- Adam, the founder of Penumbra, discusses his journey from being a lawyer to starting his own company.
- He started his first company, Smart Therapeutics, as a joke but ended up selling it to Boston Scientific.
- Adam emphasizes the importance of embracing uncertainty as an entrepreneur.
- He believes that the ability to thrive in uncertainty can be observed through the way someone makes decisions.
- The success of Penumbra, despite initial resistance from customers, demonstrates the importance of focusing on the value and impact of a product rather than potential risks.

- The speaker discusses the challenge of convincing customers and investors that their solution was needed, despite initial resistance.
- Neurointerventionists were hesitant to treat acute ischemic stroke because it would require them to be on call, which was a different lifestyle than what they signed up for.
- The speaker believed that the motivation behind the resistance was clear and that they were on the right track.
- Reimbursement was expected due to the high cost of treating stroke patients, and this further supported the need for their solution.
- While some physicians supported the idea, many were hesitant due to the lifestyle changes it would entail.
- The speaker's first company was funded by people they knew, rather than formal venture capital.
- They did not feel that raising money from big venture funds held them back and actually enabled them to be more focused and committed.
- The speaker's second company had a longer pathway, and investors were asked to invest with the understanding that they could not call on their investment for 20 years.
- The goal of going public was not to make money, but to overcome structural impediments in getting patients treated for stroke.
- The speaker did not have personal ambitions of running a public company.

- The speaker discusses the importance of time in stroke treatment and the influence of state and local laws on patient transfers.
- There is an economic incentive for hospitals to treat stroke patients, which can create bias in patient transfers.
- The speaker was concerned that important trials might get lost without proper attention.
- Going public helped to raise awareness and emphasize the importance of stroke treatment.
- The speaker discusses the process of team building and creating a cohesive culture within the company.
- They emphasize the importance of open discussion and being willing to admit when they are wrong.
- The speaker shares a painting created by their daughter that symbolizes cooperation and the power of a unified team.
- The cultural value of cooperation has scaled as the company has grown, and it is now managed by everyone in the company.
- The speaker does not spend much time thinking about sports analogies in relation to team building.

- The speaker does not think of their company as a sports team or a family, but rather as a group of people who care about each other.
- They emphasize the importance of assuming the best intentions of others and living with grace in the workplace.
- The speaker admits that letting someone go can be difficult, but it is sometimes necessary for the betterment of the organization.
- They discuss the challenge of determining whether a person's performance issues are due to a cultural fit or a coachable problem.
- The speaker shares their experience of having a diverse workforce, particularly in terms of gender, and attributes it to the company's environment and interactions rather than specific programs or guidelines.

- The speaker emphasizes the importance of hiring the best people, regardless of gender.
- They believe that women should be treated equally in the workplace.
- The speaker shares their experience of taking their company public and ringing the bell.
- They explain that going public was not their goal and it didn't change much for the company.
- The speaker discusses the importance of being motivated by the right reasons, rather than just making money.
- They suggest that uncertainty can be trained by embracing failure and being comfortable with the worst-case scenario.
- The speaker acknowledges that they worry about everything but believes that worry and obsession are necessary in entrepreneurship.
- They mention the importance of being cheap and making wise financial decisions in the early stages of a startup.

- The speaker believes in being cheap regardless of the source of money, as it sets the culture of the company.
- They do not have departmental budgets, avoiding wasteful spending.
- When setting up sales channels, they were lucky to have connections and knowledge in the field, allowing them to hire experienced salespeople.
- The speaker believes that EQ, humility, and work ethic are more important traits for a leader than IQ.
- Managing work-life balance was a challenge for the speaker, but they prioritized being a parent, spouse, and running the company.
- The speaker advises founders to start a company for the right reasons and make pure decisions, not cutting corners.
- Money is seen as a byproduct of doing something that matters.
- The conversation was congratulated on their book, and the speaker thanked them for the conversation.

