeier. Each week we’re taking a deep dive into what it’s like to start a company, manage the chaos, maybe freak out, and not lose your mind. Thanks for tuning into our inaugural episode of “Don’t Freak Out Today. Freak Out Tomorrow,.” With me today is my co-host Wendi McGowan-Ellis Hi Wendi!
Wendi McGowan-Ellis 0:40
Hi Lea! I’m so honored and so glad to be here. This is so exciting. I know this has been on your mind to get this podcast started for a while. So here we are in our first, episode one.
Lea A. Ellermeier 0:52
So Wendi is a fellow serial entrepreneur. Wendi, why don’t you tell us a little bit about you?
Wendi McGowan-Ellis 0:58
Yep. So my background with entrepreneurship actually started when I was 14. I looked around at all of my friends who were babysitting. You know, hostessing at Bennigan’s back in those days. And I decided that I would be an entrepreneur in the way of teaching private cheer coaching lessons. And so back in the early 80s, I was charging $50 an hour for private cheer coaching lessons to girls who were in elementary school and junior high trying to make their grade’s cheer squad. And wow, that was kind of my first taste and understanding of, hey, when you own the thing, you’re the one putting more money in your pocket, rather than when you’re not the one who owns the thing.
Lea A. Ellermeier 1:45
I bet you bought some cool clothes with that $50 an hour!
Wendi McGowan-Ellis 1:49
I had great “bank” from January to April which is when I made all of my money every year. And yeah, but that was a big lesson. I then went off to college and got degrees in economics and government from UT. But before I graduated from college, I again started another business and have gone on to start several companies since then. So yeah, so I’m right there with you with the having an idea of starting an idea and then executing on the idea.
Lea A. Ellermeier 2:18
Yeah. And that’s what we’re here to talk about today. That whole process that those of us who decide we want to try something go through. And I just want to let you know, this podcast is not just for people who’ve already started a company. It’s for all of you that are sitting there on the edge of your seat thinking, “should I” or “shouldn’t I?” What it’s really like? What happens when I succeed? What happens should I fail? And I think every entrepreneur you’ve talked to, Wendi and me, too, who’s gone through it more than once. It’s not all success.
Wendi McGowan-Ellis 2:48
Exactly. Yeah. And I think that’s a huge lesson. But today we’re going to talk first about Lea’s first entrepreneurial venture, Lingualcare. Lingualcare was a medical device company that Lea started in 2003, and sold it to three M for a sh-load of money. I’m just gonna say that. Lea actually wrote a book about that entire experience called “Finding The Exit: It’s not where you start, it’s where you finish.” And I just want to say that Lea’s book is literally in my top five on my bookshelf. I’m not blowing smoke. It’s true. Yeah, I’ve read it several times. Lea talks about not only her experience with building the business, but also what she was going through personally, through the entire venture. And so I think that’s what you’re going to hear in this podcast as we move forward is that Lee’s going to tie in lessons learned and things that are important to her not only from a business perspective, but what that means for a woman also balancing family and marriage and children and everything else that goes along with life. So I’m going to kick off the questions. Lea, tell me about Lingualcare. What did the company do?
Lea A. Ellermeier 4:10
So Lingualcare was a medical device company. We made orthodontic braces. If everybody’s had those, you know what the painful lovely railroad tracks on the front of your teeth. We made orthodontic braces that went behind your teeth. And it was really a revolutionary product at the time because we were one of the first to use 3D printing to make the product and a lot of CAD/CAM technologies that back at that time were just not being used to make patient specific appliances. And the the value of that was that by making it specific to that person, we were able to make the brackets really small, and we bent the wires with robots. It was very high tech, because by making it small, it was very comfortable by using those high tech wires. It made the treatment go faster. So it was really a revolutionary product at the time.
Wendi McGowan-Ellis 5:05
Okay, so tell us about your background. Were you in dental orthodonture? I mean, what were you doing when you decided to start this company?
