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Transforming Health-Tech–Startup Challenges into Opportunities

biology. Finding talent in biology and talent in MEMS technology is one to lose the entire investment, Achyuta noted. “We only invest when we
thing; finding people with this dual skill set is another. “MEMS is a field have deep insights ... when we know we can bring tangible value to the
in itself, so transposing that [knowledge] into the health-care cell- and startup,” he said.
gene-therapy world is almost foreign [territory]. These people [MEMS In April 2021, TDK Ventures closed a US$150 million fund for
specialists] aren’t used to that, and that’s a big challenge for us.” early-stage investments in clean technology, advanced materials,
industrial, robotics, energy, autonomous vehicles, electric vehicles, and
Finding the right investors health-tech segments. TDK Ventures’ total assets under management
One of the most difficult aspects of starting a business is determining are now US$200 million.
which investors can add the most value. Not all venture capitalists Out of the first fund, TDK Ventures has made 15 investments and
play an equally active role in supporting their companies. “Finding reported two M&As, one IPO, and one unicorn. The second fund has
the right group of investors is a no-brainer,” said Narasimha, adding a portfolio of eight companies, and the checks range from US$250,000
that the right investors are those who “believe in you, in your team, to US$5 million.
and in your technology” and who understand the industry and its It goes without saying that TDK Ventures examines the growth
dynamics. potential of a candidate for funding, as any venture capitalist would.
On the technology side, Mekonos had conversations with TDK The cell- and gene-therapy market, for instance, is projected to grow
Ventures about the platform development, the MEMS foundry eco- rapidly, reaching sales forecasts of €27.9 billion by 2026, according to
system, and the entrepreneurial process. On the biology side, it could consultancy firm Roland Berger.
notably count on health-care group Novartis. “I think every investor in health care should be looking at that market
because it is growing at an incredible pace,” Achyuta said.

When to invest?
Determining at what stage of the startup’s development it is
best to invest to ensure an optimal return on investment is
no easy task. “Do I invest when they come out as a startup,
or do I invest when they go to mid-scale, or do I invest in a
later stage?” asked Achyuta. “It’s always a difficult situation
for me, because there is a lot of risk in translating these
technologies from low volume to medium volume and high
volume.”
What’s the clinical value?
For health-tech startups, the main challenge is the demon-
stration of the technical and clinical feasibility of the
proposed concept, product, or service. “I see a lot of these
CGM [continuous-glucose–monitoring] companies and
blood-pressure–monitoring companies that show up with
very good initial data but have no clinical evidence whatso-
ever,” said Achyuta. “It’s difficult to kind of jump the gun and
say, as an investor, ‘I want to put my money into that.’”
Finding the right balance is “really important, especially for a first- For MEMS-based wearable startups that are willing to sell smart-
time founder like myself,” said Narasimha. “I don’t have the ability to watches, the main question is how they can compete with Apple or
go off with my previous experience in the entrepreneur world and say Samsung. For health-care startups, however, the questions are: What is
that I know how to do this, what works, and what doesn’t. If you can the clinical value? How do you justify the technology?
identify that set of advisers and investors early on, they can help you “If startups show up with a pilot study of 20 patients, it will give
out tremendously.” the investors much more confidence than showing up [with only] the
In November 2021, Mekonos raised US$25 million in a Series A prototype,” said Achyuta. “Starting a company has become so easy —
financing round co-led by Reimagined Ventures, Fiscus Ventures, and and early capital seems to be flowing everywhere — that showing up
Peak6 Strategic Capital. The round also included new institutional and [with] a prototype seems to be much easier than it was five to 10
strategic investors such as Section 32, Sands Capital, TDK Ventures, the years ago.”
venture arm of Debiopharm, and previous investors such as Novartis The risk is that investors will adopt a more conservative posture and
Pharma AG and Elementum Ventures. seek even more guarantees. “Many of my medtech [investor] friends
are moving post-FDA. They say, ‘I will not invest until I have FDA or CE
THE INVESTOR mark clearance,’ and that’s really hard on startups. Where do they get
Established in 2019, TDK Ventures is a wholly owned subsidiary of TDK the capital to get there?”
Corp. Since co-founding TDK Ventures, Achyuta has reviewed more
than 1,800 startups and invested in 11. Besides Mekonos, three are in Is the FDA clearance enough?
the health-care sector: Genetesis, a magnetic-imaging–based cardiac It is commonly thought that FDA clearance is the key milestone for
diagnostics company; Exo, a developer of handheld 3D ultrasound finalizing the product’s development and launching the product
imaging technology; and Mojo Vision, an augmented-reality commercially in the U.S. Achyuta confirmed that FDA clearance is
contact-lens company. necessary but added that it isn’t sufficient. “There are many com-
Achyuta shared some insights from his venture experiences. panies out there that have received an FDA clearance, but really, it IMAGE: SHUTTERSTOCK
means very little” on its own, he said. “In fact, the reimbursement
Where to invest? — how you [get] traction and how you convert that [approval into a]
That’s a tricky question, and returns are never guaranteed. It is possible business — is much harder to do.” ■

MARCH 2022 | www.eetimes.eu