Startup Vic’s Health Tech & Med Tech Pitch Night

The theme for last month’s startup pitch night co-hosted by Startup Vic and LaunchVic was Health Tech and Med Tech. According to recent data, of Victoria’s 2,700 startups, 20% are in health services and technology. The judging panel was drawn from HealthKit, ANDHealth, MHX and Pfizer.

The startups in the order they presented were (websites embedded in the names, where available):

Hearables 3d

With the vision of “making custom-fit the new norm”, Hearables 3d is developing personalised and customisable ear devices. In  many cases, users give up on hearing aids because the purchase process is slow (it can take 2 weeks to place an order), expensive (average price of $300), and often of variable quality. Plus, providers are relatively inaccessible. Instead, using a combination of smartphone scanning, design powered by machine-learning and a 3D production process,  Hearables 3d aims to get costs down to $50.

The team are already developing working prototypes, running user trials, filing a patent, setting up a B2B distribution pilot, and have recently raised seed equity and been admitted to the Skalata Ventures accelerator programme. This will be followed by further fundraising in 6-9 months’ time.

The judges were interested to understand more about the business model – especially the payment system, and distribution structure. Hearables 3d aims to be a service provider to existing distributors, leveraging their automated design process. Given that the medical device registration process is currently done by manufacturers, of which there a six global firms, it would appear to make sense to become embedded in the current manufacturing eco-system and a key aspect of the go-to-market strategy..

The team is also looking at other verticals, such as sleep apnea devices, but the judges wanted to understand whether there were any plans for a direct to consumer model, and whether they were actively engaging with audiologists. There was also a suggestion that some competitors were making more of a fashion statement about their products, incorporating elements of  jewellery into their designs.

Stelect

Aiming to “take guesswork out of stent selection”, Stelect is changing the way PCI procedures (Percutaneous Coronary Intervention, formerly known as angioplasty with stent) are conducted. Currently, 4.1m cardiac stents are fitted in patients each year, but according to the founders, more than 70% are incorrectly sized.

Stelect has developed a balloon catheter with spatial sensors, which ensures a more accurate fit and a less invasive procedure because measurement and fitting are done in a single step.

Claiming that competing products are expensive (non-reimbursable), complex, not and integrated to current workflows, the team are initially targeting more acute cases, which account for 15% of procedures.

A previous winner of MedTech’s Got Talent, Stelect is aiming to complete a US FDA 501(k) pre-market submission for new devices by July 2021, with the likely exit of a trade sale once that process is approved.

A key benefit of this device is that it will combine two existing reimbursable codes, resulting in both initial cost savings for patients, plus downstream economic advantages for health service providers. Asked about clinician feedback and potential take-up, especially when compared to current imaging processes, the team stated that by removing the interim step of having to use a separate imaging catheter will significantly reduce the procedure time. The product overcomes the engineering constraints of traditional balloon catheters by drawing on the expertise of a microscopic transducers expert.

As to selling into hospitals, the team plan to partner with existing manufacturers and suppliers, and license the sensory capabilities. And while there is potential to commercialise data & analytics (for predictive purposes, for example) the current focus is on the device.

Consentic

According to the founders, the completion, collection and management of medical consent forms results in 40% dissatisfaction, just 20% retention and only 9% compliance. Often the cause of legal claims (due to limited patient understanding, poor form design or a lack of clarity), Consentic plan to challenge the status quo using video content, a checklist (to reinforce understanding) and a simplified consent form.

The team already claim a 20% improvement in patient comprehension, 80% patient preference for this model, and a 15% reduction in patient anxiety. It also saves clinician time. The product will be supplied under a subscription model with scale rates, and having completed successful trials in their own field of dermatology, the founders are looking to extend the service to other medical and consent verticals.

The team have completed 40 trials with 10 paid customers, completed the HCF Catalyst accelerator program, and are currently part of the 2019 MHX cohort.

