Science Before Hype in MedTech Investing with Varun Turlapati of Chaanakya Capital | Ep. 69

Neurotech has one of the widest gaps in MedTech between public excitement and real scientific certainty. That makes diligence more important, not less. A compelling story, a futuristic device, or a category with massive upside can still lead investors in the wrong direction if the science is thin and the clinical case is not yet grounded. That tension sits at the center of this episode. The strongest investment case is not built on how large the market sounds or how dramatic the pitch feels. It is built on whether the device is medically credible, whether the engineering holds up under pressure, and whether specialists who would actually use it believe it belongs in practice. There is also a deeper lesson here for founders. In device categories where claims can run ahead of evidence, seriousness becomes a differentiator. Companies that think through regulatory fit, reimbursement logic, clinical use, and product hardening early are easier to believe, easier to diligence, and easier to support. Cybersecurity fits directly into that same seriousness test. A connected device cannot be treated like a normal software startup where a broken feature can be patched without consequence. If security is deferred, the cost is not only financial. It can compromise product trust at the exact moment a company needs it most. Episode Breakdown 00:00 The unknowns inside neurotech 00:31 Security decisions that should happen early 01:57 The fund’s early-stage focus 02:42 Science versus speculative claims 04:42 Valuation discipline at the seed stage 05:39 How power law logic applies in specialized VC 07:55 Why neurotech remains underbuilt 14:22 How founders are supported after investment 17:15 The missing cybersecurity layer 20:24 Why redesign gets expensive 22:17 Diligence beyond the usual checklist 24:20 How a small focused fund operates 29:45 Events, networks, and specialist insight 34:44 Multiples, IRR, and realistic return thinking 38:13 Final reflections 40:09 End The Med Device Cyber Podcast is brought to you by Blue Goat Cyber, cybersecurity experts providing essential security solutions for the medical device industry. Learn more by visiting https://bluegoatcyber.com. If you're interested in our services or partnering with us, schedule a Discovery Session: https://go.bluegoatcyber.com/meetings/blue-goat-cyber/discovery-session Christian Espinosa is the CEO and founder of Blue Goat Cyber. Trevor Slattery is the Chief Operating Officer at Blue Goat Cyber. Christian Espinosa on LinkedIn: https://www.linkedin.com/in/christianespinosa/ Trevor Slattery on LinkedIn: https://www.linkedin.com/in/trevor-slattery-34852b1a9 Blue Goat Cyber on LinkedIn: https://www.linkedin.com/company/blue-goat-cyber/ Blue Goat Cyber on Instagram: https://www.instagram.com/bluegoatcyber/ Blue Goat Cyber on Facebook: https://www.facebook.com/bluegoatcyber/ Blue Goat Cyber on YouTube: https://www.youtube.com/@BlueGoatCyber/?sub_confirmation=1

Guest: I think as humanity, we don't understand our brain nearly as well as we may understand deep space mining and deep ocean mining and things that are way out there, we still don't understand what's between our years as much, right? There could be a sham device for example, like hey, just wear this ring and you do better on your day-to-day tasks. And it may pick up traction. Guest: company can exit 100x in 3 to 5 years. But that is not good for us. We are trying to go back genuine science and tech and medically grounded devices. Host: a little bit of consulting time with some experts like Blue Goat Cyber can save you a lot of money and headache down the road. You know, like our consulting might cost $5,000, but if they don't talk to us and make all these decisions later on, they may end up spending $500,000 in rework and have to roll back some of the features because they could have chose a piece of hardware that doesn't support the right cybersecurity requirements. Guest: we should also bring in the cybersecurity aspect. Now more than ever. when I say now, it's like in the age of AI, age of like this, everything and everyone is online, the smallest of the devices is on network and can be hacked into. We would be grossly underestimating the impact. Guest: Like losing a customer in a B2B SaaS case, the worst case is like, yeah, sure, a lawsuit and like whatever, some data loss or something of that sort which sounds serious, but hey, a loss of life because of a hack is worse. Host: Hi, welcome to the Med Device Cyber podcast. Today we have an investor, Varun, joining us. And where are you coming from today, Varun, actually? Guest: Dialing in from San Francisco Bay Area. Host: San Francisco. That's where our COO typically has base, but he had to travel to a client site for an FDA audit. Otherwise he would be here today as well. So it's just going to be me as the host, our co-host Trevor is not going to be here. Why don't you tell us a little bit about what you do in MedTech? I know you're an investor. I know we've met you at quite a few of the MedTech World events. I think is where we first met. Guest: Yeah, definitely. Well, first we met was uh last year at LSI Asia. That was the flagship, the first ever LSI Asia, I suppose. That's where we first met. But then after that, you're right, also MedTech World events as well. Guest: We are an early-stage NeuroTech VC, or put in other words, neuro focused MedTech VC. Early stage for us is anywhere from pre-seed to Series A even. Uh, it's more a function of the valuation uh as of when we invest rather than the name of the round itself. Guest: And, you know, in a in a span of a year, actually, I think today or tomorrow, we will turn one year as a fund. We