In Silicon Valley, the typical startup playbook usually involves raising venture capital.
But, VCs, Nanowear CEO and cofounder Venk Varadan probably doesn’t want your money. I met Varadan on a breezy patio this summer at Brainstorm Tech, and one of the first things I learned about him was this: Despite founding a company that’s a candidate for the Sand Hill Shuffle, Varadan just isn’t into raising venture capital.
Nanowear, which makes advanced wearables specifically for healthcare settings, has several hallmarks of a company that could attract venture dollars—and has. Per Crunchbase, Nanowear has raised $1.5 million, including a seed round in 2014 from Chamath Palihapitiya’s Social Capital and MAS Holdings. Varadan says that Nanowear has, to date, raised $20.5 million, but only a fraction of that has come from VCs at this point, as he’s primarily focused on raising money from high-net-worth individuals and physicians.
So, what’s Varadan’s aversion to venture? Is he just loath to give up equity in his baby?
Nanowear develops wearable devices using textile-based nanotechnology to capture a wide range of biomarkers directly from the skin. Through AI, Nanowear devices can analyze this data to provide personalized diagnostics for heart, lung, and vascular health. To date, the company has notched four FDA approvals, including one earlier this year, for an undergarment that can estimate and track blood pressure.
“That’s my father’s invention,” said Varadan, who cofounded the company in 2014 with his father, an academic with a long career at the intersection of engineering and neurosurgery. “I’m very emotionally tied to this, and I’m never going to give up on this. This is my family’s legacy.”
Nanowear’s technology has a lot of moving parts and the company’s business model is tied up in—and needs to be adaptable to—a high-inertia, labyrinthine industry. And Varadan found that, even when VCs have been interested in Nanowear, they haven’t typically understood the challenges the startup faces. He’s found that all but the most specialized VCs were ill-equipped to grasp core medtech challenges, even ones as fundamental as how complex getting paid in healthcare can really be.
“There are reimbursement issues, the legacy codes,” said Varadan. “For a company like us, we’d have to get new codes, which involves collecting a lot of real-world evidence, building a multi-year relationship with Medicare and Medicaid in that funny building in Baltimore [where both programs are headquartered], which looks like one of those horror movie buildings when you walk through it. So, when VCs were asking, ‘What’s your model?’ in the first couple years, I was honest and said: We’re not sure yet, we can go three or four different ways.”
Varadan says that “VCs hated that answer.”
“That helped us understand that we have to find really, really smart money that’s not necessarily branded and is specific to our space and the complexities we need to endure,” he said. “That really comes from operational experience, which some VCs have, but a lot are just ex-investment bankers or from private equity. So, they may be great at finance, but not necessarily able to wear the operational hat for what we do.”
A number of Nanowear’s competitors, like Eko Health and Biofourmis, have each raised more than $150 million in venture capital. So, it’s not that Varadan isn’t willing to re-explore the possibility of raising money from VCs. He’s even pitched a few as of late—but hasn’t felt like it’s a good time or the right fit, in more ways than one. Varadan says he senses that the ZIRP era fallout is lingering.
“I feel like now when I’m going out to pitch VCs, they’re not being honest with us,” he said. “They’re not telling us that our LPs have told them they’re not doing any new investments this year, because we have to triage our existing portfolio companies that are overvalued and have no exit prospects…There ultimately has to be both vision alignment and cultural alignment. I haven’t found that yet.”
See you tomorrow,
Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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Nina Ajemian curated the deals section of today’s newsletter.
VENTURE DEALS
- Unlock Technologies, a Tempe, Ariz.-based financial solutions provider for homeowners, raised $30 million in Series B funding. D2 Asset Management led the round and was joined by Saluda Grade, Second Century Ventures, and REACH.
- Mintlify, a San Francisco, Calif.-based developer content platform for public-facing documentation, raised $18.5 million in Series A funding. Andreessen Horowitz led the round and was joined by existing investors Bain Capital Ventures, Y Combinator, and others.
- Reonic, an Augsburg, Germany-based climate tech SaaS company, raised €13m ($14.4 million) in Series A funding. Northzone led the round and was joined by existing investors Point Nine and Puzzle Ventures.
- Demex, a Washington, D.C.-based parametric climate and weather reinsurance solution company, raised $10.3 million in Series A funding. Congruent Ventures led the round and was joined by Moxxie Ventures, MetaProp, and existing investor Blue Bear Capital.
- AltScore, a Mexico City, Mexico-based lending infrastructure APIs provider, raised $8.5 million in Series A funding. Haymaker Ventures led the round and was joined by existing investors Kamay Ventures, BuenTrip Ventures, Caffeinated Capital, and others.
