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BFD Expert Voices - Health Tech Deals

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Psychedelic startup incubator Beckley Waves dosed $3.3 million in seed funding, partner Daniel Love tells Erin exclusively.

Driving the news: Boosted by hopeful research, continued investor interest and an increasingly friendly regulatory milieu, market appetite continues to grow for companies focused on psychedelic-based mental health treatments.

How it works: The London-based venture incubator backs startups spanning therapy, education and software.

Some areas the firm is eyeing include training and public education, community-building and research into other potential therapeutic applications for psychedelics, such as ADHD, autism, eating disorders and chronic pain, per Love.

"When robotic surgical tools came out, you had surgeons who were unused to that modality. Similarly, there's a lot of therapists and great mental health providers, but many have less experience in this new way of working," Love says.

Details: Investors include the Joe and Sandy Samberg Foundation, Satori Neuro, Evolve Ventures and Foundation, Bridge Builders Collaborative, 1440 Foundation, Austin Hearst and Asia Agnelli.

Beckley intends to use the capital to launch roughly two companies and "make a handful of strategic investments," says Love.

Love expects Beckley to raise a Series A sometime in 2025.

By the numbers: Investment in the hallucinogenics-for-mental-health sector rose from just $62 million in 2019 to $617 million in 2020, and hit a peak of $1.6 billion in 2021, per Bloomberg.

And while funding dropped precipitously last year to $570 million, Love says he foresees "some notable companies" setting the stage for a "new paradigm of mental health care" within the next 5-10 years.

"Even if this is a psychedelic winter, it feels like the green shoots are coming," says Love.

🌊 One fun thing: The name Beckley Waves was chosen "to resemble a wave spreading impact into the universe," says Love. "It's about the ongoing ripples it creates."

What's next: "For us, it's not just psychedelics," Love says. "In some ways that's a foothold. Ultimately, we want to help people that are suffering [and] help people thrive more, so if psychedelics are a jumping-off point, meditation and other forms of conscious exploration are also important."

1 big thing: Psychedelic studio Beckley Waves doses $3M

Illustration of a warped hundred dollar bill with balls of color over it

Dozens of psychedelic startups have received venture funding in recent years, from those providing support for traditional providers to take on psychedelic-assisted therapy to those applying AI to psychedelic drug development. 

This January, ketamine-assisted therapy infrastructure startup Journey Clinical, one of Beckley's portfolio companies, closed an $8.5 million Series A.

Last December, Enthea, a benefits provider for psychedelic-assisted therapy, raised $2 million in seed funding.

In February 2022, Mindstate, an AI-powered psychedelic drug discovery startup, collected $11.5 million in seed funds.

2. State of play: Psychedelic-assisted treatment startups

Illustration of a file foldler with a note that says "State of Play" paper clipped to it.

Sonex Health, an Eagan, Minnesota-based producer of ultrasound-guided orthopedic therapies, raised $40 million in Series B financing, Aaron writes.

Why it's the BFD: More than 8 million people suffer from carpal tunnel syndrome each year, fueling demand for less-invasive procedures and a quicker recovery time.

Details: KCK MedTech, a venture capital firm specializing in medical technology investments, led the company's Series A and Series B financings.

Alongside the Series B financing, Sonex also closed on a new debt facility with venture lender, Horizon Technology Finance Corp.

According to PitchBook, Sonex raised $20 million in Series A funding in January 2022, putting its pre-money valuation at $60 million.

What's next: Proceeds will help expand access to the company's commercially available ultrasound devices.

How it works: Historically, carpal tunnel release (CTR) and trigger finger release (TFR) procedures have taken place in ambulatory settings or hospitals.

Sonex's device uses a minimally invasive technique, allowing the procedure to take place in lower-cost office-based procedure rooms rather than surgical suites.

Sonex's press release cites studies demonstrating strong, unmet demand for treatment options that let patients return to daily activities and work within days rather than weeks or longer, as often seen with surgical approaches.

What they're saying: "Highly positive patient and surgeon experiences are a strong indication that carpal tunnel release using ultrasound guidance is poised to become the standard of care," KCK senior managing director Karen Long says in the release.

3. The BFD: Sonex Health nabs $40M Series B

Illustration of a shadow of a hand hovering over a large pile of money. 

Clinical decision support provider Carenostics collected $5 million in seed funding, father-son pair CEO Bharat Rao and COO Kanishka Rao tell Erin exclusively.

Why it's the BFD: Health systems are increasingly hungry for tools that help to prioritize and risk-stratify patients, directing resources where and when they are most needed.

Driving the news: Carenostics' flagship product focuses on identifying patients at risk for chronic kidney disease (CKD), a condition that costs the U.S. health care system roughly $100 billion a year.

How it works: The company's AI-powered tools crunch all available electronic health record (EHR) data to help health systems identify patients at risk of chronic diseases, including CKD, so as to prioritize treatment.

Because of the highly local nature of EHR data collected by health systems, Carenostics develops and hones its tools for each system in which it operates.