have four portfolio companies and we have capital that we are looking to deploy into three more in the upcoming quarter because we have already been diligencing a few companies. And so we're very excited about this space. Host: What are some of the main things you look for when you decide to invest in a company, a MedTech innovator? Guest: Yeah, so the first and foremost is the science and the technology itself. You know, what is the problem that is being solved here? You know, it should make sense that here's a problem and here is what maybe an existing solution has been and here is how we are trying to do it. So I think a lot of it grounded on that. Guest: In the space that we are in, there tend to be a lot of claims that we need to be very careful about. You know, hey, we want to do this, we want to do that. The ambition might be good to have, but where the company is at currently and is it, is the trajectory good enough in the way they're explaining things? Have they thought through? is the first and foremost thing, right? Without the science and the tech, the economics may make sense. What I mean by that is, there could be a sham device, for example, like, hey, just wear this ring and you'd be, you'd do better on your day-to-day tasks. Guest: And it may pick up traction. You know, you could do a crowdfunding or even without that, you may have VCs investing and, you know, things people believe it and athletes are advertising it and so on, great. And so near term, this company can exit, you know, 100x in three to five years. Guest: But that is not good for us. We are trying to go back genuine science and tech and medically grounded devices. So they have to show that clinical application in the first place. And so then after that is when the economics also has to work. And I've very hand-waved the whole bunch here. Obviously, the regulatory and the reimbursement are very important conversations that come into picture. And I have special questions for you actually, for which I don't yet have answers, but I'm going to turn it to you in a bit to see how I should include some of those things into my diligence as well. But so far, high level, these are what we look for, the engineering strength, the medical, scientific and engineering strength, then it has to match with the regulatory and the reimbursement pathways, or if not, like what is the commercial pathway that they're looking to target and so on. Host: And you mentioned you invest at early stage, like pre-seed or seed or what round of funding would that typically be? Guest: Any of those. Even series A. So, there are a few companies, you know, a lot of these companies that we are looking at often have bring in or or often have had grant funding earlier in their cycles. And so that means when they come out to fundraise, they're not necessarily raising very big money at very big valuation. So they can call it Series A, Series B if they want, you know, I'm just saying making an exaggerated case, but it's typically, you know, we look for under 20 million valuation as a sweet spot. Guest: A good majority of the companies that we've talked to have been under the 15 million mark even. There are some that fall in the 40 million which have, which are probably closer to some sort of exit, you know, timeline, and then and then we'll look to see if those can be brought in as well. But it's more a function of valuation and some sort of milestones. Host: I've heard from other investors that in MedTech, it's super challenging. Like the success rate is like less than 10% of a portfolio. Is that what your experience is? Guest: Well, hopefully not. Host: I guess it depends on how good an investor you are, right? In choosing the companies, right? Guest: I think so too. So, I think it goes back a little towards what I said before, but before even that, note, that this is the first fund that I've launched. And so we don't even have that history to be able to say, yeah, this is what we're seeing so far. But even at 10%, it still checks out broadly, I would say with the power law, that's the other thing that goes around in VC. One out of every 100 does a big jackpot and then like five do some sort of success and then the rest of them are very mediocre. 50%, close to 50% are even outright fail, right? So it checks out with that, I would say 10% sure, but we don't as a fund have that yet. We're so early on, we're just just one year old. But the way I am looking at companies, the way we are thinking about this space is especially Neurotech, we are often in a space that doesn't have much competition either from VCs or from even companies. Guest: It's a very specific use case. Of course, it can intersect with MedTech VCs and so yes, we will have some of those co-investors, but it cannot, the metrics that we look at will not necessarily apply to this broader market, which is which includes even digital health care and those kind of apps players as well. Guest: So I think when you include some of those, the returns may seem diluted because then now you're including pure software play, AI play where maybe there's not much of a depth or a significant moat. And so then it comes down to, you know, a couple of algorithms and data and then how you execute becomes more important rather than the technical strength, which is why when we stay in the device space, we also know that there is hardware, there is deep tech in there and significant subject matter expertise that is needed. So it cannot be upended by a startup that has come up like just a month ago and already developed something and so on. So that's how we see it. So hopefully we don't, we we do better than just 10% success, but again, from our fund perspective, it's too early to call. Host: Is there a reason you've