Introduction written by the publisher of MEDS (Medical Electronic Device Solutions), John Koon
New medical device companies continue to emerge at a rapid pace. Various sources have indicated that while there are more start-ups, the length of time for a company to go from concept to successful product launch with positive cash flow is increasing thanks to the FDA clearance process. Don’t get me wrong, the FDA is just doing its job. Medical devices are becoming more complex with new features such as built-in wireless which lengthens the clearance process. It is like having multiple devices go through clearance at the same time. As a result, it is becoming more and more important to have staying power. Companies have to figure out ways to get funding in order survive. MEDS caught up with Qualcomm Venture to learn about how funding works in the medical device community, and we would like to share our findings with you.
Publisher: What is Qualcomm Life’s mission?
At Qualcomm Life, our mission is to mobilize healthcare, and to be an industry enabler. We are building one of the largest ecosystems of medical device manufacturers, pharmaceuticals, health services companies and app developers to accelerate the convergence of digital technologies and medicine. Our core service offering is the 2net Platform, a cloud-based machine-to-machine service platform that ensures biometric data is sent from wherever it originates to wherever it needs to go, safely and securely. Currently, most healthcare data is on paper or locked in medical devices or in proprietary servers or systems. Our Platform breaks down these silos and liberates biometric data by allowing our 2net Ecosystem Partners to collaborate together for the first time in a seamless way. For example, a Type II Diabetic can now monitor their blood glucose levels, weight and activity using a variety of wireless medical devices, and view all of their data in one app. Not only can the app show a chronic disease patient their readings, but it can display how the patient’s health is trending, or how they might improve their results. These types of next-generation healthcare experiences are enabled by the 2net Platform, and they are all about mashing up data across multiple devices and apps, and applying analytics so the data can lead to actionable decisions.
Publisher: Can you describe what role Qualcomm Life Fund (QLF) plays within Qualcomm Life?
The Qualcomm Life Fund was established in December 2011 in conjunction with the launch of Qualcomm Life, Inc. The fund is a $100 million allocation carved out of the existing $500 million corporate commitment for Qualcomm Ventures (QCV) established in 2000; thus it is under the QCV umbrella and operates independently to Qualcomm Life, Inc. The QLF specifically focuses on investing in venture-backed wireless health start-ups that will help accelerate the development of global wireless health services and the technology ecosystem. The QLF also looks for investments that support Qualcomm Life’s 2net Platform commercialization, but is not limited to Qualcomm Life business initiatives. The Fund currently has eight companies in the portfolio including: Airstrip Technologies, AliveCor, Cambridge Temperature Concepts (UK), ClearCare, goBalto, Noom and Telcare. The fund has co-invested with a number of top tier funds, including KPCB, Sequoia, Khosla and Burrill.
Publisher: How would you describe the market today? Is it easy for a medical device company to get funding these days?
While there are definitely challenges in traditional medical device and biotech funding, investment in digital health has been robust in recent years. According to an analysis by Rock Health, there was over $1.08 billion invested in the first three quarters of 2012, which surpassed the $956 million invested in digital health in the full year 2011. We believe there is an opportunity in the digital and mobile health space as it contributes to practicing medicine more effectively and at a lower cost, which is the direction healthcare is being pushed in.
Publisher: Can you describe how Qualcomm Life Fund has helped start-ups?
We strive to be a value-added strategic partner and technology enabler. Once you are a portfolio company of the QLF, we will assist you to gain access to various resources within Qualcomm and our ecosystem, which include:
- Global Distribution Support: Carriers, OEMs and Qualcomm
- Technical Value Add: Sensors, NDK APIs, 3G/4G Trends and Computer Vision (A/R, Text Recognition)
- Early Handset Access: Access to Pre-Release Handsets
- Market Data: Handset Sales Volume (by market, model, manufacturer and OS)
- Qualcomm Life, Inc.: 2net Ecosystem
Through our past investments we have learned many lessons that we can pass on to aid startups with successful strategies, and sometimes more importantly, to avoid pitfalls that we have seen. In addition to the investment professionals who manage the investments, QCV has dedicated business development and marketing personnel to provide a broad range of support.