- Adam, the founder of Penumbra, discusses his journey from being a lawyer to starting his own company.
- He emphasizes the importance of embracing uncertainty as an entrepreneur and making decisions based on it.
- The success of Penumbra demonstrates the importance of focusing on the value and impact of a product rather than potential risks.
- Convincing customers and investors of the need for their solution was a challenge, but they believed they were on the right track.
- The speaker's first company was funded by people they knew, while the second company had a longer pathway and required long-term investments.
- Going public helped raise awareness and emphasize the importance of stroke treatment.
- The speaker emphasizes the importance of team building, open discussion, and assuming the best intentions of others in the workplace.
- They discuss the challenge of letting someone go and determining whether performance issues are due to cultural fit or coachable problems.
- The speaker values a diverse workforce and believes in treating women equally in the workplace.
- Going public didn't change much for the company, and the speaker emphasizes the importance of being motivated by the right reasons rather than just making money.
- They believe in embracing failure, being cheap, and making wise financial decisions in the early stages of a startup.
- The speaker believes EQ, humility, and work ethic are important traits for a leader.
- Managing work-life balance was a challenge, but the speaker prioritized being a parent, spouse, and running the company.
- They advise founders to start a company for the right reasons and make pure decisions.

Few founders have managed to stay the CEO of their company, especially when it is publicly traded at a market cap of $10B. Adam tends to shy away from the spotlight, so we’re happy that he’s joining us to talk about how he got the company going, what drove him to stay in the CEO seat, and how to maintain a startup-like culture even when you have thousands of employees.

Chapters (Powered by https://bit.ly/chapterme-yc) - 
00:00 - Intro
04:33 - Exploring the Uncertainty of Starting a Business
13:34 - Investment and Funding experience
15:12 - Without VC funds - Did it held you back?
17:59 - Did you Think of Taking the Company Public
21:41 - The Culture of Penumbra
29:35 - Family vs Sports Team
31:45 - Have You Had to Fire Someone?
35:48 - Apple's Fight for Women in Engineering
40:21 - Ringing the Bell Moment 
44:16 - Q&A - How to Train Yourself to Love Uncertainty
46:19 - How Did You Get Through the Regulatory Clearances and Capital Needed
50:37 - Building Sales Teams
52:21 - Describing the Traits of a Leader
54:55 - Parting Advice

And Adam, thank you so much for being here today.

Maybe there's a little noise in the background.

My headphones didn't work and I'm at a medical conference.

Folks that maybe haven't heard of Adam's background quite yet.

Adam started Penumbra and took the company from its founding state all the way to a market cap of $10 billion.

And he did this as the founder CEO, which is so incredibly rare in our industry.

But in fact, this is your second company, right, Adam?

Did you always know you were going to start companies?

In fact, I started my career, I actually played in politics for a couple of years, realized I might be still too idealistic to do that.

So I went to law school, became a practicing lawyer for many years, did commercial real estate in the Bay Area, became a partner in my firm.

And it wasn't until the late 90s that I was having dinner in New York with my best friend from college who was a neuro interventionist.

And in a silly bit of fate, I jokingly said, let's start a company.

When did you know that this thing was going to be more serious?

I had been married before and I had just met a woman on a blind date that I fell madly for in the first date.

And Arani Bose, my co-founders, was my best friend from college and I was telling about her.

He lived in New York, we lived in the Bay Area and I wanted him to meet her.

And so the point of the dinner, we went to New York to have a long weekend.

And the point of the dinner was for him to meet Martha.

By the way, I've been married to Martha ever since and still the love of my life.

But the he gave me the sort of sign, the thumbs up sign very quickly in the dinner because she's amazing and told me I better not screw it up.

And then I guess he felt that he could then spend the rest of the time talking about his stuff since he had checked that box on his stuff, my stuff.

So he started talking about ideas for neurovascular devices.

And in 1998, there was really only 1 at that point cleared medical device, the first detachable coil that Target Therapeutics had done, and then Boston Scientific had bought.

And so it was very early, there were all kinds of needs, and he was talking about aneurysms and stroke and all kinds of things that I didn't really know much about.

But after about 15, 20 minutes, I realized we would spend the next 2 hours talking about it.

So because Martha was there, I couldn't just tell him to shut up.

It's not that hard, thinking that would stop him from talking about it, but then we'd be done with it.

So I knew I had screwed up pretty badly the next day when he called me while I was still in New York and insisted that we get together to sort of plan starting that company, which I was reluctant to do.

But again, Martha's the nice 1 and suggested it was OK.

And we planned a company and started that company about a month or 2 later.

And the company made the first stent ever to go into the brain.

And we ended up selling that company to Boston Scientific a couple of years later.

And so how was that transition into entrepreneurship for you, Right?

We have a lot of listeners who are perhaps doing something else that are thinking about becoming founders.

What was it like to go from doing something completely different into the seat of a founder?

