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Tuesday, May 24, 2022

Medical Device Accelerator Unveiled

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Koa Accel, a recently unveiled accelerator for early-stage medical device startups, is betting on its experienced team to achieve success. 

“There are no rookies on this team,” co-founder Dr. Francis Duhay told the Business Journal this month, following the accelerator’s official kickoff.

Koa is led by Duhay, former chief medical officer at Edwards Lifesciences Corp. (NYSE: EW), who also served as general manager for the transcatheter heart valve therapy business of Orange County’s largest public company; and Ray Chan, managing director at Newport Beach-based K5 Ventures, an early-stage technology startup seed fund that’s been one of the area’s more active venture capital firms in recent years.

The Koa team includes more than 20 additional professionals, many with experience at medical companies such as Beckman Coulter Inc., Medtronic PLC (NYSE: MDT), Thermo Fischer Scientific, as well as talent from the University of California-Irvine.

Koa differs from K5 Ventures, in which Duhay also is involved, through its medical device-specific focus.

The new accelerator intends to invest in one new device maker each quarter.

Koa has already selected two initial companies, Irvine’s Makani Science—which Duhay founded—and Vancouver’s Microdermics Inc., which had already gotten funds from K5 Ventures (see story, above).

Officials with the accelerator said they are a few weeks away from announcing a third investment by a local company. They also said they’re interested in bringing on additional investors to their team.

Embedded Experts

Koa won’t be a passive investor. It plans to embed its medical device experts into the early-stage ventures it takes a stake in, “in order to translate ideas into commercial businesses in less time, at lower cost, and with a greater likelihood of a successful exit.”

Duhay was already chief executive at Makani prior to its partnering with Koa; this month he was named CEO at Microdermics. Chan is chairman at Microdermics.

“The Koa team is our secret weapon,” said Chan, who also is a member of the investment committee for Tech Coast Angels’ ACE Funds.

“The problem is that medical device company founders often lack the business acumen, professional networks, and financial capital to assemble a large team of business functional experts.

“Koa provides a one-stop shop for everything they need,” he said.

The company’s founder liken their business plan to that of a Navy SEAL team, which is deployed in tricky situations and does much of the heavy lifting at a startup.

“Our team is as invested in the startup success as the inventors and investors, with all parties having ‘skin in the game,’” Chan said. “At Koa, everybody’s interests are perfectly aligned to achieve the desired goal in a fraction of the time with limited investor dilution.”

Facing Headwinds

Early-stage medical device startups are notoriously tricky to get up and running. “Early-stage medical device funding is faced with unprecedented headwinds,” Duhay said.

Failure rates in the 90% range are common in the sector. It’s often a combination of poor business execution or dysfunctional management, and not always the technology, said Koa officials, who expressed confidence that their team has the experience to pick a few winners.

Along with his work at Edwards, Duhay has run a number of medical device startups including Aegis Surgical, Atrius, and Kino Biosciences.

Koa plans to run its portfolio companies at the new wet lab incubator created by University Lab Partners, an independent, nonprofit program of Beall Family Foundation founded in partnership with the UCI Beall Applied Innovation.

NXT Nearby

Duhay is the second notable ex-Edwards exec setting up an incubator shop at Applied Innovation.

Stan Rowe, the former chief scientific officer at Edwards, last year kicked off the NXT Biomedical Incubator at the startup facility near UCI.

NXT plans to spend $25 million over the next five years on “cutting-edge technologies” designed to address unmet needs, with another $250 million pledged for creation of five to eight startups to be spun out of the incubator. It has financial backing from Deerfield Management of New York.

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