Health tech funding reshapes, diversifies

July 22, 2013 | by

In thinking how funding for health tech startups has changed since this Editor’s early days (2006) when VCs had a lock on the Letter Series (A, B, C) and your real goal was to ‘please, Lord, won’t you find me a strategic investor?’ (are there any of those left?), some more pointers to the future, both in EU and US:

Withings, known for its pioneering Bluetooth scale circa 2009, and more recently other Bluetooth monitors, nimbly moves to wearables with a fitness tracker about the size of a USB drive and priced at an affordable $99. It also has raised $30 million led by Bpifrance with $15 million, with participation from Idinvest Partners, 360 Capital Partners, and Ventech. (Most of us have forgotten that Withings is a French company.) A French challenge to Fitbit, Nike, Jawbone and a whole raft of smartwatches coming 2013-2014 including Sony, Pebble and Apple? VentureBeat

Angel funding diversifies geographically. No longer do the coasts have a lock on the action. Silicon Valley has had some problems [TTA 18 July], Silicon Alley (NY) is still finding its way and Boston/Cambridge is, well, Boston/Cambridge. We recently covered angel groups in Ohio (LaunchHouse), Texas (Wildcatters) and Arizona (SeedSpot). Now Delaware joins the list with FP Angels. And where are most of the companies? According to the Halo Report, in the US Southwest. Angel investing groups show love for the Southwest and healthcare in Q1 (MedCityNews)

And the rise of crowdfunding. As mentioned previously, angels and ‘FFF’ funding has been supplemented and market tested by crowdfunders such as Kickstarter, IndieGogo, MedStartr and Health Tech Hatch. Two kitchen-table entrepreneurs can market test their idea almost immediately. The problem is failure to deliver on time, on budget and as promised, as witnessed by the overwhelmingly successful Misfit Shine. The math of Hardware+Crowdfunding=Success has more than a few caveats in the formula. The hardware revolution will be crowdfunded (VentureBeat)

And a little-noticed change in Securities & Exchange Commission (SEC) regulations lifted the ban on ‘General Solicitation’ which according to this Forbes article will allow entrepreneurs seeking funding to cast a net beyond their network of ‘pre-existing relationships’–but they have to be accredited investors. It makes the reach to non-accredited investor interest just a little bit closer–for good or ill. The SEC’s Removal of General Solicitation Changes Everything

For our readers, health tech appears ‘siloed’ by region and country. What does it take to move beyond borders?:

  • If your startup is based in the UK or EU, have you thought about reaching out to US funding through a US base?
  • If you’ve considered and rejected it, why? (Health tech
  • Why are we not seeing more activity by UK/EU companies in the US (or Americas) markets?
  • What do you perceive as the differences between developing health tech ex US–and translating it to the US market?
  • Has anyone had experience extending in non-US/UK/EU markets?

Funding: the concentration continues

July 15, 2013 | by

The funding concentration trend apparent in RockHealth’s latest survey [TTA 9 July] is not contradicted by latest bits of news:

  • PracticeFusion, a free physician, web-based and ad supported EMR, is rumored to be raising $60 million from what Venture Beat last week termed “a New York-based investment firm, not one of the usual (local) Silicon Valley suspects.” Now we can suppose that sources would be silent unless the deal was signed, sealed and delivered. The leaks can also be strategic ones. (PracticeFusion has also introduced PatientFusion, a PHR with added functions of booking appointments and leaving doctor feedback–which puts it squarely in ZocDoc’s increasingly challenged, but extremely well-funded territory. (We advise them to put aside a few dollars for the inevitable MMRGlobal challenge as well.) Having raised $34 million less than one year ago, the funding is clearly going to updating ‘Meaningful Use’ requirements, the patient portal and to be determined growth.
  • Chicago-based Caremerge just raised $2.1 million for its mobile apps for coordination of long term care (LTC) between providers, doctors and families. (MedCityNews)  It claims to be the first-ever integrated mobile and web solutions provider for this market. It does answer a crying, not-terribly-glamourous need in senior care, and it’s also interesting that two of the key investors are from Poland and Switzerland. But Caremerge has deep roots in GE-land: one of its founders came from GE Healthcare IT Solutions and it’s currently part of the StartUp Health/GE Healthymagination program–which accepts only companies further along in their development for their $250 million fund, and takes a generous slice of equity for advisory services rendered. [TTA 10 Jan, 7 March, 4 April]
  • Health tech accelerator Blueprint Health announced its latest class–and they are increasingly not in the earlier pattern of true startups in need of guidance to appeal to angels and VCs. Five of the ten companies already have customers, versus two in the previous class. Is this mission creep? According to an article in Gigaom, their co-founder has said that they are not deliberately looking for more ‘mature’ companies, but are nonetheless accepting them. Of course, early stage companies that have already gotten into the market have a greater chance of success and look better on the record of any accelerator program. Another trend is B2B rules. Only one of the picks is consumer focused (health coaching) and another is engaged in employee wellness rewards adopted by companies.

Are these pointers to the future, at least in the US?

  1. Nascent maturity and realism in business plans–the horizon narrowing
  2. The continued collapse of practice EHRs into a few trusted providers [Doctor backlash brewing, TTA 22 Feb]
  3. With less funding to go around, and with few companies moving from A to B to C rounds, will future investment and development go to those who have already gained traction in customers and previous investment–and somehow got to that stage with the help of angels and crowdfunding?
  4. Is it the end of the Quantified Self consumer device buzz? These investments, and the past quarter’s, are largely in the surer, more VC-acceptable water of B2B tech.

Contra-wobbly: Aberdare Ventures bets on digital health

April 30, 2013 | by

While the PwC tracking survey of VC investment in life sciences (including medical devices) shows definite global cooling [TTA 26 April], a $130 million venture funder is just warming up. Aberdare Ventures is one of the top three, after Qualcomm and Merck, making investments in four or more digital health companies, according to RockHealth, and moving away from other parts of life science. Funding for their present suite of seven firms is between $3 and $5 million each. The firm’s latest acquisition is partner Mohit “Mo” Kaushal from West Health. Forbes

[Unrelated editorial note: This is the 5,000th news item on this site.]