The team were asked about whether they have integrated with practice management software (not yet), and whether they had plans to address US issues on health care and “financial consent”, and for removing the issue of consent as a barrier to clinical trials.

Hayylo

Hayylo is an aged care home services provider. For many clients, services change often with little or no notice. According to the founders, there is little transfer of client knowledge, a lack of shared team processes, and few common tools. Part of the problem is a communication challenge. This all impacts client independence.

Hayylo is an online platform, working with multiple channels and providers. It can provide clients with automatic updates, resulting in call reduction, and increased satisfaction. Using a B2B SaaS model, along with white label options, the team is targeting a potion of the $4bn-$8bn global market.

To date the team has mainly bootstrapped, obtained some angel investment, and has been in market since April 2018. Their strategy is to offer integration solutions (with rostering and practice management tools) and develop distribution partnerships (reseller agreements).

While there is competition, including from AI/ML and IoT solutions, the team believe that by mapping multiple data sources on to a single platform, and by unifying the team experience, the resulting operating system model gives them an edge. Currently in user testing with 10 providers, and 30,000 clients, the team is also using focus groups to gather feedback.

After the audience voting and judges’ diliberations were done, the People’s choice was Stelect, while the overall winner was Consentric.

Next week: Sometimes it’s OK to Meet Your Idols

Pitch X’s Winter Solstice

The latest Pitch X event, organised by Academy Xi and hosted by YBF Ventures, was held a few days before the (Southern hemisphere) mid-winter – there may not have been any mulled wine, but there was still a warm atmosphere on a cold and wet Melbourne evening. The judging panel was drawn from YBF, Melbourne Angels, Linfox and Clearpoint Ventures.

The usual format applied: 11 startups were each given 90 seconds to pitch, followed by a 90 second Q&A with the judges. The top three were then brought back for a 5-minute pitch, and 4 minutes of Q&A.

The pitches, in order of presentation were (links in the names where available):

Startup 101

A self-styled online startup school, targeting university students and recent graduates. The core premise is that entrepreneurship is not being taught to undergraduates. The judges asked about the MVP, which was not clear, nor was there a breakeven forecast based on the number of students. The founder is offering a freemium model, based on memberships and services. Looking $500k for software development and marketing in China (a key demographic for this business).

Studio Ninja

This is a cloud and mobile PaaS solution for professional photographers. I first covered Studio Ninja in late 2016, when they pitched at a StartupVic event – and it’s great to see that they have managed to bootstrap themselves this far.

Professional photography is competitive, but margins are low. Studio Ninja offers an end-to-end platform for scheduling, contracts, payments etc. They have now integrated with Xero, QuickBoooks, Google, PayPal and Stripe, and have built a community via their chat app, Facebook group and Instagram account. At a basic $29.95 per month, they now have 4,000 paying subscribers, mainly in Australia, UK and US. but need to reinvest in product development, scaling and building further efficiencies. Users are offered a 30-day free trial, with an average 25% conversion rate, thanks to the hook of discounts for early sign-ups, plus a referral program.

RoamingDuck

Calling itself the “Uber of travel”, RoamingDuck offers travelers access to curated itineraries, based on their personal preferences. Using freelance resources (along the lines of Upwork and Airtaskr), the service uses a travel planning dashboard on which the customer and the curator can collaborate. With a quick turnaround, RoamingDuck can help customers build and review an itinerary within 12 hours. With the ability to consolidate and share, the content is easily accessible to users, who can plan anything – even supporting “self-plan” users with a search function.

Freelance curators come from the ranks of existing travel bloggers and services like Travelo, and are subject to a vetting process. There is also an escrow system, so freelances only get paid when the customer is satisfied. Normal travel agents are quite restricted on what they can access or offer, and services like Skyscanner are great for searching individual fares – RoamingDuck is solving the planning issue, and building the itinerary. Asked whether RoamingDuck can support actual bookings, the founder will likely implement this via APIs.