- DRiP, a San Francisco, Calif.-based creator engagement platform, raised $8 million in seed funding. NFX and Progression led the round and were joined by 6th Man Ventures, existing investor Placeholder, angel investors, and others.
- Cercli, a Dubai, UAE-based hiring, management, and payment platform for businesses in the Middle East and North Africa, raised $4 million in seed funding. Afore Capital led the round and was joined by COTU Ventures, Y Combinator, Rebel Fund, and others.
- ZipBio, a Seattle, Wash.-based generative AI platform for gene and protein compression, raised $4 million in seed funding. NFX led the round and was joined by MoreVC.
- Great Lakes Crystal Technologies, an East Lansing, Mich.- based single crystal diamond materials developer, raised $2.5 million in a seed extension. Bill Jackson led the round and was joined by Ultratech Capital Partners, Princeton Alumni Angels, EM2 Capital, and others.
- NetNow, a Toronto, Canada-based trade credit application management platform, raised $1.8 million in pre-seed funding. Ripple Ventures led the round and was joined by Centre Street Partners, Antler, Motivate Venture Capital, and Day One Ventures.
PRIVATE EQUITY
- Amulet Capital Partners acquired Genetics & IVF Institute, a Fairfax, Va.-based reproductive tissue banking and reproductive technology services provider. Financial terms were not disclosed.
- Auréa acquired The Body Shop, a London, England-based beauty brand. Financial terms were not disclosed.
- Blue Star Innovation Partners acquired Ledger Run, a Tiburon, Calif.-based workflow optimization technology services provider. Financial terms were not disclosed.
- Earvin “Magic” Johnson acquired a minority stake in the Washington Spirit, a Washington D.C.-based professional women’s soccer team. Financial terms were not disclosed.
- EcoVadis, backed by Astorg and others, acquired Ulula, a Toronto, Canada-based human rights technology and analytics company. Financial terms were not disclosed.
- TPG agreed to acquire a majority stake in Altimetrik, a Southfield, Mich.-based digital business services company. Financial terms were not disclosed.
EXITS
- Absolute Security acquired Syxsense, a Costa Mesa, Calif.-based automated endpoint and vulnerability management solutions provider, from Oquirrh Ventures. Financial terms were not disclosed.
- TPG acquired MIRATECH, a Tulsa, Okla.-based emissions reduction solutions provider, from BP Energy Partners. Financial terms were not disclosed.
- x, backed by Platinum Equity, acquired a majority stake in ecube Solutions, a St. Athan, Wales-based end-of-life aircraft service provider, from Baird Capital. Financial terms were not disclosed.
IPOS
- Bicara Therapeutics, a Boston, Mass.-based targeted therapy biotech company, plans to raise $212.4 million in an offering of 11.8 million shares priced between $16 to $18. Biocon, RA Capital Management, Red Tree Venture Fund, Omega Fund, Invus Public Equities, and TPG back the company.
- Zenas BioPharma, a Waltham, Mass.-based immunology-based therapies biopharmaceutical company, plans to raise $212.4 million in an offering of 11.8 million shares priced between $16 to $18. The company posted $50 million in revenue for the year ending June 30, 2024. Xencor, Enavate Sciences, SR One, Longitude Capital, Tellus BioVentures, Fairmount Funds Management, New Enterprise Associates, Norwest Venture Partners, and Bristol-Myers Squibb Company back the company.
- KinderCare Learning Companies, an Oswego, Ore.-based early childhood education and care services provider, filed to go public on the New York Stock Exchange. The company posted $2.6 billion in revenue for the year ending June 30, 2024. Partners Group backs the company.
FUNDS + FUNDS OF FUNDS
- Warburg Pincus, a New York City-based private equity firm, raised $4 billion for its first fund focused on capital solutions.
- Bregal Sagemount, a New York City-based private capital firm, raised $800 million for its credit solutions fund focused on software, information and data services, financial technology, and more.
- Slauson & Co., a Los Angeles, Calif.-based venture capital firm, raised $100 million for its second fund focused on SMB SAAS and consumer tech.
- Luge Capital, a Montreal, Canada-based venture capital firm, raised $96 million for its second fund focused on fintech.
- Asylum Ventures, a Brooklyn, N.Y.-based venture capital firm, raised $55 million for its first fund focused on early-stage companies.
PEOPLE
- BoxGroup, a New York City-based venture capital firm, hired Jeff Silverstein as a principal. Previously, he was at Andreessen Horowitz.
- Clearlake Capital Group, a Santa Monica, Calif.-based private equity firm, hired Dave Beeston as managing director. Previously, he was at Fenway Sports Group.