VC office hours

Hello, I’ve been a lurker at various QS meetups and Gary Wolf suggested that I should introduce myself. I’m an early stage investor out in Silicon Valley and happy to provide perspective from an investor point of view. So, feel free to ask away and I’ll be glad to help if I can.

Thanks for posting this James! I’m going to do some brainstorming and come up with a few questions of my own, but I’m sure the community will also really appreciate this opportunity.

I’ll throw my name in the hat. I was an entrepreneur in Residence at Trinity Ventures last year, was a co-founder of Basis (Pulsetracer), and led VC fundraising efforts in Silicon Valley until I parted ways with the company. I’m an advisor to a few VCs and an inactive angel investor. I coach and advise a lot of entrepreneurs, and I’d be particularly interested in helping people in the QS space.

I’ll vouch for Dave and he’ll provide a great point of view. Although we didn’t overlap at Trinity (where I work now), I can say for certain that he’s made a big difference in the lives of a number of colleagues!

Great! I’m glad to help however I can and provide a point of view.

Uh, I forgot to mention that side effect. If you spend much time working with me, you tend to find yourself drinking bulletproof coffee (butter/mct) and eating things that once had cute little faces designed to eat grass. :slight_smile:

James, Dave — In addition to answering people’s questions, it would be great to hear the VC perspective on the QS and consumer health markets. Both your own viewpoints, as well as that of the larger VC community.

A fellow paleo? Awesome!

Here’s my quick take:

The medtech-oriented VCs may be a lost cause. They are used to stupidly high valuations and stupidly long startup times because of FDA and HIPPA compliance, so they have heavy-duty diligence that’s not so QS-friendly.

All VCs are skittish when it comes to any hardware play for consumers. The risk/reward is kind of broken. Zeo did it, and Basis eventually did, but I’ve never before in my career had 5+ meetings with each of a half-dozen tier 1 VCs without a term sheet resulting. VCs are very good at saying “no” quickly, but for a consumer hardware play they never would say no, they just wouldn’t ever say yes. It was more exhausting that raising funds for a typical tech company. There were other issues - team and valuation - that made that deal much harder to close. I wrote more about the decision making process here in my blog.

So all the VCs seem to want is a software play that uses social gaming methods with consumer health data - as long as they don’t have to invest in a device. The closest thing to crack to a VC is a cheap to start cloud-based social gaming play with costs that scale only with revenue.

From my perspective, this is a problem - we’ll get way too many QS data visualization startups and nowhere near enough data gathering devices. And I watched first-hand what applying social gaming techniques to QS data does when you don’t understand how a system works. Motivating someone to burn 3 calories instead of 1 calorie does nothing for health and is just a distraction, yet that seems to be the direction of some companies.

The real money is to be made in knowing what to do with QS data. I want to share my data with a reputation-ranked algorithm that I pay to access in order to get the algorithm owner’s view of my data. Then, you aren’t reliant on startups using your data to tell you to do the wrong things…if you don’t like what you hear, you choose another algorithm provider who “gets it” more than some hardware manufacturer using social gaming to encourage you to “check in” instead of doing something actually healthy!

This conversation is already paying off. While Dave’s post is written a bit densely and will have to be read a few times by people who haven’t watched a lot of QS pitches, it contains some very valuable advice that is worth parsing. Thanks Dave!

Gary, excited to find this forum after our conversation yesterday :slight_smile:

Dave, I totally agree with your post that the low hanging fruit in terms of fundability is data viz / behavior change / gamification - with the talent acquisition market being so strong right now these are sort of de-risked bets for VCs assuming that they’ve identified a strong team.

That said, I think some innovative things are being done to use existing sensors to generate new types of low-level data (Azumio’s smartphone-camera-powered Heart Rate monitor), plus there are a bunch of startups working on interesting smartphone peripherals (Vitadock, Cellscope among others). So I’m somewhat optimistic that we’ll still see a bunch of serious innovation in this space.

COO Scanadu

Misha, good point. I honestly think that you could build a business around webcam-based info. Just eyeblinks can tell so much if you’re trying to solve a specific problem. The problem is to convince VCs that you cause changes. One of the heaviest diligence processes we went through at Basis involved a full on medtech senior partner pulling apart our claims using a standard that was frankly insane. We weren’t making a Holter monitor, but were being treated as if we were. It helped that I got to see the partner’s full assessment of us, in writing, after the fact, even though it wasn’t intended to be shared. It was rife with FDA concerns and references to hospital studies, essentially saying that a heart rate monitor was useless for employee health because there were no double blind studies showing that it could work.

Medtech VCs struggle with QS companies because QS is disruptive and requires different thinking. That said, I’m optimistic too!

Dave, Misha - either of you know how glucodoc works? I ask both out of curiosity and because our conversation here connects to one of the key guesses investors/founders are going to have to make when the consider a QS company: where does it fit into the emerging architecture? Of course, this requires a guess about the shape of this architecture, which is still being created. For various reasons, the sensor-phone connection is still hard. (For instance: power demands of encryption chip on phone.) Thus: the dock. It’s a kluge, really. But we used to connect our computers to the internet with phone handsets (the ones with cords) set into audio modems; that was the beginning…

Is that a typo? Can’t find it anywhere.

I actually pitched to the VC who, while he was at apple, instigated the requirement for an Apple chip if you wanted to integrate your device with the ipod. He apologized for the effect it was having, saying, “I just wanted to keep Bose from making more than their fair share off those expensive iPod docks!”

Bluetooth and/or Zigbee and/or ANT are the way to go I think, depending largely on which android devices support which first. If not for power consumption, BT would have won long ago, except on ipods, where audio interface is probably it.

Whoops: Glucodock