Communitech photo: Anthony ReinhartMedella Health raises seed round to drive smart contact lens forward Anthony Reinhart June 2, 2016 Columns, Startups, View from the ‘Loo 1 Comment Photo: Medella Health CEO Harry Gandhi, shown here at the Communitech Hub in Waterloo Region’s Tannery building, looks forward to moving his company’s smart contact lens technology to testing within the next 18 months. Medella Health, a Waterloo Region startup whose smart contact-lens technology promises to change the lives of people with diabetes and other conditions, has tapped into its Silicon Valley network to raise CAD$1.4 million in seed investment. The company, based in the University of Waterloo Velocity Foundry incubator, will use the money to tie together three years of research and prepare its smart lens for testing in about 18 months, said Harry Gandhi, Medella’s CEO and one of its three co-founders. Medella’s technology aims to enable patients to better manage their diabetes through a contact lens that continuously monitors blood glucose levels and transmits the information to a mobile phone. The lens, equipped with a small sensor, chip and micro antenna, offers a non-invasive alternative to the current monitoring method of pricking a finger and running a drop of blood through a glucometer for analysis. Participants in the seed round, announced today, include San Francisco-based 1517 Fund, whose partners have worked with star investor Peter Thiel’s foundation (Gandhi is a Thiel Fellow); Fifty Years Fund, backed by Y Combinator alumni and also based in San Francisco; Skype co-founder Jaan Tallinn; Garage Capital, an angel group from Waterloo Region; BDC Capital; and a leading ophthalmologist. Medella’s founders – Gandhi, 23; Huayi Gao, 27; and Maarij Baig, 23 – met as University of Waterloo students and began work on their technology in 2013. The proprietary sensor in their smart lens, unlike others in development, has been shown to last up to a month, simplifying calibration and reducing costs. That work, now spread across a team of 15 and counting, has personal significance for Gandhi, whose father, grandmother and uncles have diabetes. Despite his relative youth, the CEO is something of a healthcare veteran, having begun his working life at Brampton, Ont.’s Bramalea Community Health Centre at age 17. It was the first of several jobs in the health field, one of which involved implementing a cloud-based glucose monitoring system for diabetics in the Vancouver area. I caught up with Gandhi in advance of today’s funding announcement, to talk about Medella’s path thus far, the funding announcement and his vision for the company’s future. Q – How did this round come about? A – What prompted us to get started on fundraising was that we are coming to the end of our research phase, where a lot of the unknowns were being closed off. We knew what we were going to do, and it was turning out to be a matter of execution – putting money at the problem was going to solve a lot of that by growing the team and adding numbers. We spent some time [seeking investment] in Canada, but we realized that the appetite for risk for a moonshot wasn’t the greatest out here, and quickly moved [our efforts] to the Valley, and some really, really awesome folks decided to back us. It just snowballed into what it has today, where we’re backed by some of the folks who not only bring us financial value, but also will bring us strategic value over the next 18 months, whether it be from themselves, whether it be in raising future rounds, or having folks in their network that operate in this space. It was sort of hitting two birds with one stone. Q – Tell me about your investors. Who are they? A – It’s a group of angels and some micro-VCs. So, 1517 fund, they’re newly formed. Fifty Years Fund is a group of Y Combinator alumni; we’re also backed by the co-founder of Skype, Jaan Tallinn. And one of the leading ophthalmologists, which is really, really exciting. It’s a good balance, from the clinical-technical world to folks who are well-connected in the Valley and have the networks to help us, not just in the coming 18 months, but from there forward. Q – Take me back to the beginning of the company. When did you start it and where did the idea come from? A – The backstory goes as follows. We officially incorporated in October of 2013, and we had started working on the technology, let’s say seriously, in the summer. Before that, one of my co-founders from the nanotechnology engineering program was just building this really cool nano-sensing technology that can be used in many different settings. We chose the smart contact lens, and the diabetes market specifically, because it hit close to home for at least two of the co-founders, and indirectly affected the third one. Also, my background, personally, has been working in healthcare, from Vancouver all the way out to Toronto. As a matter of fact, in Vancouver, we implemented a cloud-based glucose monitoring system across the B.C. Lower Mainland. So, just taking a lot of the experiences that we’d accumulated, between the co-founding team, whether that be on technology, whether that be on market, it came together really, really well, and I’m super, super lucky to have the kind of co-founders that I have. It’s not the easiest thing, finding co-founders, but it’s all worked out for the better. Q – You mentioned you’ve answered the unknowns and you’re ready to grow. What does that look