Tales from the Trenches, Episode 2: Shantanu Gaur and the Pig Carcasses

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Krishna K. Gupta | March 2, 2023

Welcome back to our new podcast: Tales from the Trenches. On today’s episode, Krishna speaks with longtime friend and colleague Shantanu Gaur, Founder and CEO of Allurion Technologies. We seeded Allurion, which recently announced its plans to go public on the NYSE, out of Harvard Medical School in 2011. In this conversation, Krishna and Shantanu discuss how the macroeconomic environment has shaped the company, why it’s critical to focus on customers, and what makes a company an outlier success.

Listen by clicking play below and/or read the transcript of Krishna and Shantanu’s conversation.

KKG: Hi everyone. Welcome back to another episode of Tales from the Trenches. Today, I’m excited to have a dear friend and someone I’ve worked with for over a decade as our guest: Shantanu Gaur, Founder and CEO of Allurion Technologies. Super exciting company in the weight loss space; we actually seeded it out of Harvard Medical School in 2011, and it’s a super exciting time for the company. Allurion just announced it will be going public in partnership with Compute Health, which is run by the former CEO of Medtronic, Omar Ishrak. 

But I can tell you it’s not always been so exciting, and we’re going to learn today in this episode about what it’s taken Shantanu to go from Harvard Medical School through the trenches of the recession through many rounds of funding to where he is now. Thank you for being with us, Shantanu. 

SG: Thanks for having me on, Krishna. 

KKG: So let’s start with just, if you can introduce yourself and introduce yourself from the lens of, what is the hardest thing you have had to do in your career, and how has that shaped you, how did you deal with that. 

SG: Thanks for having me on. I’m Shantanu Gaur, Founder and CEO of Allurion, and I started Allurion actually back in 2009 when I was a medical student at Harvard, learning about obesity and learning about all the things related to weight loss. And over the past 13 years, have had a lot of ups and downs at the business and building the company. 

I’d say one of the toughest times that I personally had at Allurion was during the COVID pandemic, the second quarter of 2020. I’ll never forget it. Literally overnight, our business just ground to a halt. And unlike a lot of other startups, our main source of cash flow is actually the revenue we generate from sale of our product. And to wake up one morning and realize that that cash had dried up…to also realize that the cash you have in the bank is whittling down very quickly, to the point where you may not be able to even make payroll…that is a come-to-Jesus type moment, where you realize that you have two choices. One is to either give up and just let the company die and fold. The second is to peer over the cliff and figure out a way forward. 

KKG: So let’s, for the benefit of our listeners, let’s talk just briefly about what the company does and why COVID impacted it so much. I mean I believe your main sales channel is clinics, so maybe you can touch on that a little bit. 

SG: Yeah, we started Allurion with the mission to end obesity around the world. And what we developed is a weight loss program that features a medical device that is quite revolutionary. It can be delivered in a 15-minute office visit. That’s actually turbo-charged with a digital platform and a behavior change program that’s meant to deliver and does deliver best-in-class weight loss. 

And our product is sold through physicians and through clinics. And when the pandemic happened, literally overnight these clinics shut down. The doctors that were staffing these clinics were called in to take care of all the patients that were dealing with COVID. Many of the doctors we work with are bariatric surgeons or gastroenterologists, but that didn’t matter — it was all hands on deck at the height of the pandemic. 

We’re also a global business; we’re in 60 countries around the world. And every single company was impacted by the pandemic. So all of a sudden, the single sales channel that we have — doctors and clinics — completely shut down. 

KKG: Yeah so you can imagine a business that’s theoretically very well diversified across so many different countries but then because of an exogenous threat is immediately impacted. 

But let’s actually go back a little further. So you started this in ’09. Was it ’09 or was it ’10. 

SG: Yup, ’09. 

KKG: And this was coming right out of the recession. You were at Harvard Medical School. Did the recession impact you at all? Did it shape your thinking at all in terms of how you were starting the business? 

SG: Not really. I’d say as a medical student it wasn’t really on our radar. We were mostly, my classmate and I were mostly concerned with what was on patients’ minds, what was on the mind of physicians. And obesity and weight loss just kept on coming up over and over and over again. And I’d say once place where the recession might have impacted us was this decision of whether to take this invention — our device, our balloon — into a laboratory and make it a research project, or spin out a company. And I think what we felt was going on in the world around the time of ’08 and ’09 when there was a global recession, was a second movement that was completely unrelated to the macro economy, and that was in the world of healthcare, where patients were becoming much more empowered. They were becoming consumers. They were starting to pay for things out of pocket. We were living in a world where insurance plans were becoming much more high-deductible oriented. 