decided to focus primarily on on NeuroTech? I know you said because there's not much competition and I guess it's because it's relatively new? Is there another reason besides the competitive element? Guest: Oh boy, many. I would say more than one. The first thing is, look, I have been intrigued by how the brain works. I obviously still don't understand everything. I think as humanity, we don't understand our brain nearly as well as we may understand deep space mining and deep ocean mining and things that are way out there. We we still don't understand what's between our years as much, right? enough to make that that kind of impact. Guest: We've been talking about longevity for a while. We've been talking about biohacking, all of these things. But simple thing, like our command and control center, do we understand it enough? Like, there's somebody who suffers a stroke, and then we are often surprised at at the variance or the kind of loss of functions or quirky functions. Sometimes there have been some cases that I was watching on YouTube by Professor Ramachandran, who has this very exciting and interesting way to present case studies. And so Oliver Sacks, for example, his books as well, like how I mistook my wife for a hat. And so, so these cases intrigued me. Guest: And then it came back to me like some of these exaggerated movies that that used to be like, hey, this guy met with an accident, cannot recognize his mother anymore. How is that even possible? So, so it it got me in that journey, had a lot of questions. Then came my, then girlfriend, who's now my wife, and who's now also my fund advisor in neurotech. She has significant years of experience. I mean, well, obviously, when I met her, she's just she had just wrapped up her PhD in neuroengineering. Guest: So I had this person to just casually ask questions, sound very intelligent. But then her answers were not necessarily trivial or simple. Like, yeah, this is how it works. No. It's like she would still start with it depends and I would get frustrated. You know, you got a PhD in this. How can you not explain this? And so it got deeper and wider in the kind of questions and the intrigue that I had. Layers of onions peeling and each layer brought its own topics and so on so forth. Guest: And so in 2018-19, I distinctly recall, I was telling her, like, look with with the knowledge that you have, and you know, I'm ambitious enough to try different things. I want to start my own company. How about you and I start a company in NeuroTech and raise funds from VCs and so on. Right? So some of those things didn't pan out, but this conversation in some capacity, some form kept happening. Guest: And then we invested in a company called Scionic in 2021 as angels, and subsequently when last year we launched the fund, we really brought in all of those things together, like the desire to fix humanity. I know it's a very dramatic statement there. But hey, yeah, I mean start with what's between our years and advance the research, advance the devices and therapy therapy that is available so that we don't only have to rely on pills causing side effects. We don't have to rely on snake oil being pedaled by social media influencers. And so we genuinely advance the cause, have some answers for the likes of Alzheimer's, Parkinson's, neuro-motor neuron diseases, a stroke and hopefully even inflammatory diseases and cancer, right? Modern-day stresses and so on, so forth. So, we really like it just started gelling together and we said, you know, also turns out that neurotech is not a space which is really touched upon by a lot of VCs. So, I think we would be in a very comfortable spot focused and that's what we want to do. As a first fund, I think it makes sense to focus, get some results out, get some stories out as well of how we've supported founders and so on and then look to a bit bigger. Host: I think it's interesting what you said that we know less about what's between our ears than we do like deep space mining which, you know, is way out there in outer space. That's an interesting thing. And hopefully, you know, at some point we'll we'll learn more about that but I I think it's a challenge because everybody's brain is a little bit different. I was still things we're learning about. There's a lot of lots of that we're still figuring out about how our brains work these days it seems like. Guest: You know, and the reason I also feel this strongly about what I said is, if you observe anything else out in the universe, you know, there's a Doppler shift, you have all these novas, supernovas, etcetera, etcetera. And yes, there are theories which are propounded and then debunked and, you know, there's a grand string theory, you know, fractioning theory and so on. But it is still deterministic in some way. Guest: The point that you raised was was exactly one of the things. Can we truly replicate empathy? Can we just say what is what is this thought going on in Christian's mind right now. If we cannot, I cannot feel how it is to be in your shoes, other than like, yeah, understanding your story. And if I have a similar experience, I'll be like, oh yeah, oh wow, this is how I would feel. But like, if you're feeling like a pinch on your hand right now on your arm, can we translate or can we transfer it to me? Can we not transfer, but at least have me feel it at the moment? Guest: So long as we cannot truly do that, the perception and hey, there was this meme once which was like gold and white dress and blue and black dress. I don't know if you've heard of that. But like, apparently people perceive these colors differently on the same dress. And so look at how our brains perceive things differently, right? So I feel like the variance itself is pretty significant