like? Does this mean you will be shipping product soon? A – We’re working on a medical device, so shipping product is a bit of an ordeal. I’ll get a little technical here. There are four main aspects to the technology that we’re building: One is the sensing module; second is the power module; third is the communication module; and fourth is the integration with the contact lens. We’ve done a lot of work to the point where each individual module is quite strong. For the next year, the focus is going to be on the integration, processing and putting all these elements together, and doing it in such a way that it’s scalable, so it’s not just prototype, but at a point where we can go out and scale. Q – So, in a year’s time, you hope to be able to have a complete device ready for testing? A – Ready for testing about 18 months from now. Q – Going into development of a medical device, which is more mission-critical than, say, a photo app, and being so young and looking for support over the long haul to develop this device, what’s been the biggest challenge in convincing people to come along with your vision and back it – or is that even a challenge? A – You’ve made an assumption in there that that is a challenge. So far it hasn’t hit us. We’ve been able to hire fantastic people. One of the folks who just joined earlier this year is a postdoc and a lecturer from Harvard, and is probably one of the 20 people in North America who can build out the ASIC [application-specific integrated circuit]. We have another person; she comes from Iran, worked on a spinoff in South Korea and moved to Waterloo. We brought her on as well. So, we’re hiring some of the best minds and great talent. For those who have been working at the frontier of the technology, it’s about aligning with the vision; it’s about aligning with ‘what are we building and is the technology cool and am I going to be challenged.’ And the most important thing is, ‘who are the folks I’ll be working with,’ and ‘how can we work as a team together?’ One of the things I’m adamant about is that this interview process isn’t just a one-way thing. It’s a two-way process, where not only are we getting to know you, but you have to get to know us, and there has to be a cultural fit. We’ve turned away some fantastic, fantastic candidates who technically would be a great fit, but we turned them away just because it might not be a great culture fit. All of that plays into how we grow and where we go from here. Q – The only reason I asked about the age thing is that, when I arrived at Communitech five years ago, young founders would often report that investors were dismissive of them, particularly in Canada. Is that just part of the broader Canadian problem of risk aversion? A – There is this conception around investing in Canada versus how investing in the U.S. works, and I’ll dig deeper here. The grass always seems greener on the other side, in a lot of ways. I promise you, it’s just a different ball game; it’s not that the grass is greener. The only place where you see this type of risk-loving attitude is in Silicon Valley, and we’re starting to see it in New York now. But just about anywhere else in the world, whether it be Europe or Canada or even other parts of the U.S., that type of risk-loving mentality is just not there. So, risk aversion – or the way you’re defining risk aversion – is fairly standard, at least in my experience. As far as what a 20-year-old could do, there’s a great podcast I was listening to, and the average age of a successful entrepreneur is 29. The reason seemed to be that’s the right balance between hunger and experience. So, the younger crowd is usually very, very hungry; ‘I want to make it; I’m going to work that 80-, 90-, 100-hour week for months and months and months and push this through,’ whereas, for the older crowd, that hunger has sort of died out. But it’s compensated for by that experience and knowing some of the right steps, and on paper, being more efficient. It’s really just finding that balance. For us, what’s really worked is, we realized we’re up against a pretty big challenge, not only from a technology standpoint, but also from just running a business, and the different hardships we face as entrepreneurs. For us, it was really important to have advisors and mentors very early on, whether that be CEOs of successful companies or whether that be a specialist in each of these different areas that we operate in. There are known unknowns and there are unknown unknowns. And unknown unknowns can only come early if you work with mentors and advisors who know a little bit about what you’re working on, and have some experience in that space. Q – You received a Thiel Fellowship. What did that experience do for you? A – It tapped us into that community (in the Valley), and that has a lot of value. The good entrepreneurship programs, yes, they have great mentors and a great name, but in order to get there, it’s the peer network that brings the most value. Whether that be Velocity or the Thiel Fellowship, the value comes from the peer network, and then I would say mentors after that. The way the story goes is, I did school for two years. I did school as I was supposed to, at the University of Waterloo. In third year, I started working on what’s now called Velocity Science and Medella Health. Those were my two projects. And I just couldn’t handle school alongside that, so I started doing part-time school. And eventually, as