We are excited to announce Movac Fund 5’s investment in Alimetry. Movac led the company’s heavily oversubscribed $16m Series A round joined by IP Group, Matū Karihi, K1W1 and UniServices. The company was founded by Greg O’Grady, Professor in Gastroenterology from the University of Auckland Medical School, and his research partner Armen Gharibans a bio-engineer from the University of California San Diego. Alimetry’s main product is a wearable medical device that helps diagnose gastric disease by measuring the pattern and intensity of electrical waves in the stomach. Conceptually it is like an EKG but for the gastric system (surprizing that this does not already exist). It’s quite a breakthrough in gastroenterology and the company has deep clinical evidence, approval to sell in multiple countries and its product in R&D trials at five of the key gastroenterology clinics in the world.
The Vogue of Deeptech.
The New Zealand ecosystem is somewhat in love with deeptech investing these days. No wonder – deep tech investing is based on tangible and often patentable scientific discoveries and can come with a structural moat built-in. Several of Movac’s best investments have been in deep tech so it’s an area we feel confident with. However, it is fraught with double peril. Companies have to overcome both technical hurdles as well as commercialization hurdles often more complex than those faced by software companies. Common problems include severely broken cap tables where early capital strategy is flawed or a bad spin-out from a research institution hobbles the company, wasted time on the wrong market application or taking missteps with channel partnerships that dead-end the market potential. Other problems come where the founding team are overly academic and do not have the capabilities to grow and adapt to a commercial environment. Founders often expect to keep their tenured university position and run their companies part-time and are not prepared to fully commit to the commercial path. We have been around the block enough that we can spot the red flags. This is why we were so excited to meet Alimetry and its founders Greg O’Grady and Armen Gharibans. Their company had a truly exciting technology foundation but none of these problems.
Soothsaying for a diagnosis
The gut (along with the brain) is one of the least understood parts of our anatomy. Approximately 11% of the population suffers from gastric dysfunction at any time and may have symptoms such as abdominal pain, nausea, vomiting and indigestion. Anyone who has suffered from these symptoms knows how debilitating they are and how tough diagnosis can be. Largely this is because the causes of abdominal pain are varied and may arise because of neuro-muscular issues, gut chemistry, food allergies or anxiety and other brain-related issues. There are currently no tests that will definitively reveal the cause. Rather, diagnosis happens through slow trial-and-error therapies such as diet eliminations or through invasive procedures such as cameras inserted into the stomach to watch the flow of food. Alimetry’s device is a flexible array of sensors which is pasted across the abdomen to measures the electrical signals as food is digested. The pattern of signals allow gastroenterologists to detect or rule out neuro-muscular causes of stomach upset. It promises to be an accurate yet non-invasive diagnostic that moves the gastroenterologist away from trial and error to quicker decisions and more direct treatment paths. The idea of using electrical signals to diagnose stomach motility issues has been around for decades. It has not been developed before now as the electrical signals in the gut are relatively weak (ie 100x weaker than those coming from your heart) and so it has taken advances in both sensor technology and artificial intelligence to turn the promise into practice.
Standing on the wings of other kiwis
But again the technical innovation is only half of the risk in a deep tech start-up. So far Alimetry’s commercial path has been textbook perfect. Much of the expensive early R&D funding was provided by non-dilutive sources with over $5m being provided by the NZ government and more in flight from the National Institute of Health in the US. This has allowed the company to make 4-5 years of progress without taking any angel funding and for the founders to retain the lion’s share of the company going into the Series A. The first external funding round in late 2019 was led by a global developer of intellectual property businesses, IP Group, which is a FTSE-listed company with a NAV of over $3b NZD. Other early investors included local deeptech specialists Matu. The University of Auckland’s commercialization group, UniServices, has been supportive and owns a modest stake of the company resulting from a clean spin out of the IP. The team have used this capital strategy to make extraordinary progress: The device is already approved for sale in the UK, EU, NZ, Australia and has been submitted for FDA approval in the US; over 20 further clinical trials are either published or in flight and five of the leading gastro clinics are engaged in pilots. How did the team get so much right in such a short space of time? In part, they have leveraged the learnings of the other kiwi bio-medical success stories such as Fisher and Paykel Healthcare, Pacific Edge and Aroa Biosurgery. Every success in our ecosystem makes it easier and faster for the next great company and we believe that Alimetry is a signal of a step-change in success coming in the NZ medtech sector.
What’s Rarer Than A Unicorn?
While lessons from the past are helpful, it is still rare to have a deep tech founder capable of making a great company out of their research. Greg O’Grady, the CEO of Alimetry, is a distinguished university professor and gastrointestinal surgeon, but also a gifted and determined entrepreneur. He has a crystal clear vision of creating a multi-billion dollar, publicly listed, life sciences company right here in New Zealand. He has an unusual personal charisma and ability to tell Alimetry’s story which has helped recruit a world-class team behind the vision. He and Armen know how to drive execution at high velocity and high quality. He is curious and open-minded around developing as a business leader and has actively cultivated mentors in the industry to learn from. But perhaps the most important characteristic of any entrepreneur is bravery. It’s pretty brave to give up an academic career at its very pinnacle and challenge yourself to find even greater success in the uncertain and ambiguous world of a deep-tech start-up. What’s rarer than a unicorn is a Gastroenterologist serial entrepreneur with a huge vision and we feel pretty lucky to partner with him, Armen, and his amazing team.
Mihi: The NZ VC village
In closing, I wanted to thank some people for helping make this deal happen. Because the thing about our country is that it’s a village, and many hands are involved in building greatness. Thanks to Greg and Armen for believing in the NZ venture ecosystem and inviting Movac on their journey. Thanks to Sarah Reeves for building the investment case during her secondment to Movac from Forsyth-Barr. Thanks to the Alimetry board members Dana McKenzie, Siro Perez, and Greg Sitters for welcoming us onto the cap table.