Wastr

According to the founder, households waste about 20% of the food they buy. Wastr is an AI-powered app that is designed to help consumers use what they purchase, rather than letting to go to waste. The solution allows subscribers to scan their grocery receipts, and in return they will receive recipes, notifications on expiry dates, plus other reminders. The app is offered under a freemium model, with a paid service starting at $2 per month.

VRWalker

Described as “VR for your foot” (or the “mouse” for VR), this is a motorised shoe device that allows wearers to experience”walking” within VR applications, without actually moving.
It’s an idea that has been around for a while, but the founder claims to have filed key patents. The shoes work on the concept of intuitive locomotion (linked to the dantian, or our centre of gravity), and are intended to be much cheaper and much more convenient than existing treadmill-based solutions. The founder hopes to have a working prototype by the end of this year. Likely customers will come from areas like construction, engineering and gaming. The judges asked about how insurance would be handled, and the device could be bundled with existing VR headset devices.

The Nurture Project

The Nurture Project is designed to teach life skills to deal with anxiety issues, which according to the founder, affect 30% of the population. Unlike other solutions, this treats the causes as well as the symptoms, using a well-being model built on 5 core pillars, and delivered via a 12-week online program. It is currently aimed at women in their 30s and 40s.

Natural MedTech

Designed to boost the immune, hormone and nervous system naturally, this has come out of a CSIRO project, with a scientific basis that has been peer-reviewed.

Magicast

This is a decentralised online podcast recording and editing service. Existing podcast software is either too complex, or too expensive. Instead, Magicast uses web-based programme development, publication and distribution, offering a two-sided marketplace for content, sound effects, music etc. The judges asked about international competitors, given that podcasting is very much a cottage industry, with relatively few barriers to entry.

Turtle

Something akin to an Uber courier service, Turtle enables customers to obtain goods from overseas that are not available where they live. Targeting expat and diaspora populations, the platform has an escrow function to provide a level of trust. It was not clear who would be responsible for tax, customs and quarantine issues.

Young Shaman Foundation

Having run a number of leadership development retreats on country for women in indigenous communities, the founder is now seeking funding to develop and extend the program she currently offers.

SecureStack

Helping companies to secure the cloud, with a focus on cyber security, the founder pointed out that key problems are caused by “cloud sprawl” – the uncontrolled proliferation of content, services and applications hosted and running on cloud-based servers. Using a proprietary cloud infrastructure security design, the startup has already secured two clients and $100k in revenues. Now looking to raise $2m, for an 18-month runway, in order to gain 100 clients. The solution is agnostic as to which cloud service clients use. Traditional cloud management and compliance is saturated, whereas SecureStack’s value proposition is in the security layers.

After much deliberation, the winners were:

1. StudioNinja
2. RoamingDuck
3. VR Walker

Next week: The Metaphorical Glass Jaw

FinTech Fund Raising

In the wake of the Banking Royal Commission, will FinTech startups capture market share from the brands that are on the nose with customers? And will these upstarts manage to attract the necessary funding to challenge the deep pockets and huge balance sheets of the incumbents? This was the underlying theme of a recent panel discussion hosted by Next Money Melbourne.

The panel comprised:

Nick Baker from NAB Ventures, typically investing $1m-$5m in Seed to Series C rounds, self-styled strategic investor with a particular focus on RegTech, Data and Data Security, and AI/Deep Learning

Ben Hensman from Square Peg Capital, writing cheques of $1.5m-$15m into Series A onwards, more of a financial investor, mainly in businesses starting to scale. Sees that the industry is ripe for disruption because of the mismatch between profit pools and capital pools, compared to the size of the economy.

Alan Tsen an Angel investor, making personal investments of $10k-$25k, mostly into teams/founders that he knows personally and has had an opportunity to see the business evolve fairly close up.

