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VentureHealth on Securing an Online Venture Fund

Posted Aug 19, 2013

By Eric Blattberg, Crowdsourcing.org
http://www.crowdsourcing.org/editorial/venturehealth-on-securing-an-online-venture-fund/27790

We recently introduced you to VentureHealth, an online venture fund that connects accredited investors with biotech startups. Today we feature the second part of our conversation with VentureHealth co-founder Talat Imran, who also serves as the platform's lead developer. Discussion topics include security concerns, payment processing, past investments, and the company's future.

Eric Blattberg, Crowdsourcing.org Editor: How big is the VentureHealth team? Who are the people involved, and what are their various roles?

Talat Imran, VentureHealth Co-founder: There are three managing directors. Mar Perez is our marketing director. Stephanie McGrory is in charge of our related PR. Then we have maybe three people for accounting and finance, and there are two software developers who work directly for me.

So, given that you’re on the development side, you could probably speak to some of the potential security issues to running an online venture fund. What are the concerns there and how do you address them?

One of the ways to address it is to not talk about it publicly. (laughs)

Broad strokes, then.

To answer your question a little more obliquely, it is definitely a concern for us. We’re a small outfit. Even large companies [get hacked] — Apple’s developer emails were just compromised a couple weeks ago. I think the idea that you can do anything to guarantee the safety of your data, if you put it out on the web, is a suspect premise to start with.

So one of the things that we’re doing is separating out the really sensitive information and not having that in the web portal. We can build out systems to push that to repositories where we can access it directly, but it’s not connected to the rest of the world. Because we’re not Apple, we’re not dealing with millions of people where it would become a real challenge, we can do that. And then there’s all the standard things: SSL encryption, having strong passwords, making sure you separate the different data layers. You know, those are the things that any tech company would do, but we have to be a lot more sensitive about.

That makes a lot of sense, because especially in recent months, we’ve learned that nothing on the web is all that private…

That’s exactly right, I completely agree with that. I think the approach I’ve taken here is assume that if it’s hacked, that the data that is taken is not going to compromise the people that we work with.

How do you handle payment processing?

To date, it’s been checks coming in the mail and wire transfers. We have not made a decision yet on taking money through the web directly. There are a number of wire transfer services that you can sign up for that have an API or web capabilities, and I think we’ll look into that. The number of checks and wire transfers has been small enough [that we can stick with it for now], but I will say that it’s already kind of a challenge to chase everything down. I think that’ll probably be the last thing we touch, though, because frankly that’s the one that makes the most nervous.

And just a little tangent: I think DocuSign is a great service, and that’s something that’s going to be important here from the standpoint of going paperless, having electronic records of all the documents whether they’re NDAs with the companies, our subscription agreements, etc.

So are you helping to facilitate communication between your investors and these companies? What do you do to make sure they’re talking to each other, if you do anything? And how do you ensure they have a healthy relationship once the money is there?

We are structured as a venture fund, so the primary relationship for the investor is with us, not with the companies — we make a single investment into the company. However, the investors having a good understanding with the company, having comfort with the entrepreneurs and management team, that’s all very important. We do a lot of scheduling, connecting, and providing diligence questions (and answering them ourselves in certain cases). We’re very active in connecting investors and entrepreneurs, because they’re writing large checks and they have to feel comfortable.

Can you discuss some of the companies in which VentureHealth has invested? What products are they bringing to market, or what sort of research are they doing?

Bodymedia was an exit. They’re a company that my dad has invested in quite a while ago, so we had a strong relationship with the company, and I think that’s a story you’ll here throughout all of these — that we have certain relationships that gave us access. The folks that we know in San Antonio pooled together and invested in Bodymedia, which was acquired by Jawbone [PDF] earlier this year. They had a really great product, good sales, a relationship with 24 Hour Fitness and one of the major weight loss companies, along with good data, tremendous IP, and a growing business.

Nfocus was one of our own companies. They built a novel approach to treating aneurysms. They had excellent clinical data, and they were acquired by Covidien earlier this year. It was a good return for investors, and really exciting technology.

Channel Medsystems was the second most recent deal we did. Again, we’ve had a longstanding relationship with the CEO of that company. He’s excited about the model and got us into the deal.

There was a structured exit for Spinal Modulation with St. Jude [Medical]. That’s a very exciting deal that came out of our incubator, treating chronic pain. They have a product approved and selling very well in Europe, and it was off the strength of their clinical data and the promise of getting FDA approval that they were acquired.

The way we look at [a potential investment] is that it should be meeting some unmet clinical need. Bodymedia is maybe the only edge case there, because it’s more consumer facing, but like I said, Bodymedia had extremely strong IP, which is another thing we look for. We’re stage agnostic and size agnostic.

What should I know about VentureHealth that we haven’t already discussed?

I don’t know of any other traditional venture funds that have built their own crowdfunding portal. We’re done six deals to date that are fairly large in terms of dollar value, and we have exits. So I think even outside of healthcare, we’re a fairly unique organization — this is something we were doing before there was a term for it. When I first wrote the position paper and I pitched it to my dad [Mir Imran] and Andrew [Farquharson], I didn’t know what crowdfunding was. With my background in technology, and a little bit in social media and search engine optimization, I saw an interesting market opportunity. I think the market outside of healthcare is ramping up and seeing this as a big opportunity, and I think that soon other venture funds will too. But we’re the first.

Where do you see VentureHealth in a year or two? What are the team’s hopes and ambitions?

We want to broaden our investor base and get into the very best deals. This is not a volume play for us, it’s can we get into some really great deals, increase the amount of money that we’re raising, and demonstrate value to investors? I think if we do those things, we’ll have an interesting business for quite a long time.

We'd like to thank VentureHealth co-founder Talat Imran for speaking with us. You can find the first half of our conversation here.
 

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