After two decades of clinical practice, a couple of healthcare startups and a handful of angel investing networks, Jose Bolanos noticed a few things about the process of medical innovation. First, venture capitalists were struggling in healthcare and were moving toward later-stage investments. Secondly, physicians were self-funding a lot of their projects. And third, many angel groups that weren’t focused on healthcare struggled to understand HIPAA and FDA regulations and reimbursement issues, which are crucial pieces in the due diligence process and just as crucial for the companies to understand.
To address some of those issues, Bolanos created MD-Foundry, a network of accredited angel investors who address those things by funding and advising early-stage health companies. In the first year of its existence, the Silicon Valley-based group (now being rebranded as Venture-Med Angels) has funded 24 companies in seed and Series A rounds. Usually those investments have been less than $500K, but the group also syndicates with other angel groups and international investors that allow it to do bigger rounds, he said.
What kinds of companies does Venture-Med angels invest in? Its investors focus on class 1 and 2 medical device startups, including diagnostics, as well as mobile health, health IT, telehealth and remote diagnosis.
But, when it comes to the latter, the group is proceeding with caution. “My concern is that we’re having a lot of re-inventing of the wheel,” he said. “That’s a difficult thing for investors, when there are so many companies doing similar things.”
The winning companies have experienced teams, a pipeline of potential customers and partners, and an elegant solution for users, Bolanos said. “The team is extremely important, your advisers are very important, your intellectual property is very important.”
Other areas where Bolanos said he’s seeing a lot of activity is in HIPAA-compliant communication among physicians and identity management solutions for patients. “We’re getting into a situation where duplicate medical records are a problem,” he said, due to mistyped letters or numbers.
In addition to funding, Venture-Med Angels also helps startups prepare for their pitches and milestones. One piece of advice he offered on this front is that entrepreneurs should make sure that their executive summary and pitch deck are congruent. They’re fluid documents that change a lot, so it’s easy to change one while forgetting to change the other.
Also, during a pitch, “you’re not selling your product, you’re selling your company,” he said. “Sometimes, (inventors) get so into telling what their technology is that they blow over the investor’s heads on the technology portion with only a small emphasis on the business plan and model.”
As a final piece of advice, Bolanos offered some wisdom learned the hard way: choosing the company name wisely. The group is changing its name to avoid confusion with similar groups like Silicon Valley-based medical device incubator The Foundry.