The Anti-JUUL (#79, Hava)

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Today's founder almost didn't make it on the show because well investors really like this thing called money or at least some hope of revenue due to come at least some time soon. So naturally when we're deciding which startups to bring on the show we look for the money honey. Hopefully they've tried to sell their product to someone at some point but today's founder Josh. Israel hasn't sold anything and he won't see any revenue for at least another three years. His company is called Haba Health and they've created a new way to help people stop smoking and with thirty two million Americans wanting to quit. The problem is searing during hot but they need permission from the federal government before Josh can start selling to customers but if any of our investors are willing to take the risk from Gimblett. This is the pitch. I'm Josh Muccio. Today's investors are an emmy. GotTa Mimi is a partner at box. ex-group where they've invested one hundred million over four hundred startups including or be Parker. I'm Al Dome. Ou- built several ECOMMERCE brands. Two of them do over one hundred million in annual sales. And now he's Angel Investor I'm she ALMANAC shield has sold three startups for over fifty million dollars. Now he's an angel investor who's back several companies were billions. Today I'm Charles. Hudson Charles started precursor ventures invested forty five million in over one hundred startups APPs. Two days the pitch for Haba Health is coming up in just a moment. This episode of the pitch is brought to you by just works when I ran my own business handling. HR meant a ton of paperwork. It's basically like filing taxes. No one likes doing taxes. Just works does a lot of this kind of thing for you with this system. You burgeoning entrepreneurs out there. We'll get access to a big company benefits automated payroll and compliance support. All in one place just works dot com slash the pitch to learn more. That's just just works dot com slash. The pitch this episode of the pitch is brought to you by mastercard's priceless experiences dances. Here's a travel tip. You can discover unique adventures by asking your Amazon device to open priceless experiences. This voice activated skill can help you discover memorable experiences in some of your favorite cities. Maybe even your home city for more details visit PRICELESS DOT com restrictions. Apply all right here we go. Hey Josh she'll Charles Nice to meet you need ash. Just give me a second here in what some may consider a power move. Josh takes a drag out of what looks like an e cigarette threat through a thick cloud of white smoke. Josh begins his pitch is going to go with for you judge me. I know that this is our way of fighting fire with fire fire. In this case being nicotine addiction I'm Joshua's roam the CO founder and CEO Jio of Hover and hover. We're solving nicotine addiction through technology rebuilding connected vape pen that pairs with a smartphone application to automatically and gradually Wean people off nicotine addiction through minimal effort on their part. We do this with a patent pending design that allows us to burn nicotine oil while inversely Bernie clean oil thereby giving our users or patients consistent smoke experience as we automatically regress their nicotine intake. The idea here is just smoke are device however and whenever you want and will handle the entire cessation process for you reducing withdrawal symptoms and relapse rates. -have is kind of like the Anti Jewish in its way smarter. It uses a little plug in pods life the jewel but these actually have to chambers one still with nicotine oil and the other a clean oil without any nicotine you can just smoke it like any other e cigarette art but there's a twist the Hobbit e CIG actually pairs with an APP on your phone and the APP gradually decreases the amount of nicotine you hail and the idea. Is that slowly over time. You become addicted to nicotine started this company just a little over nine months ago and in that time we've made incredible progress. We've put together fully functional harbor prototype as you see here today mobile applications on Ios and Android we've had our first interaction with the FDA because this will be regulated drug happy to say that we recently closed their precede round of one million dollars. So I'm here today to look at potentially oversubscribing that round with investments up to two hundred and fifty thousand dollars to further product development. While we go through a preclinical face what a strong intro issue josh can give me a sense for the range of smoking intensities rethink your product can make a difference so every smokers different so we have to be able to account for someone who smokes two packs of cigarettes a day or someone who smokes for six six cigarettes a day for example. And so what we do when we onboard you onto our product our mobile APP ask you to type of smoker that you are of course you can lie. You probably don't want to say that you're a horrible smoker. So what we do for a week is actually what we call control week so he truly understand. Understand your habits by you. Just smoking are device smoking. Eight hundred two hundred times a day. We're GONNA know that you're not a guy like you said right and so from there we kind of set our baseline nicotine and regrets you you from there. So if you're a heavy smoker might take you six to eight months if you're a medium smoker might take you four to six for example and should we really be thinking of this as an alternative to nicotine eighteen patch or gum or using compliment with some