So consumers were actually becoming major stakeholders in the healthcare system. And so while the macroeconomy was suffering, there was this other momentous change that was happening in consumer health. And that is actually what sort of forced us or urged us to pivot and spin out a company versus just develop something in a research laboratory. 

KKG: Yeah, I think one of the benefits of coming out of school during a recessionary time is that you have fewer distractions. So you don’t have people calling you left and right with job offers, and I think there’s an advantage to being able to be insulated from all of that while at school and just think purely about what are the needs? And those needs exist whether there’s a downturn or whether there’s an upturn. But in some ways, it’s easier to isolate those needs in a market that has more signal and less noise. 

So that makes sense. So you got started, and then you went ahead and you started trialing some of this stuff. Your first round — the one that we participated in, led — tell us a little bit about that. How did that go down? Was that hard, was that easy? How did you think about the company at that time? 

SG: It was one of the hardest parts of the journey in building Allurion was that first round. Because we literally had nothing. We had an idea, we had a concept for this balloon. Back then, we hadn’t done much thinking about the digital part of our business or the behavior change part of our business. It was really around this revolutionary device or the concept of a revolutionary device that we had created. 

So we realized very early on that this was going to be a tough road. Because every single institutional investor, family office, even some of our friends and family said no — we’re not interested in investing. You guys have to really show us that this thing actually works. You know, show us some traction. 

And here’s where I think the recession did play a big role in the journey: there just wasn’t much capital around for early-stage companies at that point. So we had to be very creative and very entrepreneurial in order to get this round done. So after the first wave of failures, we went back to the drawing board and said we need something — we need a hook. Something to actually bring this to life. And so what we did was we worked with one of our professors who did simulations for endoscopies, and we went to his home, and in the basement of his home he had a bunch of pig carcasses and cow carcasses and GI tracts that he had harvested, and he had created a simulation box if you will, where you place the GI tract of the animal in this box…

KKG: Is his name Anthony Hopkins, by any chance? 

SG: (Laughter) It wasn’t, but it had that sort of feel to it. And so you can basically film a video inside an animal stomach of your product — whatever it is — sort of coming to life. 

So the night before we did this session with this professor, I was hand-stitching our very first balloon prototype together. I had just done my surgery rotation at Harvard Medical School, so I had learned how to stitch and sew. So we took that prototype to this guy’s basement and filmed a video of our balloon actually expanding inside a pig stomach. 

It was a one-minute video. But that one-minute video brought this concept to life more than our 20-page slide deck could. And with that one-minute video, we were able to go to some of our professors at Harvard Medical School, go back to some of our friends and family who now sort of saw this thing coming to life, and we were able to raise our first small round from family and friends, and then we met you. And at that point, the round wasn’t closed yet, but we had some momentum, and we had gained the confidence, I think, to talk to an institutional investor. 

KKG: I remember I did a diligence process, and it was clear that every question I asked had not yet been asked. So you guys were learning how to sort of do diligence. And it was actually fun for me, as someone who had started my firm a couple years before that, to see the impact we could make on a company through our diligence process, because we forced you to think about things you hadn’t thought about before. So it was a nice iterative back-and-forth that I think was valuable to both sides. 

SG: Yeah, I remember one of the things that you and your team did, which you know, no one had done previously, was actually talk to some of our vendors and partners who were developing these prototypes for us…

KKG: Right, that’s right. 

SG: Because with a little bit of cash, we were able to go out of our home laboratories and actually start talking to people who were experts in polymer chemistry, experts in fabrication of medical devices, and you were the first person outside of us to talk to them. And one of your first pieces of feedback was, hey, it’s not clear to me what’s protectable here, so you guys really need to develop sort of an IP strategy. It’s not clear to me that this is very scalable. It’s not clear to me that these are the right vendors and partners for you to be using. And so through the course of that diligence…and initially you said no. 

KKG: Did I really? 

SG: Yeah, yeah yeah. Your initial view was no, not yet. And your main feedback was, you just need to tighten some of these things up a little bit and really create a cohesive strategy around this balloon. The science it’s there — it’s just is it scalable, is it protectable, is it manufacturable. That was your main feedback and your team’s main feedback. 