to study. And then how do we translate this? And perhaps then we stop all the wars and everything because nobody misunderstands anyone else, but I digress there. Host: Yeah, I remember Melissa my wife, she and I talk about this kind of stuff quite a bit obviously, she works at my company. But she was saying that she's watched a couple studies and she used to be a nurse where they were able to like touch a certain part of the brain to affect emotions and maybe that's not universal, but if they touch a certain part of the brain with like a stimulant, then a person would feel sad. Another part, they'd feel happy. And it seems like if we're able to do that, we should be able to get really good at NeuroTech and have a better understanding but I think the challenge is that's not the same for everybody like you said, like how I interpret sadness or happiness may be different than you, but then there's still the emotions and the things I tie that back to in my brain as well. Like happy moments for me are going to be different happy moments for you. I don't know it's a very interesting space to focus on. Guest: Yeah, definitely. Host: And what is it like when you invest in one of these companies, how involved are you? Is it just you give them the fund, the money and then you kind of just sit on the sideline or do you periodically check in with them? What's that involvement look like? Guest: The four companies that I have funded are all in different stages, right? Like not only in terms of their fundraise but the journey and the regulatory etcetera, etcetera. It comes down to a little bit of not autonomy and the trust. Like I want the founder to first of all be empowered to do everything that they they need to do to make the company successful. I definitely would love to know everything on a day-to-day basis. Would love to. That's a different thing. Guest: What I would love to to know definitely are significant things, milestones, etcetera, etcetera. Because one, yeah, well, I need to be able to help them if I can. But also, I have investors who I'm accountable to and I want them to know what the soonest, right? Look, things go south sometimes, sideways, or things wobble, all of these are are known, these can happen, but the important thing is how resilient we are. One, how resilient the founder or the founding team is, how resilient I am as a VC, how resilient we are as a team collectively, because at the end of the day, we all come together as a team enabling different parts of this journey. So again, I don't have prescriptions, but I also let founders know that I am a speed dial away. Just let me know and bring me into your problem solving. If you feel like you you're up in the middle of the night and you are not able to get answers to this by yourself and you want somebody to talk to, talk to me, no problem, right? Can I give you an answer right then and there? I may not be able to, but maybe maybe I can. So, but it starts with having that confidence that they have my ear. Guest: And the most important thing to do is to obviously when they don't necessarily always share good news with me but I should still be available to them and that's when the trust builds over time as well and that's the kind of VC that I want to be and it's been only a year again right the relatively short history with a few of them. With some of the others, I'm actually helping them, some of my portfolios already, like two of the four, I'm already helping them fundraise in some capacity, either making introductions or facilitating an SV or just having conversations to cross validate their inflection point that I anticipate coming up and so on. And then this in turn helps me give this feedback to these founders who can then take that into account when they're doing their next round or next milestone that they want to achieve. So, it's bespoke at this point and that's good enough. We are a small enough fund that we should be able to do that and we'll see when that becomes a problem, we'll try to set up something else. But at no point, even with a bigger fund, I no point do I ever want to not be a speed dial away from my founders, that to me that defeats the purpose. Host: That makes sense. So if you've got an investment you want to help them succeed obviously so you succeed. It's a team effort really. One of the things that I've noticed, I go to a lot of these LSI we talked about and MedTech World and I'm also part of MedTech Innovator. I hear a lot of pitches. a lot of them for NeuroTech, a lot of them for digital health like wearables and things and none of them ever really have cyber security on their roadmap. They have like intellectual property protection, they have maybe a little bit of a regulatory strategy, maybe a little bit of pre-clinical and clinical things on there, but they never have cyber security on there. It seems like with things like NeuroTech, getting the cyber security done right early on is extremely important. Guest: I think so too. My background prior to starting this fund, if you recall, has been software engineering. For us, and especially at early stage companies, it was always this this passionate discussion and almost religious debate about like, hey, I think writing some unit tests here or test cases here and there is just sucking up the time. We need to get this demo out to the customer as soon as possible. And let's focus on features and development. And we will get to test at some point. You know, at some times, it did make sense, but on a long-term basis, it always used to cause us a lot of grief because then we are not surprised what lands, how the product lands at the customer's site, and what are the issues it causes. And then we may not have second chances or third chances to go and