of those smoking cessation products. I would say we want to disrupt those products. So those products are very unsuccessful. If you look the success rates with a patch of the government's five to fifteen percent people try seven to eight times those products on average to quit. Don't work so we're looking to deliver product. That's actually going to help. People truly quit and are those products. Do they not work because of client adherence or because they're just fundamentally not effective So it's both so yeah. Compliance is a big problem for them because because they actually jumped people look the pass jumped from twenty four milligrams to fourteen milligrams in that big range. People have a lot of withdrawal symptoms right and then on top of that. They're not delivering. Nicotine is rapidly rapidly. A combustible cigarette does moreover. They're not giving the smoke inhalation. Oral fixation everything that you get out of this social smoking aspect right. So we're trying to deliver a parallel experience and gradually reduce you. So we can take you. Let's say twenty four to twenty three point nine or you're not gonna get those withdrawal symptoms. Is this something that wants to switch is made from a nicotine eighteen oil to a non nicotine oil. Do people continue to smoke it. Yes so that's what we're calling our posted diction plan. Rica addiction is not like a common cold. Doesn't go away you don't you don't cure it. It's a lifelong struggle for people right so if we abandoned them it's time association. We would be doing them a disservice. So we're calling. Our addiction plan is essentially clean oils or a placebo effects at a party. Maybe they're drinking. They can continue to use. Our device is to curb that nicotine urge they may have and just just use it as as time goes on potentially maybe they will eventually throw a product away. Furthermore as we raise capital we do WANNA look at spending some money in rnd potentially introduce maybe nutro picks or alternative oil so kind of take people on this beautiful journey from an unhealthy lifestyle. Actually helping them live better day to day life. Got It as this pitches playing out. I'm in the other room listening in and I can't figure out if it's going extremely well or we're extremely poorly as soon as an investor asks a question. Josh whips out this super concise well thought out answer and then investors didn't even have have a follow up question. There's like cool. I'm not sure how to read this pitch. It doesn't sound like anything I've ever heard before. Here's Charles getting down to business. What is the cost to the customer and registered and has always paid for by the customers or an insurance angle? We want to be able to price it so that you can buy over over the counter like CVs walgreens very similar to the gums and the patch looking at price are device around fifty nine sixty nine dollars monthly subscription for around thirty to forty dollars which includes the replacement parts so cost. The consumer shouldn't be that high insurance shouldn't be necessary and then how long they expect the customer to stay with the product on average about twelve months So we should get around around three hundred seventy five dollars per customer. The cost around eighty five to one hundred twenty five dollars to acquire the customer for what they're we're going to block and your plan is it sounds like to go. Direct to consumer yet direct to consumer online and over the counter is A. Is anyone else doing this. Have you seen. What's what's the closest comparison yet? Nothing that we've seen that's exactly like what we're trying to do. There's one company based in France but they obviously can't sell here and they. They've missed the boat on where a cigarette design is going to very large kind of MoD vape. We've purchased their product. Just not working at the moment. So can you tell me more about like inner conversations with the FDA given all the issues around jewel and other podvig was the current thinking around sort of relationship with regulators and sort of what best practices are. Yeah Yeah I think the regulatory winds are actually at our back so the agency has held public hearings on how to sort of stop this epidemic of vaping and especially in the teenage demographic so we've actually spoken to them about a prescription pathway for our product under eighteen go to the doctor going to prescribe for your teenager in regards to like jewel in all those products their addiction alternatives. And they're not really truly helping people people quit their nicotine addiction. And we're not going down the path that they're going down that's tobacco. That's nothing to do with us. We're going down to a regulatory pathway that has to do with drugs and Medical Devices so oh I think you know the agency sees our product hopefully in a positive light and what the technology should have been instead of what it is today and can you tell me a bit more. What is in time like for the on the FDA so our preclinical studies? We're anticipating taking six to eight months post that we submit what's called in to the FDA investigational new drug They have thirty days to responding. I N D FDA preclinical phase ones and twos etc.. All the investors. Here is. This is GonNa be a long journey journey through the regulation swamp. That Josh will have to slog through before his product ever sees the light of day and even that's not a guarantee they may never get approval to sell in the US and this is Josh's positive spin on the process. The best he can do is guess as to how long this will all take so total time to market estimating around thirty six months while it