Lea A. Ellermeier 5:14
Okay, I know just enough about dentistry to be dangerous. So let me start off there. So my background, I have a degree in political science and history. And I also have an MBA. I originally got the political science degree, I thought I wanted to go to law school. In college, I worked at a law firm in El Paso, Texas. And just observing that I realized, hey, maybe I don’t really want to be a lawyer. I like the study of law, but that day to day practice, that reality is probably not for me. And so I ended up going to business school and got an international MBA. And I like to tell a story when I was getting out of school, you know, everybody’s interviewing and all these big companies and these, they come to campus, and it’s a big thing… How many are on your sheet? Who are you talking to? And out of nowhere, I got a phone call from this company in Berkeley, California called Geo Works. They were a software startup. And at the time, I thought, you know, I want to do something big. So I was thinking commodities trading, you know, that seemed like a really cool, big thing to do. But I was going to school in Phoenix, it was 115 degrees outside, and I had never been to California. And I thought, wow, I’m going to get a free trip to San Francisco. So how awesome is that? Yeah, right. I’d like to say I had more better intention and planning going into this, but I clearly did not. So I take the interview. And over my first plate of authentic Thai food, this fantastic entrepreneur by the name of Brian Doherty, Brian has started multiple companies. You know, he started back at Atari. Brian convinced me that Geo Works, could beat Microsoft at the operating system game. And I was so naive, I believed him. Right? I totally bought in. By the time I get back to school, forget about the commodities trading, I actually had a job almost lined up in that. I’m going to Geo Works, I’m going to Berkeley, I’m going to change the world. And I was so excited about it. And I tell my friends, hey, I’ve got this opportunity. I’m going to get stock options. And they’re all like, what are you doing? What will that company even be around in two years? And I stopped, I thought, well, I don’t know. But that’s okay. If it’s not, I’ll figure out something else. Man, right now, this is what I want to do. that’s
Wendi McGowan-Ellis 7:37
The sign of a true entrepreneur, by the way. Two years? That’s a lifetime away.
Lea A. Ellermeier 7:44
Just throw caution into the wind, right. And so you know, I loved the energy of that entrepreneurial company. Anybody who’s worked in a tech startup has probably felt the same feelings about you’re with smart people, everybody’s very motivated, you just believe you can do anything, right. And so I loved it. And that’s, you know, that’s how I got started, I spent 10 years in software working for a little bit larger company, a little bit smaller companies. But one of the things that happened at the end of my tenure at geo works that really convinced me that this is what I wanted to do is the company went public. And I had a little bit of stock, you know, it’s pretty low on the totem pole. So it wasn’t like, you know, I made life changing money. But it was pretty life changing. For me. It’s like I got a new car and some decent furniture, I got rid of those college milk crates that were still serving as bookshelves my apartment, and I saw the possibility of it. And and that’s really what I loved. In 2000, the very beginning of 2000, I was looking for a job I’d been with a software company, actually was more like end of 99 end of 99, early 2000. And they had sold to Compuware, which is a big systems integrator in Detroit, most of their software and there were some products that were left in the portfolio that were just kind of maintenance products. I didn’t want to do it anymore. So I’m looking around I meet these guys who have just started this orthodontic software company. What I know about orthodontics at the time, other than my own experience having braces, which was terrible. But they’ve made these platform technologies for scanning your teeth, robotically bending the wires to move your teeth to the correct position. They had this great treatment planning software intra-oral imaging, it was very cool. And it was one of the first jobs I’d ever taken where I could really explain to my mom when I did, huh, right, it wasn’t, you know, some software as a service or, you know, complicated testing tool software. So I was I was really excited about it. And I so I took the leap into healthcare, and I was there for about three years before I left With the founder of that company to start Lingualcare, okay, that’s kind of a different story.
Wendi McGowan-Ellis 10:04
Okay. So what was the thing that convinced you to leave your job at that time and take that leap?