fix those, right? Not always. And so, so if there've been a lot of those kind of debates, even at bigger companies, often, like, you know, it feels burdensome. As a developer myself, I'm like, ah, now I've done this beautiful algorithm here, but I have to write and write boring looking test cases. But guess what? As soon as something needs to be changed, the first sign of whether I've done the right thing or not is to watch for those test cases. If they fail, that means the change that I made to optimize it has actually fundamentally broken the algorithm in ways that I didn't obviously see. But this is an ongoing debate and this is the reason I bring this up is, to me, cyber security and especially in the NeuroTech and MedTech MedTech, it sort of have this kind of a decision point where it's debated still. Actually, I want to turn it to you, and I want to see how as a VC, I can bring these conversations, given that I already have the software and the engineering and the testing perspective. How can I start making this seem less burdensome for the founders? Host: Well, one of the things we talk about quite often is a little bit of consulting time with some experts like Blue Cyber can save you a lot of money and headache down the road because simple things like design decisions to use a certain piece of hardware, could have an impact down stream if that piece of hardware doesn't support certain security features that are required by the FDA if you're trying to get cleared in the United States. So we recommend just a an initial conversation with someone like us, and we can quickly discern what they need to do. And you know, like our consulting might cost $5,000, but from our experience what happens if people don't have that initial consultation with an expert. And this is not just unique to cybersecurity, it's unique to your reimbursement, your regulatory strategy, a lot of other aspects as well. But if they don't talk to us and make all these decisions, later on, they may end up spending 500,000 in rework and have to roll back some of the features because they could have chosen a piece of hardware that doesn't support the right cybersecurity requirements. So it's just having an initial conversation and I know it's super challenging as a MedTech innovator. You've got all these things on your all these things to do in cybersecurity is like one of, you know, 100. You've got bio-compatibility, sterility, you've got to source your right software development team. You've got to choose the right hardware, you've got to worry about manufacturing it, you have to have the pre-clinical and the clinical trials and there's so much to cover that, you know, I think it's just a matter of having a short conversation with someone like us. And the amount of money saved by an initial conversation is significant. And we have seen a cost 500,000 and up when people have to redesign and redo their product because they didn't think about have that initial conversation early on. Guest: That's what I want to do, by the way, in all seriousness, as I look at companies. In neuro, it makes ready sense and it's a given. Even in some things which are which seem less intrusive or less, yeah, less intrusive to the brain itself, but elsewhere, there could be like implanted devices and so on. It still makes sense. And I think having a plan at hand is pretty important. So you can with that plan, you know where potentially, it may not be now to do it, but at least you know where to start that versus going completely blind. And I think this is where I really enjoyed, you know, listening to one one of your talks. Uh, I think this was in Dubai recently and I actually told you about it, right? So I I it does bring home this point even as a software engineer to me, it drew parallels to the kind of conversations we used to have. So I'm with you on this, totally, right? And so one of the things I want to do is during the diligence, we look at FDA and the pathway, does it make sense? We look at commercialization ambition and say, yeah, okay, sure, we also look at neurosurgeons and they then asked them like, hey, surgically, would you use this tool for example? If not, then no. And so similarly, we should also bring in the cybersecurity aspect now more than ever. When I said now, it's like in the age of AI, I mean, the smallest of the devices is on network and can be hacked into. We would be grossly underestimating the impact of neglecting some of these conversations. Host: I think prevention is better than the cure and it comes to things like this, right? Guest: Yep. Yeah. Host: Yeah. One of the things I think is interesting as an investor, I don't know how it works for you. I know you have a fund, but you also or maybe not you. I mean some people like a family from office, they have their own capital to put in their fund. But as an investor, you're always typically looking for investors to invest in your fund and then you invest in the company. Is that how it works for your organization? Guest: That is correct. So we are a 506C fund. So, you know, we are for accredited investors only and with that, you know, we to potential investors to come into the fund. A lot of them understand that neurotech is not a flavor that they can commonly get at a stage and at the check size that we accept, which often is like the size of angel investment that one would make. And so yeah, we we do that. We have raised some capital, we still have to close our round, but we continue to make that progress. And I talked about my being an early stage, you know, early stage engineer at startups. And one of the things we did was iterate, like make a sprint goal saying like to today, I'll make enable this or this week, I will make this feature happen and then