INVEST Digital Health Pitch Perfect Judge Shares Healthcare Startup Investment Insights

Several investors are taking part in the MedCity INVEST Digital Health conference in Dallas on September 18, including Dan Easton, Principal with Unorthodox Ventures. Easton is one of the judges for the INVEST Pitch Perfect startup contest, which will focus on pediatric mental health. In response to emailed questions, Easton shared his perspective on healthcare startups.

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What’s your background in healthcare investing? What are your responsibilities at Unorthodox Ventures?

In just the past two years, Unorthodox Ventures has made 16 investments in medical companies. There’s such innovative work being done, particularly in medical devices, and we’ve seen that our money paired with our manufacturing know-how helps our portfolio companies grow faster and reach more patients. At Unorthodox Ventures, we’re not into fly-by-night gadgetry or software that purports to perform a service yet only serves to clutter up our lives. When deciding where to invest, we consistently look for products that solve problems and help people who genuinely need just that. This makes healthcare an obvious choice for us. And within healthcare, we’ve found all things cardiovascular especially promising, as more and more of us are living longer and are likely to face some sort of heart or circulatory problem at some point in our lives.

As a principal at Unorthodox Ventures, I help our portfolio company founders develop strategies that focus on long-term success. That helps them avoid falling into the trap of being distracted by day-to-day issues, which can often delay real progress. To that end, I also assist with their hiring initiatives because it’s so crucial to find the right people at the right time. I’ve even stepped in as an interim executive at times to ensure our portfolio companies have all the resources they need to rapidly grow.

What investments in pediatric mental health tech or pediatric healthcare startup companies have you/your firm made in the past?

While our investments have primarily focused on cardiovascular companies, we’ve made a number of investments in companies that help people of all ages better understand their own bodies. That includes understanding your metabolism, blood sugar and other keys to improving your health and knowing when it’s time to see a physician. In 2023, the U.S. Food and Drug Administration approved a record number of new technologies, and that pace of innovation is predicted to continue through the rest of the decade, powered in large part by advances in machine intelligence. It’s an exciting time for everyone in the medical field, and we’re thrilled to play a part at Unorthodox Ventures.

What interests you about the pediatric mental health sector?

It’s so important at an early age to develop both an appreciation for and understanding of the importance of building relationships with physicians. We see the consequences everyday of failing to do that over time. For example, the American Medical Association estimates half of all patients don’t take the medications they’re prescribed, leading to poor health. Technology can only take us so far. People have to be eager participants in their own healthcare, and pediatric mental health stresses the importance of that at an early age.

What are some examples of technologies that have grabbed your attention? 

Unorthodox Ventures has invested in technology that helps patients more easily monitor their blood sugar, and research suggests this is going to become more and more important to children in the coming decades. A study funded by the U.S. Centers for Disease Control and Prevention predicts by 2060 a nearly 700% increase in the number of patients under age 20 diagnosed with Type 2 diabetes. The study also suggested the number of Type 1 diabetics may increase 65% over the same timeframe.

What’s critical for healthcare startups to do?

The following is true for any medical company — you must do market research, business modeling and reimbursement planning early, long before you’re in clinical trials. We’ve been approached by numerous medtech companies over the years and so many have unfortunately focused on technology for technology’s sake — the classic example of a solution in search of a problem. They fail to consider how large the market is for their product, and that will forever haunt them as they seek to raise the funds needed to grow. Beyond a real market, investors also want to make sure you have a strong business model and early enthusiasm from insurance companies willing to reimburse your costs. Many would be surprised to learn the number of companies that make it to their FDA submission process without a clear understanding of how they will grow if their products are approved.

What is your outlook on healthcare startups? What are some factors critical to their success?

One of the biggest obstacles in the field is making sure you properly estimate the capital you need both before and after you launch your product and service. We’ve seen so many companies vastly underestimate their capital needs and then have difficulty finding new investors when their existing ones rightfully express concern that they’re not meeting expectations. This has all been compounded in recent years by rising interest rates, as even the most freewheeling of investors have started to more closely scrutinize funding requests. Aspiring founders shouldn’t be dissuaded, though. If you have a well-developed idea backed by research that shows a real unmet need, you’ll find the money you need.

What advice would you give to healthcare startups?

Always be willing to bring on experienced people. This is true in far more than medical, as young founders, in particular, can be overly cautious about hiring people both older and smarter. The best managers will always understand what each person on their staff brings to the company and want everyone to succeed.

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