Lea A. Ellermeier 10:11
Yeah, that is actually a question. I love asking other people, because you’re sitting there thinking about this possibility, you know, and I, for me, I always fall in love with an idea first. And it’s like, almost falling in love with a person, right? You will sort of imagine this future of what it can be and how it’s going to feel when you’re in it. It’s going to be great, and all the stuff you can do. And then you get that reality of, Okay, I’m going to leave a job and I’m going to leave my paycheck behind. I’m not going to have insurance, there’s nobody to book my travel. It’s just going to be me. How do you get to that point where you’re just willing to do that? I didn’t leave. I’m going to say I was somewhat reluctant. Okay, okay. Because I love the company. I love what we were doing. The company went through a difficult time, they ended up hiring a new CEO. And he and I just didn’t match. And one day I was in New York, and I get a phone call from a friend who said, “Hey, I think I think those guys are shopping your job.” He was, uh, my friend was an executive recruiter. He said, I just saw a spec, and he starts reading it. And it’s basically my job. So I’m thinking, okay. A nd it was very, it was crushing to me, actually. Because as the company had gone through these difficulties, I had really stepped up and basically filled in the CEO role. We lost our CEO. We raised money in the aftermath of September 11, with no CEO, right with me and my co-founder Ruedker, basically taking the company forward. And so I expected some appreciation for that some recognition from the board that Wow, thanks. I didn’t ask for anything. I didn’t say, Oh, I want more stock, or you have to pay me more money. I just did it. It was instinctual. And so then to find out that they bring this new guy on board, and his first step is to want to kill me, right? Feels pretty terrible. And I wasn’t sure what to do. So I’m I was actually on it. In a cab on my way to LaGuardia, I fly home. And I think you know what, I’m going to go confront him. Because if he’s going to get rid of me, he’s going to get rid of me. I’d like to know why. So I went to the office, he was still there. And I said, Hey, I hear I’m on the upgrade list.
Wendi McGowan-Ellis 12:31
I got that, okay.
Lea A. Ellermeier 12:34
And had made a comment at one of the board meetings prior about needing to upgrade some of the talent company, right. So “hey, I understand I’m on the upgrade list.” And he sort of hemmed and hawed around. He said, “Well, I think that your job really is going to require two people.” At the time I was running sales and marketing. And implementation because we were in a beta phase, the product hadn’t shipped. And marketing is my love. Product marketing is my love. And he was wanting to bring in someone to run product marketing, and wanted me to run sales. I didn’t want to run sales. I had a five year old. Yeah. I didn’t want to be a road warrior. Yeah. But I thought, well, what am I going to do? So I leave, and he brings this guy in, it’s a friend of his, the friend has less experience than me. Less education than me, has not spent one day in dentistry. And when I get the financials that first month, he’s on board, I read through and I realize he’s making more money. Oh, my, they’ve given him more stock. And I feel crushed. Yeah. Crushed right now because I’m, I’ve got so much loyalty to this company. And that moment of realizing they don’t have any loyalty to me, right? I’m disposable. And so I went to see a board member and I asked him about and I said, this seems so unfair. And he was very cavalier about it. He said, Well, you know, we just call that a mulligan. And I said, What are you talking, you know, golf, don’t throw a golf terminology at bay. And he said, Well, you know, every CEO has one, you get some guy in the company who doesn’t really fit, you end up paying too much money. You don’t really get it, but you know, you hired a CEO, you have to let him run the company. So what else are you going to do? We have to so basically his answer to me was suck it up. Yeah. And I just couldn’t get past it. Yeah. You know, when this guy shows up, not only does he turn out to be not very qualified, he has this incredibly weird habit. And and I just bring this up because it was so crushing when I realized that this guy is sitting in the office and in meetings, sucking on the collar of his shirts, like he’s chewing on it. Yeah, in big meetings, and then it’s like all the saliva is staining down to like the collarbone of his shirt.
Wendi McGowan-Ellis 15:08
He needed a pacifier.
