Seniors Housing & Healthcare Trends

MELBOURNE: A group of doctors is raising $40m to create a fund to back the medical technology that venture capitalists keep missing – and smash the ‘anglosphere’ that keeps sending the best nation’s start-ups offshore.

Medical Angels, a doctor-led syndicate running since 2017, has opened its first institutional vehicle – Medical Angels Venture Fund I – to channel clinician money into healthtech that generalist investors struggle to read.

Co-founder Bi Mian, an emergency physician, said it also aims to prevent a US-style multi-tiered health system – where the wealthier can afford better treatment – and maintain Australia’s universal model of care.

“With VCs, what I see is often a very American-style kind of medicine, and when we place a lot of money in that, there are people who get left behind, unfortunately,” Dr Mian said.

“It’s a typical Uber kind of play. You throw money in there, acquire a customer, and then figure out how to make a profit at the end, which is fun, but in healthcare, when you do that, and if you don’t succeed, you’re going to end up burning a lot of people.”

Medical Angels has so far deployed $18m across more than 30 healthtech companies in nine years. Its portfolio includes Smileyscope, which became the first VR device in the world to win FDA clearance for acute pain; Coviu, the telehealth platform that powered Healthdirect through the pandemic; and Clean Slate Clinic, Australia’s first virtual alcohol detox program.

Medical Angels has been the second biggest backer of Australian healthtech since 2020, with 32 deals, ahead of UNSW Founders (28 deals) and Blackbird Ventures (16), according to Clincial Advisors data.

Now its doctors want to scale further after nine years of doing the early, unglamorous work of de-risking companies, then watching bigger investors arrive on better terms.

“We do the hard work, we put in $300,000, $400,000, and then another VC comes in and pops in $1m,” Dr Mian said.

“I’ve done all the hard work, and you get to deploy your money and earn your fees.”

Dr Mian said grants from Victoria’s start-up agency LaunchVic, which has merged with Breakthrough Victoria, helped make the leap from “hobbyist” syndicate to professional fund.

He said the investment criterion is based on three questions: Does the product solve a real clinical pain point; who pays for it; and does it help the whole health system?

That’s how the fund plans to help maintain Australia’s universal model of care while backing innovation that can compete with Silicon Valley’s best.

“The thing is what kind of healthcare system do we want in Australia? Are we heading towards a user pays for everything, and a two or three-tier healthcare system, or are we still trying to maintain a basic level of healthcare for everyone?” Dr Mian said.

“I feel that by investing time and money into the right areas, we can actually lift the whole country, rather than just the wealthy individuals that can fork out $5000 to $10,000 for whatever they’re doing.”

And Dr Mian says Australian companies should not just have the US in their sights, highlighting a bigger opportunity closer to home.

“Anything that survives in Australia can work in (the) Australian market, and then pivot to any other jurisdiction and make a killing there,” he said.

“We live in the Anglosphere. That’s the nature of the beast.

“(But) our backdoor neighbour is Southeast Asia, China, India, and we’re not sending enough stuff over there. That’s where the future of healthcare is. You’ve got like what, nearly three billion people living in that area, that’s a huge untapped market, and so that’s something that I’m actively thinking about.”

More than 1400 have joined the fund’s platform in 10 weeks, with 50 already committing close to $4m.

The pitch is the doctors backing this fund prescribe the tools, run the clinics and sometimes treat themselves with the products they invest in. When asked about potential conflicts of interest, Dr Mian said the fund’s managers operated at “arm’s length” to clinicians but self-interest wasn’t necessarily a bad thing.

“Should endocrinologists who treat diabetes invest in Novo Nordisk or Eli Lilly? It’s like you can’t say, ‘oh, because you have shares in those companies and you’re a bad endocrinologist’.

“Their investment is actually the conviction, and it means that that technology is probably more likely to succeed, and more likely to be adopted across the profession. That’s the signal that we are trying to create.”

Dr Mian said the fund is targeting a 20 to 25 per cent return net of fees, structured as an early stage venture capital limited partnership, which he said was one of the few fully tax-privileged investment vehicles left in the country.