Two weeks ago, a team of four founders roll out Hire a venture partnera Minneapolis-based venture capital firm focused on early-stage medtech companies.
Engage is located in Minnesota medical alleyHome to more than 1,000 healthcare technology companies, the region is one of the hottest incubators for healthcare technology innovation in the country.
The founding team formed Engage to bring their investments to market through a special purpose vehicle (SPV), reducing friction between early-stage medtech companies and their investors. The team consists of four members, two of whom serve as managing directors of the company.
Steve Sigmond and Kelly Pchal are managing directors of Engage.Sigmund’s most recent founder and chief financial officer carrot healtha healthcare analytics software company, unite us get last year. Pchal is an active angel investor who co-founded United Virtual Nursing, a telemedicine platform focused on older adults’ brain health and age-related hearing loss. They were joined by Morgan Evans, who founded two medtech companies (Excited Solutions and Highland Circle Innovation), and Ryan Spanheimer, a practicing patent attorney specializing in medical technology.
Sigmund said in an interview that all of Engage’s founding members have extensive experience in health tech investing, and they created the company to provide investors with greater flexibility and lower overhead through its SPV model. . The company is currently building a network of accredited investors, which he said includes angel investors, trusts, IRAs and corporate organizations.
Instead of raising a huge upfront fund — which would take 6 to 10 years, and requiring VCs to ask investors to commit to a blind pool — Engage has organized a SPV. That makes it “very different from traditional VC funds,” Sigmund said.
When angel investors become LPs in traditional venture funds, they usually have to make aggressive minimum commitments. The minimum investment to participate in Engage SPV is “much smaller,” Sigmond said, adding that the model increases investors’ access to quality investment opportunities in healthcare technology.
“You can sign up as an investor in any or all of the SPVs we bring to market,” he said. “You can do everything or just one deal — you don’t have any minimum requirements at all. This enables a really different level of control and flexibility in our venture capital model compared to traditional funds.”
The management fee for the Engage model is also quite low. Engage charges investors in its network a one-time upfront management fee, typically 4-5%. Sigmund noted that traditional venture funds typically charge angel investors a management fee of 2-2.5%, but that fee is repeated every year over the life of the fund. About 20 percent of investor capital could end up in traditional funds’ management fees, he said.
Engage’s model is also attractive to health tech entrepreneurs because it simplifies the fundraising process, Sigmond said. Rather than the tedious and time-consuming process of identifying accredited investors and giving them the same presentations over and over, startups can use Engage as a “single point of contact for fundraising,” he said.
As for companies the company is looking to invest in, Engage’s first investment focus is on medical devices designed to address unmet needs. Early-stage medical device companies often do not yet have regulatory approval, so when reviewing potential startups for investment, Sigmond said his team will analyze their initial research and product development, the strength of their medical advisory boards and how they are Start protecting their intellectual property.
Coinciding with the launch, Engage announced its first investments in the following areas Melody Health, a surgical device company that created an absorbable stent for supporting soft tissue. The startup was founded to reduce infection rates in women undergoing reconstructive or cosmetic breast surgery.
Sigmond shared that for each SPV it brings to market, the investment typically ranges from $500,000 to $1 million. Going forward, he said Engage may organize four to six SPVs per year.
Photo: Hiring a Venture Partner