Well, you know, there was something I used to say as a lawyer, and I think it's really the advice that I would give anyone who is considering doing this, and that is, understand how you view the idea of uncertainty.

You know you can look at and say what are the odds that I'll do this or that, and you can quantify risk.

And most people, me included, we're pre-wired not to like uncertainty.

We kind of hope that we have a plan and then we want the world to sort of fold out in front of us according to the plan.

And that dynamic is tricky for a lot of people.

So what I would advise everyone is to really look deep in your heart and say, how not only can I tolerate uncertainty, but do I like uncertainty?

And if you do, then, you know, you'll be pretty good at it because every single thing you do as an entrepreneur is uncertain.

Is that whatever you're doing is uncertain.

And I want to come back to sort of how you found the early team and if you looked at uncertainty with how they handle things and if that was something you started being able to spot in interviews, how do you know if someone is not just tolerant of uncertainty, but sort of thrives in it, enjoys it?

You know, if you're trying to look at that from afar, I think it really just comes down to the way they make decisions.

You know, are they making decisions that look more like risk adjusted decisions, as opposed to the analysis that goes through their head around something.

So for us, it was always the simple things.

If we're making a product, what is it gonna do?

Is it going, when it's ready, does it do what we think it's gonna do?

All the things that sometimes you're taught to look at the market to deal with reimbursement to deal with you know you know physicians who you know whatever the customer base is don't worry about any of that you know focus on the most important thing Does it do what you want to do and is what you want to do valuable?

And so when we started Penumbra, you know, we were gonna go after a schemic stroke, the idea of taking blood clot out of your brain with a catheter deep in the brain and sort of suck it out.

At the time, no doctor wanted to do that.

So our current customer base basically said, we don't want to treat the like it.

It was not something that they were dying to do and looking forward to.

There was 0 reimbursement for the procedure and there was nothing that was patentable.

And so, you could look at that and make the decision, don't do that.

Because of those risks, we're not going to do it.

But if you don't look at those things and say, yeah, but there are a lot of people, probably in the US alone, a couple hundred thousand, worldwide over a million plus, who have what's called a large vessel stroke, and that stroke could be devastating for them, and we think there's a way to make them much, much better.

Then it's an easy decision to go into because the rest of those things take care of themselves.

And in our case with Penumbra, which is that company, the stroke company, all of those things took care of themselves.

We've got reimbursement, doctors want to do it.

We're finally now, almost 20 years later, the technology has evolved and evolved.

Our current iteration of these products have patents on them.

So it might take a while, you know, but you can get there for the things that you otherwise might have valued higher than the end result.

Yeah, Adam, what really strikes me about that is that when you talk to the potential customers, they just said that they didn't wanna do this.

So first, what were they doing at the time to treat this condition?

And how did you make yourself believe, make investors believe, make your early team believe that even though the customers were saying that they wouldn't want your solution, that it was something that was needed, right?

Yeah That's a That's a tricky and I'm really glad you picked up on that particular Point because you do have to listen to your customers, but to a point.

You know, what was motivating them to say that?

Neurointerventionists at the time treated aneurysms.

There weren't that many of them, so they were doing them all.

And that business, that those clinical cases did not require them to be on call.

So if all of a sudden they were going to start treating acute ischemic stroke, they had to be on call.

And that's a totally different lifestyle than they had signed up for when they went into neurointervention.

So the reason they didn't wanna do it, again, they didn't say that, but that was probably pretty clear.

No 1 said, oh, I don't wanna treat those patients because I don't care, you know, everyone wants to help people if they could.

And in that case, it was pretty clear that we were on the right track.

From a physician standpoint, they just, you know, would have to be on call.

And, you know, but obviously, you know, and on the reimbursement, it was again, something that we looked at and said, you know, reimbursement will take care of itself because we know that it costs the health care system 30 billion dollars or some absurd amount of money to treat patients who have, you know, after they've had a stroke every year.

You know, the amount of care given to people who don't die after a stroke but live impaired is huge.

And so if you could take a significant percentage of those people and not have them have that cost, that burden, there's gonna be reimbursement.

And lo and behold, long before we had any da reimbursement because the looking at the same numbe a dynamic of innovation, But we knew that was on our side.

So you the most physicians didn't want to change our lifestyle so drastically to then be on call, which completely makes sense.

Did you did you have a few believers, like a few physicians that were sort of rallying around the idea and supporting it?