Lea A. Ellermeier 15:09
Yeah. And I’m sitting there watching this, I’m like, Wow, really? This is my replacement? This is my replacement for half my job making more money? I just couldn’t take it. Yeah. Okay. So that’s probably a very long story to a short question. But, and then there were the flip side of it was, we had had this idea of the brackets that went behind your teeth. And we were working at that company I was with, with an orthodontist in Germany who had been developing it. And we were trying to license it. And I’ve been trying to talk the company into licensing it, and I wasn’t getting any traction. And then one day, Ruedger, who ended up being my co-founder at that time, he was the CEO of the company we were with, he said to me, stop selling that lingual idea. Let’s see if we can get it ourselves and start a new company.
Wendi McGowan-Ellis 16:00
Okay, and so that that was the genesis?
Lea A. Ellermeier 16:03
That was the genesis. And I thought, you know what, why not? Yeah, I’ve raised at that point. You know, I should probably mention, I’d raised money for a couple of different companies. I at that time, I probably raised about $42 million total. So I was no stranger to venture capital, fundraising. What I didn’t realize was that after September 11, the whole market changed. And raising money became much more difficult, but that’s a different story. So yeah, so that’s, that’s how I initially ended up taking that leap. And realizing that I would so regret it, if I stayed in that company, and had to basically swallow my pride every single day. It was like falling out of love. Like catching your boyfriend cheating or something.
Wendi McGowan-Ellis 16:52
Yeah, exactly. And then you decide to stay in the relationship…
Lea A. Ellermeier 16:55
No, it’s never the same. You never recover from at least most people that I know. I never did I never get past it. Right? So that that was the genesis.
Wendi McGowan-Ellis 17:05
Okay, so what impact did that leaving have on your home life? What was the situation there?
Lea A. Ellermeier 17:11
Well, it was not great timing. At the time, my husband was unemployed. I was, I was the sole breadwinner, and I had a five year old. My husband was not feeling great at the time. I mean, struggling to find the right kind of work. And you know, I’ve got a child. My job was providing insurance for everybody. So it was not ideal. He wasn’t very excited about it. And all I could say to him was, look, I’m going to get this thing funded. I promise I’m going to get it funded. And then that puts so much pressure on me. Yeah. And and I think that this is true. For a lot of women who work I know, it was true for me, even though I worked even though I contributed substantially to the household. I was still on the hook for what are we having for dinner?
Wendi McGowan-Ellis 18:05
Exactly. The job. The parties. The birthday cakes. The house. The PTA mom duties…
Lea A. Ellermeier 18:14
Yes, all those things like, “Oh! Will’s got a birthday party. Did you get them a gift card for the kid? And who’s going to drop him off?” Yeah. It always landed at least even if I didn’t have to do the activity. I at least had to be the one thinking about it and planning it and getting someone if it wasn’t me to execute it. And that’s a lot to hold in your brain.
Wendi McGowan-Ellis 18:34
Oh, yeah. Well, especially while trying to navigate a successful startup. I mean, especially in the beginning, when it’s so vital. So you leave. Now you’ve got two co-founders. How did you decide who was going to do what within this new company?
Lea A. Ellermeier 18:54
Yes. So I left the company and two of the technical guys from the prior company came with me Hey, Ruedger, and Thomas. Thomas was a systems engineer. Ruedger was a mechanical engineer, but also an inventor and he had founded the prior business we were at, okay, he had gone through the venture capital raising process. He was very business savvy. He understood the regulatory side. I was just really a sales and marketing person. Okay. Honestly, the first time I told somebody, I was a CEO, I thought I needed to take it back. It’s like, oh, April Fool’s. Like, yeah, I can’t get to them even call me on it. Oh, you’re a CEO. Wow, how’d that happen? So I agreed to take the CEO role because we were basing the company in the US. Both of them lived in Germany. Okay. Okay, right. But we knew we wanted a US company. We were able to negotiate a deal with the other inventor on the system, this orthodontist in Germany and he basically gave us North and South America as our Our markets exclusive licensing to the technology, we did kind of a crazy deal, I’ll give you just a little bit of it. So this technology had been developed with router and Thomas and this doctor, when our prior company decided they didn’t want anything to do with it, it all reverted back to the doctor, okay. But he didn’t care about the US when he didn’t think there was any business there. So it’s like, hey, if you guys continue to help me on the development on manufacturing technologies, which is what those two guys were really good at, I’ll go ahead and just give you this territory. Okay, so we had exclusive rights to North and South America for all of the intellectual property. And my two partners ended up writing most of the patents even for the for the European side. So it was a really a good deal for all of us. I think everybody brought something to the table that was helpful.
