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*Q&A: Fabio Gratton

We will periodically run Q&A’s with interesting entrepreneurs, in their own words. Our first is with Fabio Gratton, founder of the Alchemy Factory, a digital health incubator in Costa Mesa. He also founded the Alchemy Fund; he’s looking to bring in some partners to get it up to $500,000 with a focus on companies in the health and wellness space.

OCSN: What was the primary catalyst for starting an incubator?

I spent my last few years at my previous company (Ignite Health, which was acquired by inVentiv Health which recently merged with INC Research and is now called Syneos Health) developing a labs division. The focus was creating innovation within a bigger organization, with the purpose of creating new products and services which we could offer our pharmaceutical and biotech clients. I became intoxicated by the playground of invention, by having a structure whereby I could experiment, test, validate, explore — and that gave me this desire to not just do one thing in the future. Based on what I had done previously – building an agency – I felt that if I started another agency or did that kind of work, it would be a little bit redundant from a career perspective.

So then it became a simple question of how do you create something that doesn’t end up bringing you right back to the thing you don’t want to end up doing?

That question was the catalyst — it required pushing myself into a zone of newness. So I created the incubator concept first, before there was anything to incubate. You really can’t tell people you run an incubator unless you’ve got something you’re incubating, so the mere act of calling it an incubator forced me to put shit in it! I kind of reverse engineered everything from that stake I planted.

OCSN: What part of your background gave you the expertise to start an incubator?

There were a lot of failures and hardships– ranging from the unexpected loss of my mom to my failed attempt at being a screenwriter in Hollywood. In my opinion, what really prepares someone for being an entrepreneur is knowing how to overcome hardships, things that go wrong that you don’t expect. It’s a type of muscle you develop that you need as an entrepreneur. You have to be prepared for everything. All the bad things that happened are what prepared me for all the good things that were to come.

OCSN: Why locate the incubator in OC?

For one, I live here. But also, a big part of the success of Ignite Health was creating a really exciting digital agency in a region where there wasn’t an overabundance of exciting things happening. When we created it in the early 2000s, digital health marketing agencies were very rare and so we were very different than everything else. Especially in SoCal. There were digital agencies in SF and NYC. But not much in OC.

The advantage you gain of starting something in a place where there is scarcity of that thing is that you can attract incredible talent that’s looking for something exciting. When you combine that with the fact that it’s the most beautiful place on earth, why would you not start a company here?

OCSN: What was the catalyst for starting the Alchemy Fund?

Originally, the idea was to start something that would allow me to invest in startups; it looked a lot like the standard angel-type thing. But I realized quickly that there are hundreds of others doing very similar things, and the more I thought about it the more it didn’t feel like a unique concept that would be very fulfilling. Also, it just felt a little too self-serving. So I started asking myself “What can I do to give back?”

Typically investing is a calculated judgment where one wants, hopes and prays for some kind of financial return. But for me, the return had to be something more than just financial — I needed it to be personally meaningful. In order to do that, I think it’s important to find a way to be OK with losing money, as long as what you’re doing feels right. So I’ve recently decided to refocus the fund to be something that supports social good startups (those that focus on providing some sort of benefit to the general public.)

That means finding companies whose entire mission is structured around doing good. The startup world and VC culture have created an environment where everything ultimately needs to be about making money — and while that’s important, not everything that’s great is designed to be the next billion-dollar business. I think there’s a big unmet need for funds that encourage companies to solve challenges that are important to the community.

For example, a friend of mine who’s had a remarkable recovery from a major stroke decided to start a tele-health service to help people rehabilitate using technology — something he feels would have helped him a lot in the first year and something not readily available to stroke survivors. It may or may not be a viable business model, but regardless of the revenue, if it succeeds at delivering the technology, it surely will deliver a very meaningful and valuable service to the world.

So how do startups like that get off the ground if the only model for funding is demonstrating revenue generation? I think the typical investment models force founders to focus on the wrong things — and they’re not geared towards doing good. That’s where the Alchemy Fund is pivoting to. It aligns better with my ethos.

The first two fund investments were not in this model, but they’re still great companies that I believe in deeply — I just think that moving forward I’ll be focusing on different types of investments. One of the companies we invested in is Bitmo and the other I can’t disclose yet. (The fund invested $50,000 in Bitmo, with HQ in Carlsbad. The company created software enabling the sending and swapping of gift cards via text message, according to its website.)

OCSN: How much is currently in the fund?

The fund has $175,000 left, but I am currently looking to bring in some partners to get this fund to $500,000 with a focus on companies in the health and wellness space. So if there’s anyone out there interested in investing and mentoring, without the need to see a financial ROI, I’d love to hear from them.

Stay tuned for updates on the startups within The Alchemy incubator.

About The Author

Deirdre Newman is a veteran journalist, who’s covered OC startups for two-plus years.

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