some test cases and so on, demonstrate that that works and then move on to the next and so on, so forth. That's the model that I've been embodying for my VC fund as well. The but yes, this is basically pool of money coming in from investors, LPs, limited partners, and then we use that capital to then deploy to companies. And so that's what we've done. We've already raised some and using that, some of the some of the funds that we've raised already, we've deployed into four companies in a span of eight months since we launched and then now tomorrow, I think we'll hit our one year mark and then for the next quarter, I have a couple more companies lined up. We have capital to to be able to do up to four companies at this point even and then we are continuing to fundraise as well. Host: And then how do you find the investors to invest in your fund? Like what is the your strategy for that? Guest: Yeah, the first ones that I reached out to are people who know me who work with me because that's the best way. They those are the folks that I mean basically know my track record, right? Even personally knowing my track record is good because they know that this guy, you know, struggled through his engineering classes with me, right? And we did a project together and look where now what he's doing and that's pretty handy to have because they've seen the journey so far, right? Then there are folks that have worked with me, we talked about unit tests like five years ago and here we are talking about this. So they are the ones who have seen me talk about my ambitions but also make progress towards those. So they now know that this guy's not all talk but he's also prepared to make things happen. Some capacity, start small, then do big and so on as with any other thing. But those have been my first few ones. What has been happening now is that the folks who have now backed me understand the space more because personally as a VC, I am not happy with just receiving the money into the funds and then deploying them and then looking at portfolio management. But what I'm also doing is I'm very intent and passionate about educating my LPs. Not just LP, actually I have people who are not LP's on my newsletter and I send out these newsletters which include like what's happening in the VC space in the last two weeks, what's happening in the new tech space in the last two weeks. Here's a VC term you may not know and what this means in terms, right? Like cap table. Not everybody would know. Sure they know and they'll be like oh something in the VC terms but no, we're trying to deconstruct that, make it make sense to people and so who those who don't know VC space get something out of my news letter. Those who don't know, those who know VC but don't know neurotech much, they get something out of my newsletter. And then of course we talk about conferences, we say hey here's where we've gone, here are some of the companies at a high level that we've met. Here's where innovation is going. So what that does over a period of time is it draws more people into neurotech, right? And surely when we launch our next fund it could be a bigger Mettech with like cardio devices as well included, you know, inflammatory diseases, surgical tools across the body, everything when we include those, we will do something similar there as well and so now medical knowledge at large or medical technology at large seems to be understood at least by people and that's where we start making a difference. Somebody walking into the doctor's office now is able to make sense of why the doctor is saying such a and why maybe some device may be useful. And so when they start seeing the connections, they start leaning in. When they lean in, they may not invest, but they may think of somebody who could invest. Of course, the key first thing for us has been priority has been fund raising because without the funds, how are we going to support startups? Not going to happen. But on the other hand, we also still need ecosystem players like hey, accelerators, incubators, founders that somebody may know. And so those connections also. So we started with people that we know and Joanna obviously has medical doctors, neurosurgeons in her connections, and we've recently onboarded a neurosurgeon, chair of neurosurgery at Duke, Dr. Grant. And he's already making an impact. He's already talked to me about two companies that I validated my thoughts again. So these are kind of convictions that I already had about these companies and what they may be doing, but I was not I'm not a neuro surgeon, so I was like, let me test this out. So I presented my views on the company, showed the deck and he said, yeah, that matches, that checks out. So I was like, okay, well, good. That means I have strong fundamentals in place. And so this when I convey back to my investors, they get even more confident. So it's a case of building that trust over a year. And of course, we're still looking for LPs. So Host: Do your investors have to be accredited investors? Guest: Yes. Host: I that's a general to invest in anything like outside of like the stock market, mutual funds, like anything private you have, you're supposed to be an investor, right? means you make over a certain amount of money or have a certain amount of money saved up. I don't know what you are. Guest: Correct, as defined by the SEC, and that's why being a 506C fund means that we don't necessarily have all these issues. We can do general solicitation for example, knowing that we will do thorough accreditation checks on the back so we can do that and so that way we are clear, we are not doing something shady or anything. Host: Right. I know we see each other at quite a few events. Are the events you use to find companies to invest