Wendi McGowan-Ellis 20:50
So what do you consider to be the biggest challenges you faced in those first years?
Lea A. Ellermeier 20:59
I think that as soon as you start something, and you get on other people’s radar, people start feeling like, “Oh, what are they doing in this space? Are they going to infringe on what I’m doing? Is their idea better than my idea?” And one of the very first things that happened to us when we founded the company started talking about the technology and how we were going to roll it out, is one of the biggest companies in our industry, threatened us with a patent infringement lawsuit. Wow. I mean, we weren’t even really in business three months, and their CEO caught me at a trade show and said, By the way, I think you guys are violating our intellectual property, which is terrible, because as a technology company trying to raise money, you have to disclose that right? You can’t keep that a secret, right? And what we ended up doing, ultimately, to get past that, we didn’t want to admit any wrongdoing, because we didn’t believe that we were, this is a startup company with no money, you can’t hire lawyers, right? You can’t defend it. You know, and I tell people all the time, look, you can have an invention and a patent, that unless you’ve got the money to defend it, your patent is basically not worth a whole lot. So we ended up going to them and saying, look, we don’t think we’re infringing. But we understand that you guys have made big investments in this space, and you do have some patents that are interesting to us. So what we would like to do is make you a reseller of our product, we will pay you a commission on everything that sells. And in exchange for that, we would like to have a license for all of your patents that are applicable to this space. Okay. And if the thing falls apart on the marketing and sales side, we want to continue to have that license at a predetermined rate, and a promise that you won’t sue us for infringement. Okay, which they did awesome. And I tell that story, because people don’t understand the difference between assessing risk that is known and assessing risk that is unknown. There’s just one thing unknown risk is always high, high risk. Yep. If you can’t put a number on it, people are going to assume that it’s probably four or five times riskier than what it actually is. Yeah. But if you can quantify your risk and say, Okay, our worst downside is that this agreement goes away, and we end up paying these guys 7%, then you can quantify that, and it’s easier to know. So it actually turned out great because we were able to turn our worst enemy into our best friend. So instead of telling an investor, oh, we’re probably going to be sued for patent infringement by the largest company in the industry. We could say, oh, did you know the largest company in the industry is our distributor. Right?
Wendi McGowan-Ellis 23:48
They did. That’s a different story.
Lea A. Ellermeier 23:50
It’s a very different story. They didn’t do the work we expected them to do, but that was okay. At least they weren’t going to bring us down.
Wendi McGowan-Ellis 23:57
Did it give you the halo effect also, of having that large brand? Yeah, I would think so. So I have a note on here. There’s something about running out of money. Yes. I love it. I love it. We’ll leave that thank you so much for today. I hope you enjoy this your very first podcast and thank you listeners for joining us on our female founder journey to manage the chaos without losing our minds. We invite you to download and subscribe to this. “Don’t Freak Out Today, Freak Out Tomorrow!” with Lea Ellermeier podcast on iTunes, Google Spotify, wherever you like to listen. And please visit Lea’s website at www.DontFreakOutToday.com for links to all her social media resources for entrepreneurs and to subscribe to her email list and stay up to date on everything in Lea’s world. You can also find out more About Lea’s book, “Finding the Exit,” where you can hear and read all of the details about things that we talked about today and her journey. And check it out on amazon.com, where it’s available for hardcopy purchase Kindle format or as an audio book read by Lea herself!
Lea A. Ellermeier 25:20
Thank you, Wendi, and special thanks to our listeners. This is the start of a unique path where each week I’ll be sharing my lessons learned and bringing on amazing women who have other lessons to teach all of us and don’t forget… Don’t freak out today, Freak out tomorrow!