And we took that to heart. And we buttoned those things up, and we went back to you and your team, and then you know, you wired the money and closed the deal. 

KKG: Yeah, it’s interesting, because when we were looking at that round, the market was in a very topsy-turvy place. And to be honest, I had only started at the bottom, and so I was used to doing very detailed diligence. And to be honest, what attracted me about the company was just how much you had accomplished on so little. It showed me that this founding team and the management team was really scrappy and was really hungry to actually solve the big problem and to build a big business. 

I don’t think you guys knew where you wanted to go with this thing eventually, but I felt like you had solved some problem, you had found something that was unique and frictionless. But importantly the image that I have of that time is of Shantanu sitting in some lab, working on pigs, even though I never saw that. That’s the image that always comes to my mind. That and then some diagram of an ellipsoid, which captivated the mathematical mind in me and eventually…I remember a year later Shantanu calling me up once and being like, you know, I have some news — the ellipsoid thing doesn’t work. So I’m like, ok, great, so the entire premise on which we invested is over. 

But yeah, the recession shaped you, I think, in ways that maybe aren’t obvious to you in that they made you very scrappy and that DNA persisted all throughout the next 10 years, even when the world went in a place where capital was very cheap or the markets went nuts. But the fact that you were founded and built in this time I think shaped your entire career. 

And so I think any entrepreneurs starting off now have a similar opportunity. 

Let’s talk about when you are in trench mode. So I’ve seen you across a decade. We together have experienced some very very tough times and raises and rounds. Let’s talk a little bit about what you’re like in trench mode. What are your habits, your personal habits? How do you deal with stress, resilience, etc.?

SG: The first thing I like to have around me when I’m in that mode is my tribe. I want to have the people around me who care most about me shoulder to shoulder. And so we’ve spent a lot of nights in your living room, in your dining room, working side-by-side together through very difficult situations, difficult problems. Sometimes I’ll fly down to see my parents for the weekend. 

KKG: Yeah I’ve seen that, I’ve noticed that, yup. 

SG: And you know, there you feel like you have your tribe next to you. You also get taken care of, which is nice. But it allows you just to be focused. And it also sends me personally back to some of the younger days, when I was a lot more academic. I would literally lock myself in my room and work on problem sets, work on competition math, whatever I was working on at the time, and my parents would call me down for meals, etc., take care of me, and I would go right back up. That is sort of naturally, even in my youth, how I was in trench mode, right? 

KKG: I can relate. 

SG: And now, similarly with my wife and my kids, it’s the same way. I always want to have my tribe around me. Whether it’s close partners and collaborators like you or my family. So that’s the first thing. 

Despite that, I think there are going to be times where the stress boils over. You reach a breaking point. And you’ve seen me reach a breaking point a few times. And that’s where I just need to get away, whether it’s for a couple of hours or a couple of days. Commune with nature, go outside, take a few deep breaths, and then come back inside and go back at it. I think that’s the second thing. 

And I think the third thing, which I’m very bad at, and I think this is one place where I can mature a lot as a leader. I was reflecting on this transaction we just announced, and the sense of relief and the sense of accomplishment I felt when the transaction was announced. And I felt like a ton of energy was unlocked inside of me. 

I think a great leader feels that way in the heat of the battle. They’re able to sort of put themselves at a higher plane, where all of the stress and distraction is underneath them, and they can think with a clear head and think with the same sense of relief that they feel when the battle is over. That to me, is like Nirvana. If you can achieve that as a leader and as a general, there’s no battle you can’t win. 

KKG: I think we need to gift you a book on daoism then, and you need to embrace that philosophy, because that is the eastern way. 

You know, we just touched on the transaction, and so let’s talk about that for a second. Obviously the company is en route to going public on the NYSE, which is super exciting, I’m excited about it. But why now? Why did you choose to pursue going down this route of being public? Everyone around you told you what the hell are you doing or thinking, so why now? 

SG: I guess my question back to you is why not now? You know, there’s…

KKG: Well, there’s a recession, there’s you know, these capital markets that are choppy, it sounds like a terrible time to go public. 

SG: It’s a terrible time to raise any type of money. It’s a terrible time to do anything entrepreneurial right now if you just look at the financial conditions and macroeconomic conditions that’s all true. 