in or to get Intel on companies? Is that primarily are you going to you know, Mettech World and other events? Guest: Yeah, a combination and also to meet subject matter experts like you too, right? Because now it it again, it takes not just one village, it takes multiple villages to build what we are mutually building. And so it's important to do all of these things and I meet my co-potential co-investors in possibly my next deal. I meet and I get their opinions on what what they're thinking, what's a most biggest pain point that they see from their vantage point. I see surgeons, I see doctors, I see people who have had like personal stories in the neuro space like yeah, you know, hey my grandfather had Alzheimer's or something. And founders of course get some amazing stories on why they're building what they're building and so it's a combination of all of them. We when we go to conferences we are completely open to try to meet as many people of every from every walks of life and that for me is a longer term commitment and goal that I I do I I walk the talk on that every day. Host: Awesome. I think it's it's interesting that I don't know if you have to have the same skill set but you're looking for someone to pitch you an idea and you know, a lot of times you have like five minutes in this pitch decker pitch competition. But then you're also looking for your own investors. So it's like kind of like you're pitching to other people and they're pitching to you. So you're, you know, managing this fund in the middle. So it's a Yeah. you got to report to your investors just like they have to to the company that you invest in these report to you as well. Guest: Correct. So, but what do you mean at the conferences when we're listening to pitch, we need to report to investors, we don't. Host: No, no at the conferences, but I know you kind of have to give your pitch to investors in your fund as well, I'm assuming. I maybe not so much because you sound like you're really leveraging your network of people that already know you and know your track record and everything. But I think as your fun will grow, you're probably going to have to find other people outside your network which that then you're going to be, I'm assuming pitching them to some degree of why they should invest in your fund. Guest: That's correct. So even at the conference when we're listening to pitches, we need to report to invest, we don't. At the conference, but I know you kind of have to give your pitch to investors in your fund as well and assuming, maybe not so much as you sound like you're really leveraging your network of people that already know you and know your track record and everything. But I think as your fund would grow, you probably gonna have to find other people outside of your network, which you, then you're gonna be, I'm assuming pitching them to some degree of why they should invest in your fund. Two things, let me just clarify that. So, while we did start with people that I knew when they invested, we also have investments from second level connections. There have been a couple of cold outreach folks as well who really resonated with the story and what we are investing in. Again, it's not a flavor that you can commonly get, but it's also an area that everybody knows will at some point impact them in some capacity. If not them directly, maybe their spouse, maybe their kids, maybe their grandparents, somebody, right? And so, it's not like that to assume like yeah, this is a space that impacts everyone. In fact, the other day in Dubai actually in one of the conferences in the panels, I actually said, look, we think of aging as something after 40, 50, 60, something, but that's not it. I think we're aging from the moment we are born. So if you look at it that way, then I think we really need to attention to some of these fields, and neurotech is that. Now, to go back to that question, on a day-to-day basis, we don't need to pitch about any company, not to the investors, but obviously, like today I had two pitch calls, right? So I these were folks who did not otherwise formally know my fund and so I had to explain what we are doing and why we are investing and you know, some very strong pinpointed questions like, hey, what do you think are the exit timelines usually and so on, so forth. So whatever the investors LP's, potential LP's have for for us, we have to answer those, need their diligence criteria and generally it has to still be appealing to them. Then they invest. Once they invest, arguably it's like just like me putting faith in the founders to execute. That's the same thing that they are doing in me as well. Yes, and in in doing that, not only people who did not know me, even the people who knew me or know me, I would still want to report back to them things like hey, here's what's happening on this portfolio company. Here's how we are targeting not the ones that are in the portfolio great. How are we trying to strengthen our portfolio. How are we trying to look for the next ones? That's where all these news letters and you know calls with with LP's help a lot. Host: And I know on your LinkedIn you say you typically invest between 25 and 150k. I'm assuming you get some portion of equity typically and the company for that investment is that the way it works? Guest: Typically at the stages that we invest in, you know, we mostly would expect safe notes. Host: Okay. And what like if you have to put a number on it, like are you looking for a 10 times return your investment or like what is the typical number you're shooting for? Guest: Yeah, I don't want to throw numbers here because again, this is not a space where you can guarantee anything. So with that disclaimer aside, look at a fund level, we want to do 