Yeah, yeah, there were, there's no question there were people, and I certainly appreciate the clarification, because there were definitely people who, you know, and a lot who wanted to see these patients helped.

You know, but it was, it was sort of a two-edged sword.

You know, yes, we know we should be doing this, but, you know, oh, now we have to be on call, you know.

So It's a little bit, you know, it's understandable.

You know, we didn't make judgments on that.

Yeah, that's 1 of the things I touch upon in my book, without a doubt, which is actually being released tomorrow.

Is, you know, I was rejected so much, so many times by so many different people, including customers, including investors.

But you just need those core few people, right?

You really believe in it to kind of push things forward.

So with that being said, what was it like?

Tell me a little bit about your investment and funding experience.

For the first company, Did you raise venture capital?

And then what did you do the second time around?

Yeah, so to be very fair, we we did not ever in both companies raise formal venture capital money, we were lucky enough.

I was coming from a law practice where I knew a lot of people who had lots of means and Irani, my co-founder, had some other additional friends.

But With just people we knew, we were able to fund the first company.

Obviously, we ended up selling that relatively quickly to Boston and raising money the same way for the second company was was pretty straightforward.

So we never took any sort of institutional venture capital or other forms of institutional money until we actually, a little less than a year before we went public.

We did what they call a crossover round that Fidelity led, but that was in anticipation of going public, which we can talk about why we did that.

Now we were lucky, you know, that not everyone has that level of people that they knew who would fund, you know, and invest in the business.

Adam, I love, love this part of your story because in our industry, people are always saying you have to raise money from the cool kids, you know, the big venture funds to be successful.

Do you ever feel like that held you back at all?

Again, nothing wrong with the, you know, any form of money or whatever institution they're in.

It's just the amount of time spent dealing with their views wasn't helpful for us.

If it wasn't working and we weren't going to be successful, we would have understood that.

In some sense, I think we were more committed because they were friends of ours.

You know, like the last thing you want to do is fail in your business and then lose all your friends at the same time.

You know, so I think we were, you know, pretty driven to succeed and continue to go because of the friendship.

In the second company, it was a little bit different because the pathway there wasn't make a product, get the FDA approval.

The second company, we knew that it would take a lot longer to deal with acute ischemic stroke.

That was just a much, much more significant pathway.

So in fact, we told our investors, you can invest, but under 1 condition, you can call either of us as friends, because we're friends, but you cannot call us as investors for 20 years.

For 20 years, because the 20 and so and that was just the deal.

Like, you know, we this is going to take a long time.

You know, if it was easy, it would have been done.

The pathway is going to be not a straight line and therefore, you know, invest with your eyes wide open.

And that's not something obviously that institutional investors would typically be interested in.

It's just the nature of their the sources of their money.

And so for us, it was really a critical component of the journey that we've been on in order to build this business.

So because you knew it was going to take decades, I mean, you had just sold a company and then decided to do another 1.

Was there anything about either the acquisition or not, or just generally, Did you think that you were going to take this 1 public when you started it?

I didn't personally have any ambition of running a public company.

I still don't, albeit I've been doing it a long time.

The goal wasn't that form of what our company was.

We actually went public not for the reasons you typically think, which was to get the ability to take money out and put it in your pocket.

The goal was in 2014, we went public in 2015.

In 2014, a series of clinical trials were conducted and finished and published in New England Journal in stroke, where it proved definitively that you should do this treatment across the board for anybody who has a large vessel stroke.

And it was this really watershed moment, but the problem was notwithstanding that clinical trial, those clinical trials rather, there was all these structural impediments, and there still are, in how to get those patients treated.

Because the theory was they had to be treated by a neuro-trained physician.

So the patients would have to be moved from where they show up to a different hospital.

You know, you're losing neurons all the time.

All of that's governed by state, and in many cases, local laws and ordinances.

So the idea that that would automatically happen because, you know, and there's an economic incentive, unfortunately, not to transfer the patients.

Hospitals that get stroke patients get a lot of money for treating them after their stroke.

So, you know, there was some built-in bias, again, not anyone's fault, not, you know, it was done for the right reasons, you know, to make sure those patients could be treated after their stroke, but it wasn't updated fast enough.

And so I was worried, you know, we have some competitors, sorry, I'm noises getting louder.

There's, we had big competitors, Medtronic, Striker, you know, but it didn't make a huge difference.

That business compared to the rest of their businesses.