Publisher: What advice would you give to those who are looking for funding? Can you briefly describe the process?
Do your homework in research, especially for those seeking first round financing from institutional investors. While the market drivers are clear, and interests in the investment community are high in digital and mobile health, few start-ups in this space have been able to demonstrate ROI to their targeted customers. In the healthcare space, the technology can often be the easy part. Understanding the regulatory issues, the system you are selling into (understanding the payer vs. provider vs. consumer and the inter-relationship between them), and human behavior are where the challenges lie. Having a deep understanding of these areas is key to being successful, and a company should be able to prove a deep understanding of this part of the equation.
In general, our evaluation process and criteria are fairly similar to those of an institutional venture investor. Once vetted by the investment manager, the investment opportunity needs to get the QCV group buy in before submitting to our investment committee for final approval. Our typical size of the first investment is between $2M to $5M, and in most cases we would only participate in a syndicated round with other institutional venture investors.
Publisher: When should a start-up approach you? If a start-up company has a great innovative idea and is looking for funding, should they provide a proof of concept first or wait until they get some sort of FDA clearance?
Our door is always open to have an exchange with new start-ups in the space. The QLF builds an investment thesis by identifying a number of verticals with strong and sustainable drivers, right market timing, and massive adoption potential. Currently the verticals we are focusing on are wellness and fitness, chronicle disease management, aging-in-place, transitional care, clinical trials and telemedicine, and telehealth. We will invest in companies in both FDA or non-FDA categories. We prefer to invest in a company that has demonstrated early customer traction, and to syndicate with another institutional investor with complementary skills to the ones we bring.
Publisher: How do you measure success? For example, do you use ROI over a period of time? What other criteria do you use?
As a strategic corporate investment fund, we measure the success of the investment in two ways. First, we strive to achieve above the venture industry average ROI of a similar standard. Secondly, we strive to add strategic value to Qualcomm’s business objective in developing wireless technology adoption in healthcare. Additionally, we look for investments where Qualcomm can provide value add.
Publisher: Are you happy with your investment results so far?
Since 2007, we have made eight investments in the digital and wireless health arena. All of these companies have demonstrated leadership in their respective categories, attracted top tier investors, and have been working closing with Qualcomm on various initiatives. We are thrilled and optimistic from that perspective, but the real test will be successful exits, which time will tell as this space continues to mature.
Publisher: What are your plans for 2013?
First and foremost, we want to devote time to our existing portfolio companies to ensure they achieve their goals. We are planning to make additional investments in the six verticals that we mentioned earlier. In addition, we hope to expand our investment in regions outside the United States and Europe where QCV has offices, including China, India, Israel and Brazil. We will also continue to try to educate the market about the benefits of wireless healthcare and actively participate in the digital and mobile health start-up community.
About Jack Young
Director, Qualcomm Life Fund
Jack heads up the $100M Qualcomm Life Fund (QLF) at Qualcomm Ventures, which was recently ranked as one of the most prolific venture investors in the digital health sector. His investment interests are focused in the areas of digital technologies and wireless health services and applications including: wellness and fitness, chronic disease management, aging in place, transitional care, clinical trials and telehealth/telemedicine. Jack currently serves as a board observer at QLF portfolio companies including Airstrip, AliveCor, ClearCare, goBalto and Telcare. In addition, he serves as a board observer at Jana, Modern Video, uCIRRUS, Validity and Visage Mobile.
Prior to Qualcomm Ventures, Jack was EVP and U.S. Country Manager at ZTE, who helped establish the company’s U.S. market presence. He was a sales and marketing executive at Nokia following the acquisition of Amber Networks where he was founding AVP of marketing. Early in his career, he held marketing and business development positions at 3Com, GDC and Nortel. Jack earned a MSEE from the University of Calgary and an MBA from McGill University.