Medella picked up, it went from three courses to two courses to one course, and then to zero. I was in biotechnology and economics. And I haven’t looked back since. We still hold great ties to the University of Waterloo. A lot of what we do wouldn’t be possible if it wasn’t for the infrastructure the university provides us with. Q – And you’re still housed in Velocity, which speaks well to that fact. And it obviously speaks to Peter Thiel’s philosophy about getting out there and building without being held back by school. Did you get to meet him? A – Yes. Q – How much time did you get to spend with him? A – Not too long, but he’s definitely a very, very sharp guy. It’s a great network and it’s amazing to see how that network – the PayPal mafia – has extended and grown over time; evolved is probably a better word. Now, Silicon Valley has many of these mafias, given the growth of all these different companies, and the good thing is, it’s still a meritocracy-based system, rather than some private-access type thing. So, if you’re a hustler and you’ve done great things, or aim to do great things, people will help you. It’s very pay-it-forward, and Waterloo is very similar in that way. Q – Did the Thiel Fellowship and that particular network lead you to some of the people behind this seed round? A – It definitely helped, but more indirectly, in the sense that people read about you and say, ‘This is a Thiel Fellow; we’re going to keep an eye on this pitch,’ rather than just another young entrepreneur coming in to pitch. Q – So it adds credibility. A – Yes. Q – Tell me what your product does. A – Medella Health is making a smart contact lens that continuously and non-invasively monitors glucose levels and transmits the information to a mobile phone, so that patients can better manage their diabetes. We’re starting with diabetes management, but can expand into many other biomarkers and other applications of the smart contact lens. That’s where we see the future going. Q – What’s your personal connection to diabetes? A – My family is mostly diabetic; my grandma, my dad, my uncles. It’s a well-spread disease within our personal community. As a matter of fact, my very first job was being a researcher back in high school at a local diabetes clinic. So I lived it with my parents and my family, but I’ve also lived it by working in the industry for some time now. Q – Was that job prompted by your family experience? A – I was always interested in healthcare, and there was an opportunity that came along that I jumped on. That was in Brampton, at the Bramalea Community Health Centre. That was my first job. I was 17, something like that. Q – How important do you think it is for an entrepreneur to have a personal connection to the technology they’re developing? How big of a factor is that in motivating you? A – Personally, it’s important, but at the end of the day, you have to do what’s right for the business. You can’t let your personal judgments cloud something as important as product-market fit. It’s great if it aligns, of course, but sometimes it might not. I think what was great for me was just having that work experience, rather than personal experience. I think that brought more value into me starting Medella Health than the personal side. Q – Do you mean that first job at the Bramalea Health Clinic? A – The Bramalea Health Clinic, and I worked in eHealth Ontario. I worked in the Public Health Service Authority in Vancouver; that’s when we implemented the cloud-based glucose monitoring system. It was all these experiences together. As far as generally, I’m not sure there’s an objective answer, but [having a personal connection] definitely helps overcome that initial fear or naivete. It keeps entrepreneurs in a place of naivete, that ‘Hey, I understand this market and I know it really, really well,’ and that naivete gets them over the hump of all the difficulties in starting a company. Just about any young entrepreneur, when they start a company, does it out of naivete, and I think that’s OK, to learn along the way. In some ways, it’s even glamorized to be a young entrepreneur, and although it’s not correct, the outcome is still pretty good. Q – What will this round of funding specifically enable you to do? A – It gets us to the point of perfecting the technology, getting the integration right, starting to scale and being ready for testing. Q – How big is the team likely to be 18 months from now when, hopefully, you begin testing? A – I’d say the high teens. Q – Are you planning to stay here in Velocity as long as you can? A – We don’t aim to leave Waterloo any time soon, if at all. What’s great about this community is, not only is that pay-it-forward thing true, but specifically for us, Waterloo is probably the best place to build this company, given the tech resources that are here. Waterloo has the biggest antenna lab in North America, and definitely in the country (the CIARS lab). We have the Centre for Contact Lens Research, the second-largest contact lens research centre in the world; a lot of pre-clinical testing happens here. And the Waterloo Institute for Nanotechnology. These three things in combination don’t exist anywhere else in the world, and having that level of aptitude is so, so important, specifically for the type of work that we’re doing. Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo looks at the issues, people and events that shape Waterloo Region’s technology sector.