There’s a new med-device accelerator in OC and the founders want to make it crystal clear that it’s not run like a typical accelerator.
Koa Accel — founded by Ray Chan and Francis Duhay, a medical doctor — operates more like a boutique private equity firm, Chan told OC Startups Now.
“We will (acquire) a technology, and we will then form a company, and we will run the company all the way to commercial and manufacturing readiness,” Chan said.
That’s important because med-device startups have more than a 90% failure rate, Chan said.
He declined to disclose the amount of the fund that’s fueling the accelerator.
He did say the fund will invest up to $550,000 in each startup. And that it would invest in about four companies a year, mostly in SoCal.
So far, it’s invested in two. See below for details on those companies.
Chan’s background includes being the managing director at K5 Ventures in Newport Beach, which he is still doing, and being the investment director for Tech Coast Angels OC’s ACE Funds. He has experience in VC and PE.
Duhay was the former chief medical officer at Edwards Lifesciences. He’s also a world-renowned cardiothoracic surgeon.
They met as board members for the same company, the name of which they declined to disclose because that company went out of business.
But the duo persevered and got involved with several other med-device companies, either as investors through K5 Ventures or Tech Coast Angels, or as board members. Duhay is a partner in K5 Ventures.
Challenges of Med-Device Companies The challenges inherent in med-device companies involve dealing with FDA approval, hospitals and doctors, as well as figuring out who will pay for the devices.
“It’s a long, long journey, and the failure rate is more than 90% for med-device startups,” Chan said. “We learned the hard way. We sat on boards, K5 and TCA invested. Then the companies ran out of money.”
It’s also challenging for founders, because in order to build the devices, they need the know-how and access to a network of experts to hire — including those savvy about getting devices approved by the FDA, Chan said.
And, then they need to identify a good product design and development firm and do animal and clinical studies.
Entrepreneurs can’t do all that on their own, he said, because they generally don’t have the business expertise, connections or available time to do it.
So Chan and Duhay decided to do something about that.
They sat down about a year ago at a restaurant near UCI and brainstormed, using Chan’s investor network and Duhay’s med-device skills.
They realized there are 12 areas where entrepreneurs need help in the med-device space.
They decided they didn’t want to “just hire consultants” on a case-by-case basis.
Instead, they built a team of consultants – called value service providers – that are deployed in Koa’s portfolio companies.
These consultants work alongside inventors.
And, significantly, the consultants get an equity stake in the companies being created.
Koa now has almost 40 med-device experts on its team.
Chan is the chairman and CFO.
Like Navy Seals The company website compares the Koa Accel approach to that of Navy Seals, who drop in and do all the heavy lifting for a venture.
That model enables complete alignment of interests across all parties, Chan said.
Inventors benefit from a ready-made team, and consultants get “skin in the game” with their equity stakes.
Koa claims that its investors will see an accelerated timeline that saves money and de-risks the business.
The accelerator makes an audacious claim — that it expects to achieve key product milestones for each portfolio company in 60% less time, and with 80% less money, than the typical med-device venture.
How It Works Koa takes the word “accelerate” seriously – as soon as it identifies the tech it’s interested in, it can put together a package in one week — with funding and a team, Chan said.
Koa seeks out IP and patents to license from sources including universities and hospitals.
Investments to Date The two companies Koa has invested in so far are Makani Science and Microdermics, both of which already had patents.
The former developed a wireless, wearable sensor that continuously monitors a patient’s breathing rate and pulmonary volumes during medical or dental procedures.
Microdermics developed platform tech using microneedles to provide precise access through the skin — for biosensing and drug delivery applications. Chan is chairman of the board.
Inventors interested in applying to be a Koa company and investors looking to get involved in the venture can learn more here.