Strictly speaking he is not a VC at all, given that Safeguard Scientifics, where he is Senior Vice President and Managing Director, is a holding company that provides capital to tech, life science and healthcare companies.
Call him a financier, but he doesn’t fit that mold either. What financier has been a practicing physician, performed medical research, been an executive at biotech companies and later taught a class about entrepreneurship in the life sciences?
Kurtzman has done all of the above. He talked with MedCity News about the investment philosophy of Safeguard Scientifics and how he has learned to spot startups with real potential.
MedCity News: What stage of companies do you invest in?
Kurtzman: Generally they are companies that are in revenue or have the potential pretty early in our holding period to have revenue. We will do some pre-revenue companies. We really look for companies that have the ability to be cash generating while we are holding them.
MedCity: What innovative companies are you involved with?
Kurtzman: We sold Avid Radiopharmaceuticals to Eli Lilly in December 2010 and that was a diagnostics company that had an imaging technology to test the presence of beta amyloids in patients with dementia. (FDA approved the test for Alzheimer’s in 2011). We took the company that came out of a lab at Penn all the way to Phase III clinical trials. They paid $300 million upfront with the potential for $500 million more. So this company had a regulatory burden but it had a straight forward clinical path.
In med tech, we work with a company called PixelOptics.PixelOptics makes the first electronically-focusing eye glasses. It is a game rechanging product in the very large market of presbyopia, that causes people to require reading glasses as they get older. There’s 100 million pairs of reading glasses sold worldwide for patients with that problem, so it’s a big market. But none of the solutions for that are optimal, either for patient convenience or for visual correction.
So this solves one of the major problems and it is a high-tech solution. Basically it’s an eye glass with a liquid crystal built in that you can basically turn on and off when you need to read. They have a product called emPower and we are doing a beta launch right now and we have to have a full launch in 2013.
MedCity News: What kind of companies are you looking to invest in?
Kurtzman: Wehave progressed into more of a healthcare tech space or health IT space.We realized early on that if you are going to face one burden, the burden should be that of getting paid. In fact, we will take on execution and reimbursement risk because that is part and parcel of being in healthcare, but we are not going to do a dual risk of regulatory burden.
Our medtech revolves mostly around diagnostics; device companies are certainly out of favor. Investing in device companies used to be easy. You would invest, you would get proof of concept and someone would buy you. Today you need to get proof of concept, then you have to do your pivotal trial and then you have to do all the studies to make sure you get payment. That can take many years.
If we do look at med tech, it will be something that takes costs out of the system. That is going to be a big trend.
MedCity:What questions should entrepreneurs be asking about their products?
Kurtzman: Who is the customer? Who’s going to pay for this? What value is it to the customer? It is irrespective of the technology. It’s got to look and smell like a product that people want to buy.
How has the model for innovation changed?
Kurtzman:It was I would call a push model, meaning that people thought, ‘I will develop something and someone will want it because it’s important and it’s novel and its new.’
I think today we have to think more in the lines of a pull model – what is the market looking for today? And not just today what it might be looking for two to three years down the road when this product hits the market or begins to hit its stride.
MedCity: You have a very unusual background. What do you bring to the table that other VCs don’t?
Pattern recognition. At one point I was a practicing physician, I did medical research and I was on the operating side of biotech companies. I have seen what works, heard a lot of stories and after a while if you are any good at it – and I would say I am better than some, not as good as others – you develop some pattern recognition. Experience gives you that.