10, 20x at a fund level and that's a very high ambition. But even if we do, I think three to five X on a fund level for a smallest fund like ours, that sets I think that that is a reasonable expectation. But again, we're talking about multiples, there's also another way to look at it. If you have to wait all 10 years to get something at all out of the fund, then yeah, we probably want bigger numbers, like maybe 10X or something. But when you break it down, you know, exits happen along the way, you know, the bad ones, the good ones, everything. So, another way I'm I'm thinking about this is the internal recording rate, IRR basically, anything 40, 50, 30 to 30 plus let's say, IRR is fairly decent. It translates to like 4X overall, something of that sort. And then if you if and then at the 10th year if nothing has come out at the 10th year, it actually translates to 15, 14X or something that sort. So there are different ways to slice and dice this. I think for me, I'm looking at the IRR in combination with multiples, right? And so so that way, along the way when the returns happen it builds investor confidence that like yeah some money is coming back. Preferably like oh, with the first exit, we'll be like, okay, the entire fund principle is back. Great. Okay, so now we can take even bets and so. So that's a lot of the the execution strategy which is like an indirect station essentially, right? Because I do we don't have direct control on the company's execution and outcomes, but we need to keep track of those. Host: Awesome. What's the next event you're going to? I think we'll be at Medtech World in United States, are you going to be at that event? Guest: Yes, we'll be there in May. Even prior to that, we actually have we're key noting at the University of Illinois at Urbana champagne at their engineering open house. That's the alma matter for Joanna, who's my fund advisor. That's where she got her PhD in engineering from. And so we look to make some connections with the professors there again, reconnect and show them what we're up to and so on. But of course we also want to inspire the next generation of entrepreneurs on how to build products, especially in the medical and the neuro space. And that's the first one and then we're going to the bio electronics conference in New York and then May, we also want to give ourselves enough time to process all the conferences that we go to, meet the founders and then look to do diligence and so on and so forth. So May would be the next time that we will meet at that. Host: Okay, awesome. We'll be there as well. It does take a lot of time to prepare for these events for us and a lot of time to process it afterwards as well. It's not just a a week after the event. It's like the pre and post work as well. Cool, we're coming up here on time. So I usually go around the room and ask for like any key takeaways or departing words of wisdom. So do you have any key takeaways or departing words of wisdom for our listeners? Guest: Yeah, I think the one thing that that I'm strongly aligned with you on Christian is the importance of cybersecurity. And that's why I actually, I'm glad I got to ask you this, you know, in this podcast as well, but it is not just enough to think regularly reimbursement, but you want to do this purely from that perspective of hardening the product. You don't want to go later and then discover some of these problems and this is true not just in the medical space, but even in the software space where arguably the cost to rebuild is not that high, but yes, it still is, right? It's no there's no hardware, yes, but make the cost to build that rebuild that software is per hours, teams and so on so forth. It does take time and opportunity cost. And so similarly with but even worse because people's lives are at stake. So I think as a VC, I also want to pitch on this saying, hey, this is where we need to come together, understand initially and here's my commitment too by the way, as as a VC looking at these companies, I will challenge founders and say, hey, have you thought about this? If not, hey, let's talk to subject matter experts about this and mitigate it. So then that way, we are not willfully ignoring something that could break public trust, right? Guest: So, that's pretty much it. Host: Awesome. I think my key takeaway here is this is very exciting space. I didn't think about it in the context of how you stated it that we know more about you know, mining an outer space and we do about you know our brains and what's between our ears. I thought that's an interesting way of putting it. So it's a very progressive space and I I think there's a lot to be learned a lot of novel products that will come out of the neu tech in the near future. So it's pretty exciting. And that's also why I like about met. It's an exciting space you get to see people come up with products that solve complex problems for humanity and really alter the course of humanity in a positive direction. Great, they advance the cost, no matter which way you look at it. There's something or the other that advance the cost, makes a surgical procedure, the time taken cut down from eight hours to maybe an hour and that's significant, not just the fact that you're saving surgery time, but like even patient recovery outcomes and so on. So every which way you look at it. So you're right, absolutely, and that's why we're we're passionate about our new tech space and early investment that we're making. And that's why we want more supporters coming into us as well. Host: Awesome. Well, thank you so much for being part of this episode. And thanks everyone for tuning in. We hope you found value in this episode and we'll see you on the next podcast. Thank you for inviting you. Thank you.