Key topics included:

Open banking – Will this be the game-changer that many people think it will? Are the banks being dragged kicking and screaming to open up their customer databases? What will be the main opportunities for FinTech startups? While customers often express an intention to switch banks, the reality is that few actually do. In part because current processes make it relatively difficult (hence the current Open banking initiative, which will later be extended to utilities); in part because there is little to no differentiation between the major banks (in products, costs and service). Also, it seems that banks are quietly getting on with the task in hand, given that resistance is futile. My personal view is that banks may have a significant role to play as custodians or guardians of our financial and personal data (“data fiduciaries”) rather than directly managing our financial assets. For example, when it comes to managing the personal private keys to our digital wallets, who would we most trust to hold a “back up of last resort” – probably our banks, because even though we may love to hate them, we still place an enormous amount of trust in them.

Full stack financial solutions – Within FinTech, the panel identified different options between full stack startups, compared to those that focus on either the funding layer (sourcing and origination), tech layer, and the CX layer.

Neo-banks – Welcome source of potential competition, but face huge challenges in customer acquisition, brand awareness and maintaining regulatory capital requirements.

Unbundling the banks – Seen as a likely outcome from the Royal Commission, given that we have already seen the major banks largely exit the wealth management and advice business. But the challenge for FinTech startups will be in developing specific products that match and exceed current offerings, without adding transactional friction etc.

Identifying Strong FinTech Teams – There needs to be evidence of deep domain expertise, plus experience of business scaling. Sometimes it’s a fine balance between naivety and experience, and outsiders versus insiders – bringing transferable external experience (especially with a view to disrupting and challenging the status quo) can easily trump incumbent complacency.

Funding Models – While most VC funding is in the form of equity, some VCs offer “venture debt” (based on achieving milestones) which can be converted to equity, but while it can lead to founder’s equity dilution, it may represent a lower cost of initial capital for startups. The panel mentioned the so-called “Dutch model” (because it has been used by Dutch pension funds) that local mortgage company Athena has brought to the market. Rather than seeking wholesale funding or warehouse financing to back their home loan business, Athena allows institutional investors such as superannuation funds, to lend direct to homeowners. This means that the funds receive more of the mortgage interest margin than if they were investing in RMBS issued by the banks and mortgage originators. Athena is mainly geared towards refinancing existing mortgages, rather than new loans, but also offers a new approach to mortgage servicing and administration.

Generally, VCs prefer simpler structures rather than, say, funding milestones, because of the risk of misaligned goals, and the impact this may have on subsequent price rounds. There are some models that create a level of optionality for founders, and others which are royalty-based, or which use a form of securitisation against future cash flows.

Meanwhile, the panel were generally not in favour of IPOs, mainly due to the additional regulatory, compliance and reporting obligations of being a public company. So it would seem their favoured exit strategy is either a trade sale or a merger, or acquisition by a private equity fund or institutional investor.

Next week: Crypto House Auction

Talking Innovation with Dr Kate Cornick, CEO of LaunchVic

As a nice segue to last week’s blog on Techstars, I was fortunate to hear Dr Kate Cornick speak, just before the latest LaunchVic grants were announced. Organised by Innovation Bay, hosted by Deloitte, and facilitated by Ian Gardiner, the fireside chat plus Q&A was a useful insight on a key part of the Victorian Government’s innovation strategy.

launchviclogo innovationbay-feat-800x500At the outset, Dr Cornick stressed that LaunchVic is not an investment vehicle, and it doesn’t fund individual startups. Rather it seeks to support initiatives that help grow the local startup eco-system. (See also my blog on the consultation process that informed LaunchVic’s formation.)