But that’s never stopped us in the past from doing what’s right for the business. And so there’s a lot of advantages for us going public at this stage. It increases our visibility as a business, it obviously brings in capital to the business, which allows us to continue to build. It gives us currency that will allow us to be more aggressive and more audacious and more bold in our mission to end obesity around the world. 

So yes, it’s difficult. Everything is difficult at this point. So why let that stop us? If this is the best thing for the business, which I believe it is, then it’s time to march forward and do it. And if anything, the fact that we were able to get this transaction announced, and when it closes, it will be a huge milestone for the entire team at Allurion, for all of the investors who have backed us, and I think it just goes to show our entire team that anything is possible. There is some value in that in and of itself. In a difficult time, a difficult environment, when nothing is getting done, for something to get done just speaks to the grit and audacity of our team and all of our collaborators. 

KKG: You know, one of the things I admire about Allurion is that, you know, the company has a very strong focus on customers and consumers rather than “patients.” For me, that was embodied in this letter that one of our LPs sent to you directly basically saying that. That was an impactful moment for me, was it the same for you? And talk to me a little bit about how that filters through the ethos of the company. 

SG: Yeah, definitely. That was a very impactful moment for many people at our business, because it encapsulated how exactly we were going to interact with and treat our customers, our consumers. In the world of healthcare, especially in the world of medical devices, patients are really treated as just another data point sometimes. They are treated as subjects in a clinical trial, they are handled in such a way where physicians almost have dominion over them. And that’s just not the way healthcare is going to work in the future. Patients have become incredibly empowered. As I mentioned earlier, they’ve become consumers. Partly because they’re wielding their own money and spending that in the healthcare system at much higher rates. But also because they have become empowered by their own data, they’ve become empowered by their own understanding and knowledge of some of the disease processes that they’re undergoing, and they’ve become much more knowledgeable about the treatments that are being offered. 

And that letter from one of your LPs spoke to us about how their complaints should be handled, whether it’s on social media or whether it’s something that we get written over email, and our stance and the stance of many healthcare companies is often to suppress those comments. And what your LP advised us was to embrace those comments. This is an upset customer. That is the most valuable feedback you can get as an entrepreneur. Because here’s someone who used a product that you think the world of and had a bad experience. 

KKG: And cared enough to tell you about it. 

SG: And cared enough to tell you about it. That is gold. That was the message of that letter. So that should be cherished and embraced — it shouldn’t be suppressed. 

And that was a sort of turning point in the way we do customer relations and the way we do marketing. We actually lean into our most unhappy consumers and learn from them. I personally every month have my team introduce me to the most unhappy consumer. The most unhappy customer. And I personally talk to them to understand what exactly went wrong and how we can fix it in the future. That’s part of our DNA now. 

KKG: That’s amazing. That’s something I might almost tell every one of my companies to do, that last part. 

So finally, let’s talk about you know, here you are, 12 years into this thing…13, 14 years, whatever it is, it’s been a long journey. You’ve seen a lot, you’ve seen other people do things — what do you think sets apart fantastic outlier outcomes from mediocre ones? And what advice would you have for entrepreneurs during this time, which is a tough time for anyone trying to build a business right now or start a company, to sort of set themselves up on that path to be an outlier success? 

SG: The simplest advice I have is never, ever give up. One of our core values at Allurion is grit. Grit is simply about remaining alive when so many other people are dying away. And that doesn’t mean you have the best technology. It doesn’t mean you have the most patents. It doesn’t even mean you have the biggest business. It just means that you are someone who will never, ever, ever let your company die and fail. And that is what, I think, sets great entrepreneurs and great companies apart from everyone else. 

Nothing is built overnight. Nothing is built in a day. And there are so many times in an entrepreneur’s journey where they will have to, as we did during COVID, peer over the cliff and say, is this the end? And if you consistently say, “I will not let this be the end,” your company will not die. 

People always think companies fail when they run out of money. No. They fail when the founders or the management team run out of energy. Or run out of enthusiasm. And without that, there is no startup, there is no company, there is no growth. 

But if you have a management team, and especially a founder CEO, who will never ever give up until that mission is fulfilled, you can get through anything. 

KKG: Fantastic. Well look, I think that’s a great note to end on. Thanks everyone for listening, thank you Shantanu for coming. And I’m excited to…maybe we’ll have to do a podcast from the floor of the NYSE next. 

SG: Absolutely, it would be my pleasure. Thank you for having me on.