does seem like a lot. Obviously you know The more time in capital spending this agency does rewards you on the on the end of this they have like three to five year exclusivity if we were to get approval and things of that nature. And how much money do you think you need to get there. And get the product to market. Yeah we've already estimated costs for our phase one trial it's five hundred thousand dollars from that trial from Sierra. We'd probably in the next six to eight months after we've done. Our preclinical studies raised a seed. Round of around four million dollars. That will take us through our phase one and then post that. Probably look at one more. Raise depends on the cost of the trial and how many patients we're going to do but anywhere from probably another five to ten million dollars to to race. Did you consider launching another country country where you have a easier regulatory system so we've looked at other countries the every different country has its own regulatory body and it's it's quite complicated and for plus you know being here being on the ground. We felt that once we get through the FDA it's kind of the bigger Stanford for example and then from there we can leverage the data and science. We've already created here and go into other countries. It's a different model like than than we're used to because yeah we're not like we're not bio investors so like thinking through that process is a unique equal like. It's I don't think I've never invested in a company that couldn't get a product to market for three years. Three years is a lot of time time for things to go wrong. And that's a risk that's making the investors pretty wary but there are also intrigued by a good idea and a sharp founder when we come back. Yeah we'll see if they get over fear of the unknown so far out of my world I never smoked in my life. Discover again for you. I have no idea what any of this means. This episode of the pitch is brought to you by just last works just works as a simple and intuitive platform that basically makes work-life more funding abrogate. Picture you're a business owner. It's late at night. After after a long day of work a payroll issue is the only thing standing between you and your pillow with just works you have a certified. Hr Consultant available twenty four seven to support any HR related question. You might have after hours. Scaling of business is easier when you have the right tools in place had to just works dot com slash the pitch to learn more. That's just works dot com slash. The pitch. This episode of the pitch is brought to you by Mastercard's is priceless experiences. Listen Up New York Miami Chicago Los Angeles and Boston. You WanNa know what's happening this weekend. Just ask your Amazon device to open priceless experiences looking for some weekend inspiration in Chicago. Say Ask priceless experiences. What's happening in Chicago this weekend? The Amazon skill will give you an option like a behind the scenes tour of the Chicago. Magic lounge discover memorable experiences that spark your passions inspire your travel plans plans and create connections start. Something priceless with MasterCard's priceless experiences skill for MORE DETAILS VISIT PRICELESS DOT com. That's priceless USC. Dot Com restrictions apply Welcome back the investors are doing their best to understand Hamas business model by asking Josh Josh to look into the future just a little bit. Here's Charles what do you think is an game path for this company and given that. You're sort of art that intersection of Taqwa. I think the path forward is known and bio biotech. Where the past different? Like what are you. Can you help me envision what the end state might look like. Yeah I mean I think there's two to sort of exit did opportunities for us. One would be that if we successfully complete a phase one trial big pharma come knocking potentially at that and they have a well oiled machine to kind of take us through this whole process If not we're not building for that we're building to bring this the market. So that's not even in our mindset. The second round is that we bring this to market and look how much value we create from there. And I'm sure you've I've seen that you know. Biotech companies go public prior to going going to market. So if we have if we're on a good trajectory and we believe the regulatory Windsor back. It's a potential option as well go so far out of my world I never smoked in my life is good for you. Yeah well it's like I mean on on the one hand I'm like. I'm like rooting you on. Because I know a lot of people to struggle to come out of this Mike my grandparents You know it's it's such it's a crazy addiction and then on the other end of like I have no idea what I'd even do so just saying I'm cheering you on John. But I have no idea what any of this can you are there. Any restrictions or prohibitions or challenges with marketing project product digitally side from the regulatory regulatory aspect. And then once we once we get the regulatory aspect we can make pretty powerful marketing claims. You know saying that our product is eight times more likely to help you quit over the current leading nicotine replacement therapy so once we get through there we can pretty much anything we want that current vapes or e cigarettes just not allowed to say it's awesome we're actually investors in unaccompanied that yeah exactly so given that closeness I I'm I'm going to hold off but obviously very much believe in in the mission of what you're trying to do with in smoking cessation. I think all of these different paths to it. I think are a big part of the solution. Thank you Namie is out as