Commenting on why Victoria (and Australia) has the potential to become a world-class centre for innovation, Dr Cornick pointed to a number of factors:

  • A collaborative culture
  • Positive economic conditions (comparatively speaking)
  • Governments (mostly) open to innovation
  • Strong research base

However, a few of the obstacles in our way include:

  • The notorious tall poppy syndrome, whereby Australians are suspicious, sceptical and even scathing of local success – except when it comes to sport and entertainment!
  • An inability to scale or capitalise on academic research
  • Insufficient entrepreneurial skills and experience to “get scrappy”
  • Lack of exposure for highly successful startups (c.$20m market cap) that can help attract more investment

From a startup perspective, Australia also has the wrong type of risk capital: institutional investors are more attuned to placing large bets on speculative mining assets, typically funded through public listings, and with very different financial profiles. (Or they prefer to invest in things they can see and touch – property, utilities, infrastructure, banks.)

So there is still a huge gap in investor education on startups and their requirements for early-stage funding. Part of LaunchVic’s remit is to market the local startup community, promote the success stories, and foster the right conditions to connect capital with ideas and innovation. After all, Australia does have one of the largest pool of pension fund assets in the world, and that money has to be put to work in creating economic growth opportunities.

As I have blogged before, we still see the “expensive boomerang”: Australian asset managers investing in Silicon Valley VCs, who then invest in Australian startups. Although when I raised a question about the investment preferences of our fund managers, Ian Gardiner did point out that a few enlightened institutions have invested in Australian VC funds such as SquarePeg Capital, H2 Ventures and Reinventure.

Dr Cornick also provided a reality check on startups, and added a note of caution to would-be founders:

First, it tends to be an over-glamourised sector. For one thing, founders under-estimate the relentless grind in making their business a success. And while eating pizza and pot noodles might sound like a lifestyle choice, it’s more of an economic necessity. Thus, it’s not for everyone (and not everyone should or needs to build a startup…), so aspiring entrepreneurs would be well-advised to do their homework.

Second, the success of any startup community will be reflected by industry demand. “Build it and they will come” is not a viable strategy. And I know from talking to those within the Victorian Government that unlike their inter-state counterparts, they are not willing (or able) to fund or invest in specific startups, nor in specific ventures such as a FinTech hub. Their position is that industry needs to put its money where its mouth is, and as and when that happens, the Government will look to see what support it can provide to foster and nurture such initiatives – particularly when it comes to facilitating between parties or filling in any gaps.

Third, don’t expect too many more unicorns, and don’t bank on coming up with simple but unique ideas that will conquer the world – meaning, new businesses like Facebook, Uber and Pinterest will be few and far between. Instead, drawing on her earlier comments about research, Dr Cornick predicts that it will be “back to the 90’s”, where innovation will come from “research-based, deep-tech solutions”.

If that’s the case, then the LaunchVic agenda (for the remaining 3 years of its current 4 year lifespan) will include:

  • Getting Victoria on the map, and positioning it as a global innovation hub
  • Raising the bar by educating startups and investors
  • Bringing more diversity to the startup sector, by providing greater access, striking better gender balance, and building a stronger entrepreneurial culture
  • Introducing a more transparent and interactive consultation process
  • Continuing to support the best accelerator programs that focus on startups
  • Making more frequent and smaller funding rounds, each with a specific focus

Asked what areas of innovation Victoria will be famous for, Dr Cornick’s number one pick was Healthcare, pointing to the strong research base coming out of both the Monash and Melbourne University medical precincts. Also in the running were Agriculture, and possibly Cyber-security. (Separately, there is a list of priority industries where the Government sees growth, employment and investment opportunities.)

If one of the biggest hurdles is commercializing research, Dr Cornick suggested that Universities have to re-think current IP practices, including ownership and licensing models, developing better career options in research, and doing more to re-calibrate the effort/reward equation in building research assets compared to building companies and commercial assets.

Finally, Dr Cornick offered an interesting metaphor to describe the current state of Victoria’s innovation potential:

“We have everything we need for baking a cake, but the missing ingredient is the baking powder to make it rise.”

Next week: Gigster is coming to town….