And so I was worried that and our physicians hadn't yet gotten organized like cardiology or some of the other specialties.

So I was worried that it might get lost in that moment, but these trials might get lost.

And no 1 cares about what a private company says in that setting.

You know, so we could harness the power of, you know, Wall Street and the messaging around how important this treatment was.

So it was, you know, that that was the rationale for going public, something that made a lot of sense to me.

I was told, you know, probably shouldn't say that much to investors, but I did anyway.

And none of them seemed to think it was a bad idea.

So Adam, 1 topic I'm really excited to talk to you about is team building in the early days.

It's something that's always struck me about Penumbra.

You know, when you first brought me in to meet your team, they seem so cohesive and motivated, and There was clearly a cultural vein that kind of ran through everything that people did in the way they spoke.

And I've also been at your office at 6.30 a.m.

And I just, I admire so much the culture that you have created.

But for the founders on the call, right, it starts with those first 5 or 10 or 15 people to 50 people.

How do you build that type of team and culture, Adam?

Well, the second company, you know, was easier in that the same people that were in the first company, the first 19 employees were all from the first company, and so we'd already had a little bit of a track record together, But there are a bunch of things that I would say, culture is 1 of those weird things, everyone has different ways of talking about it.

So I'll sort of share how I talk about it.

Maybe it will resonate with some of your listeners, I don't know.

It starts with a couple of fundamental things.

You know, I've watched at bigger companies the way people interact and it becomes very political.

And therefore, even if somebody disagrees with the boss, you know, they sit there quietly, they don't challenge the boss, you know, and then you get the wrong answer, even, you know, because the boss was totally wrong and no 1 could say anything.

So it starts with creating a culture and a dynamic where you can have discussion about it.

And so I always share with everyone the fundamental view that I'm wrong at least half the time.

That's pretty good, being wrong half the time.

But why, rather than talk about that and sort of keep score, if you aren't uptight about being wrong, you know, then as a team, you get the right answer.

Because, you know, I might start a conversation by saying Hey, what do you guys think about X or I I might even say we should do X, you know I'm not saying I always have perfect rounded language.

I might say it as a more of a, this is what we're doing.

But you build a culture where someone can say, hey, you know, Adam, I don't think that's a good idea because of this and this.

And they have to feel like they can do that and go like, oh my God, that's a much better idea, thank you.

You know, it just becomes part of the operation of the enterprise where discussion and decision, ultimately, you know, I have to decide if it's a big enough issue.

And sometimes we're wrong, but you tend to be right a lot more if you're not starting out needing to be right.

Though I use the word cooperation, I think that word has this element to me of sort of everyone working together, sort of, you know, not against each other, not politicking with each other.

And many years ago, my daughter, 1 of my daughters is now 20.

So this would have been 9 years ago because she was 11.

It's not what she wants to pursue professionally.

But I asked her at 11 if she would do a painting of paint, paint a image depicting the idea of cooperation.

Because it would be wonderful to see, and I could have it as sort of a thing to talk about.

She was 11 and took about 40 minutes she came back and found me in the house and said, all right dad I figured out what I want to paint.

She said, and this I remember specifically because I was a little blown away, she said, I envision, and I thought that was an interesting term for an 11-year-old to use, I envision a giant wave on the ocean.

And that wave, inside the wave, there are all kinds of different shapes.

Those shapes are in different sizes and colors.

But together, those shapes of different sizes and colors, they represent people and people come in different shape, sizes and colors.

But together, they form a giant wave moving across the ocean that is in sync and all powerful and unstoppable.

And I thought, oh my God, that's like the single best way to describe the company culture.

So that particular painting has been framed and is on my wall in my office.

And I do encourage people to look at it and remember what it means, particularly if they're losing their way in any given moment and needing credit or all the silly stuff that we all do with each other because we're human beings.

So this cultural value and what an insightful 11-year-old, incredible.

So, and I've seen that painting and it's pretty tremendous and powerful.

So this cultural value of cooperation, OK, I can completely I can see it working 10, 20, 50 people.

How do you make your most important cultural value scale?

I actually think it's easier as you get bigger if it's rooted well.

The biggest risk to the company was when we were smaller, when we had like 30 or 40 people and and we doubled the size relatively quickly because there was a moment then that we had as many new people as we did old people.

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YC Fireside: Surbhi Sarna + Adam Elsesser - CEO of Penumbra