For example, while one institution might regularly collect blood pressure measurements — and prove a useful metric for Carenostics' AI to crunch — another might not, meaning it would seek and use other available data.

"The AI risk-stratifies. It says, of these patients, here are the ones we think are really likely to have these undiagnosed conditions today," Kanishka says. "We tailor our AI models for each health system we go to."

Deal details: M13 led the round. Greatpoint Ventures and Gaingels joined.

Humana chair Kurt Hillsinger, who also participated in the round, is joining Carenostics' board of directors.

Funds will be put to use hiring more staff, honing the company's technology and expanding into therapeutic areas beyond CKD and asthma, such as cardiovascular disease and immunology.

Rao expects Carenostics to collect a Series A in 2025.

Flashback: Kanishka left his job leading McKinsey's health startup practice in 2022 to join Carenostics when his symptom-free grandfather suddenly passed away from kidney failure.

"We didn't know he had it until his kidneys had already failed," Kanishka recalls. "At that point, there's not much that can be done. But there's so much that could have been done earlier, had he been identified earlier."

Reality check: Some clinical decision support tools have come under fire recently because of serious flaws in how their algorithms were developed and trained, revealing the precarious nature of developing tools that claim to save lives.

A proprietary sepsis prediction algorithm developed by EHR giant Epic was found to have missed two-thirds of sepsis patients and generated numerous false alerts, partially because it had not been properly trained on local hospital data.

Epic last fall released a new overhauled version that attempted to correct for some of those issues.

"Because of how local health care is — because of how at each health system, they collect different data in different patterns, the way they practice medicine is different, the demographics are different, guidelines and mandates on treatment might be different — you'll learn different correlations if you're not tailoring it to the local nature of health care," says Kanishka.

What's next: Carenostics has yet to publish peer-reviewed studies designed to evaluate its tools, but it intends to, Bharat says.

"Our plan is to publish," Bharat says. "Health systems are our partners and our collaborators and our customers."

Editor's note: This story has been updated with investor details. 

4. Carenostics raises $5M to prioritize at-risk patients

two medical record clipboards surrounded by circles and cutouts of money 

Dozens of other startups are racing to develop clinical prediction tools for specific therapeutic areas and with specific types of data.

In May, Healthy.io, which partners with payers and providers to integrate its FDA-cleared CKD test into their kidney management programs, raised $50 million in Series D funds.

In March, Viz.ai, a developer of AI-powered support tools for aortic disease, pulmonary embolism and cerebral aneurysms collected $40 million in unlabeled funds that followed the closure of a $100 million Series D in 2022 that valued the company at $1.2 billion.

In March 2022, ConcertAI raised a $150 million Series C at a $1.9 billion valuation for its real-world data cancer research tools.

5. State of play: Clinical prediction tools

Illustration of a white board with a tactical diagram using letters spelling out "State of Play."

Looking for a deal story? Search the Axios Pro Deals Tracker beta.

• Pee Safe, an Indian hygiene and wellness company, raised $3m in partial Series B funding led by Natco Pharma Limited and Rainmatter Health. https://axios.link/3LnwzW2

• Sempre Health, an SF-based provider of health care pricing tools, raised $20m in unlabeled funding from new backers Cencora Ventures and Echo Health Ventures. Insiders including Blue Venture Fund, UPMC Enterprises and Industry Ventures joined. https://www.semprehealth.com/

• GoodVets, a Chicago-based veterinary care platform backed by SkyKnight Capital, raised funding from General Atlantic. www.goodvets.com

• Aspirion, a Columbus, Georgia-based provider of health care revenue cycle management tools, acquired Infinia ML, a Durham, North Carolina-based clinical document processing company. https://axios.link/44RIant

6. Deals o' the day

• Julia Bernstein , formerly head of operations at Thirty Madison, became COO of Brightside Health. https://axios.link/462Xzml

• Fátima Rodriguez, the section chief of preventive cardiology at Stanford, joined the advisory board of Movano Health. https://movanohealth.com/

• Claus Torp Jensen, Teladoc Health's chief innovation officer, became chair of the board of Qureight. https://www.qureight.com/

• Kristen Lalowski, formerly the chief product officer at Summit Health/CityMD, became EVP of product at LetsGetChecked. https://axios.link/3PzhGTe

• Roger Rodriguez, a former CEO of UnitedHealthcare, joined Genuine Health Group as senior advisor. https://axios.link/3LmSdtP 

• Palladium Equity Partners promoted Alexander Funk, Katherine Lehman and Nancy Mitchell to partners. It also promoted Dale O'Connell to managing director and co-head of fundraising and IR. www.palladiumequity.com

7. It's personnel

🏖️ Erin is enjoying SoCal's mild weather and ocean views.

💖 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Jay Bennett. Please ask your colleagues, friends and family to sign up.

September 13, 2023

1 big thing: Psychedelic studio Beckley Waves doses $3M