she's already already invested in a direct competitor to -have a startup called Lucy which sells nicotine gum as a subscription. Now here's Charles. See I'm trying this. We've had a strict sort of no tobacco cannabis policy of precursor. Since I started the find and I think for the most part I've been happy to of set both of those markets. This is the first thing I think it's not a wink. Wink cessation product but like actually interested in addressing the problems site. I've never had to really sit down and think about. Under what circumstances would we say yes to a product that I think could actually address and we have I have a ton of smokers my family. So it's a very prison problem for now phenomena pass but I wanNA follow up with you and see if I could come up with because I'd have to explain lane to my investors why we've decided to change our can't rule since stance on both of those categories so I I don't know if this will give you any comfort but we have to advisors Ones Dot Com Brandon from the MOFFITT cancer center and he's been approached by large e cigarette companies and rebuffed. All of them us what we did in his advisory agreement you know we've made explicitly clear that smoking cessation product and we will never take capital from big tobacco and we have been approached by certain big tobacco ads about that. So we've rebuffed them awesome. Think you screaming. I'm I'M GONNA pass as well but But I mean only for my own ignorance right like I'm stoked free. I'm stoked at that. A product like this will exist Excited for to get on the other side of all the regulations relation stuff and for people to start using it. Thank you Tell me about the rows you you closed around precede around was. What was the cap provider? Show more million God I and what are you suggesting that that I would invest it I would say to go up to six million capture so we don't dilute ourselves to significantly. Can you help me with existing investors are are they folks in the in the biotech space no-one no-one directly in the biotech space as far as funds are concerned. Okay Cool I I like what you're doing doing It's pretty off these for me but I've looked from afar at at Joel playout and actually have thought a lot about in my. I always start with the lens of Lake. Is this making a building a better world and so many times I struggle with it. We talked a little bit about like Lucy and like other other other Smoking cessation products. I've struggled with because I wonder if people get addicted to those so I really like what you're doing I'd like to write like a small personal check of twenty five K.. For if you could fit me into the previous round Yep okay we can probably do something. Okay says good really nice job I think you you really had a strong pitch. That's why this is so short addressed all the questions like right off the bat and our stance seizes the fact that thought your answers were really crispy. Yeah not a lot of a lot of fluff just to the point so what you know what you're talking about. Josh Takes Off with twenty five five thousand dollars from she'll after just twenty minutes in the pitch room which is unheard of on the show a short pitch usually equates to a failed pitch but but what was even more striking to me was that she'll invested knowing full well that he'd have to wait at least three years before Josh could even think about making making any money see huge risk but that you decided to invest despite that Wa an hugest. I don't know how to price it and I haven't even done it before so I was a little bit I wish that he had other biotech investors which he didn't really but I felt like I liked him. His answers were crisp. Feel like he has a good sense of of where this is going. The price seems reasonable enough for the potential so so bad on the founder that in the founder the only other question I have is around the whole kit his delivery and just the speed at which he gave you the answer and then just shut up. I was like what is going on. Is this guy. A robot is either good or really bad bad. Yeah I think anytime like what what I'm looking for is somebody. You can clearly articulate and defined their vision why they're going to win and it's important because that's how you raise money but also like he has to convince the FDA he has to convince future employees. So when I see that I get excited after the break. Six months have passed. And in that time e CIGS have been getting a bad rap in the news so we asked Josh what it's like building company in the midst of a media firestorm. That's coming up in just a moment. The Ones Earth just opens up in trees down and then entire roads go. I'm Flora Lichtman from every little thing the podcast that answers your burning questions like will I get swallowed by a sinkhole. What I saw it in the road I was just like this is this is that what am I gonNa do? Find out more on every little thing. Listen on spotify. Or wherever you get your podcasts. Welcome back six months after his pitch to investors. We Got Josh Israel on the phone. How you doing Josh? I'm doing pretty well. You know a lot. Lot happened in the news around what we're working on Canada industry that were working in so a little stress. But it's a good stress since ashes time in the pitch room. vaping was in the news a lot over two thousand. People were hospitalized and over forty people died because of vaping how if those events and the increased scrutiny on vaping affected you I think both positively and negatively if you look at nicotine eighteen based vapes. There hasn't been any directly related health crisis or crises that have sprung up because of them. It's all been linked to