Federal Sleep Institute

Story Behind the Startup Perseverance paid off for entrepreneur

Federal Sleep Institute Founder: Brad Czernejewski

The Federal Sleep Institute provides a home-based testing and treatment system for those affected with obstructive sleep apnea. Historically, testing has been done through an overnight lab or hospital. The company was founded to provide a comprehensive sleep apnea treatment system to patients that would normally be excluded from treatment because of cost and convenience issues. The company's 4-step system, originally designed for the commercial trucking industry, is now available to anyone that is at-risk for sleep apnea. For more information, visit www.federalsleepinstitute.com

After a 12-month search for funding, Brad Czernejewski, founder of the Federal Sleep Institute, was at a low point. He had been turned down for financing by 12 different banks and was thinking about selling his house.
“It was a scary time; everything I had was tied up in this, I believed it in so much,” he said. “I was broke and looking for a part-time job. Then the loan came through and simultaneously sales took off.”
With help from his SCORE counselor and his own perseverance, Czernejewski eventually secured $40,000 in financing from a combination of SBA loans and a line of credit from U.S. Bank.

Below is an interview we did with Brad for this month’s Story Behind the Startup.

Q. Please tell us about your search for financing.
A. I began the company in 2009. I bootstrapped it with $50,000 of my own money. I spent year or so doing a lot of research. However, for this current round of financing, I went to 12 banks. In this economic climate, nobody wants to touch a start up. Even though it’s a great idea, no one wanted to touch it. Finally, I convinced them of my concept by showing sales traction and regular customers. They, the lenders, could see that my idea was producing revenue. And finally U.S. Bank came through.

Q. Where did the idea for Federal Sleep originate?

A. Commercial drivers have to go through a physical every two years and obstructive sleep apnea (OSA) screening is becoming a routine part of that physical. About 30% of the American population has OSA, but it is largely undiagnosed due to lack of awareness and education. If the driver tests positive, they have to go on continuous positive airway pressure (CPAP) therapy, and provide the DOT examiner with a compliance report. Sleep Labs are expensive, costing roughly $3,000-4,000 for the test. In addition, the CPAP machine and mask can cost about $3,000-4,000, so the total gets up to $6,000-9,000, not to mention the time off from work. A lot of drivers and trucking companies pay out-of-pocket for health services. What we do is offer drivers a home-based testing kit for significantly less. We can ship the test to them so they can perform tests at home instead of going to a sleep lab.

Q. How does Federal Sleep Institute differentiate itself in the home-testing OSA market?
A. We offer the whole solution, from start to finish: screening and sleep assessment, testing, CPAP therapy, and ongoing compliance monitoring. Our solution is convenient and we’ve reduced the cost of testing and treatment by 80% to $1,400-1,500. Also, most insurance companies do reimburse for this. The technology we used was approved by Medicare in 2008.

Q. How will you use the capital?
A. We are rolling out a national ad campaign, starting with a billboard in northern Wisconsin this month. We chose the locale because it’s a big trucking market. We’re also using radio and quite a bit of online marketing strategies such as Facebook ads and Google. We will also use funding for working capital. The funding will help us get to the next level.

Q. Aside from obtaining financing, what has been one of you biggest challenges?
A. Being a business owner is very lonely. Having someone, a mentor, or place like Venture Track with people to share the ups and downs with was helpful. My SCORE counselor, Dick Boemer, has been a tremendous help. He’s my most trusted advisor and helped me get the loan. Venture Track has been a great help and advocate.

Q. What advice would you offer others starting out?
A. You must have an appetite for risk and surround yourself with people that love you and support you and your idea--that’s critical. You must believe in yourself and idea. I believed in my company. I stayed focused, even when the banks were turning me down kept selling the product and persevered.

The Federal Sleep Institute was featured in the October 29 BizTimes’ Innovations Column. Read more here.
http://www.biztimes.com/news/2010/10/29/innovations-system-collects-sleep-apnea-data-at-home