teach in vitamin any your vitamin A acetate in. THC got a black market pods the product that we're building our northstar metric is smoking cessation Nicotine Addiction. We are not these other guys trying to sell two teenagers. We are not an addiction alternative. And we're certainly not a THC based our product has to pass through non-clinical non-clinical clinical trials for safety and efficacy so once it is FDA approved. It's for certain that it's not going to cause these major health issues that we're seeing in your eyes and you're saying like jewel in these other e cigarette companies they are not FDA certified at all and it'll have to go through any of that they haven't done any any any tests at all right. It was like a pretty much. Hey free for all pre two thousand sixteen where anybody can release a product and they were grandfathered in so obviously you're able to clearly make the argument why your different But I guess I'm curious like how is it affected conversations with investors or even conversations with the FDA DA. Like what's changed for you. I get calls. I get emails. They're just like Oh. We saw this on the news or are we at risk or is this going to is going to affect the time. I'm the market and so every single person is basically after every single news news. Item comes out. I get an email phone call about it right so I went so far as to send out. OUGHTA general update like a few weeks ago to all our investors trying to answer every single question that I've gotten like an Faq late guys go. You know what I mean like that email. You've been working on exactly right. Yeah No. You're typing furiously there by you. Know don't panic. We're GONNA figure our way around us. Yeah and have you been able to successfully talk. Investors down are or are they still concerned. Yeah I think the problems that we will face will be more around regulatory scrutiny with the FDA. So I think that's where we're going to face. Our issues is really around explaining the regulatory process. And you know how we can maybe speed up that timeline and lower the cost of market. That's what you've been up against all along right hundred percent. Yeah so josh is still fighting. The good fight assuring investors that the three year. FDA approval fulltime line. We'll be well worth the wait. But as for the investor on our show who he already convinced she'll Manatt well his twenty five K.. Check is in the bank. He also introduced Josh to another investor. Who put in two hundred K.? Not Bad and it totally makes up for the fact that Josh never heard back from Charles Hudson But he's got bigger fish to FRY. He spoke as some experts who've been through the FDA approval process before and told him. Don't put all your eggs in the FDA basket. Have you thought about launching first internationally so there's potentially Europe potentially Canada regulations are a little more relaxed in the UK They actually look favorably favorably upon e cigarettes and vaporisers over there. It's not just to bring it to market their but more importantly once it's commercially available in the market that we do choose will be able to start running in clinical trials and generate clinical data which we can leverage and bring back to the FDA to look our product safe. It's effective in humans. Take a strong look get this. So that's what's been happening. Nothing set in stone yet. But we're moving in the right direction. So you're saying you might delay the FDA approval process go go out and do clinical trials in another country and then come back and get your FDA approval like ultimately faster. Because you've got those clinical trials potentially yeah having clinical data in humans obviously is much more powerful than having nothing rabbits then rabbits rats mice or pigs or dogs exactly so the one final thing. I'm guessing Kinda still struck with is just how wildly different your businesses from anything we've had on the show before. Is it weird like doing a thing. Where like you can't just go to the market like you can't just like there's something very freeing about I guess capitalism and being able to just put a product out in the market and letting them give you feedback on whether they like it? But what you're building here. It's like you have to go going entirely different route. What does that even like you know? I think as an entrepreneur if you want something to exist in the market market and you're convinced it has to exist no barrier really is too high. And you'RE GONNA try to transcend that barrier and to be perfectly honest with you. We were naive Steve. We started and we said Oh. Yeah we'll build this overly sin. We didn't realize all sort of the regulatory issues the clinical issues behind it but we have to talk to the FDA. Yeah exactly you were like Oh man. What did we do here? So yeah but you didn't ever think of saying Africa this difficult. No no never never never soon as as soon as we started working. He said we're going to figure this out one way or another. We're GONNA figure it out the pitch is hosted by me. Josh Muccio produced Kareem Maddox and Heather. Rogers we were edited by Sarah Sarasin Fi music by the muse maker original compositions from brake master cylinder and the newsmaker were mixed by enough. Kim Lisa Muccio plan the recording of this pitch. And here's a quick disclaimer. No offer to invest is being made to or solicited from the listening audience on today's show. You can follow the pitch on spotify and listen for free or find new episodes wherever you listen. Thank you so much for listening. We'll be back with a new episode episode in two weeks see

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