The fund, named Pitango HealthTech II, is a sequel to Pitango’s first healthcare-dedicated fund — which launched in 2019 and stopped making investments at the end of last year, though it continues to make follow-up investments in its portfolio companies. With Pitango HealthTech II, the firm plans to build a portfolio of approximately 15 new companies over a period of three to four years, Managing Partner Ittai Harel said in an interview.
The new fund is focused primarily on seed and Series A-stage startups, though it may make some investments in companies that are at Series B or commercial stages.
“We have a broad healthcare view, and invest in digital health and tech-enabled healthcare service companies. Our major focus is the use and integration of AI in healthcare, which we see as only at its infancy. We invest in areas of convergence of data science and AI with life sciences — proteomics, genomics, immunology and such,” Harel explained.
He also said that Pitango is not shying away from medical devices, as the firm believes “innovation has declined in the area.”
With its new healthcare fund, the number one quality Pitango is looking for in startups is the quality of the founding team and their dedication to their mission, Harel declared. The firm also prioritizes factors such as the uniqueness and defensibility of the technology at hand, the startup’s ability to prove its potential value to customers, and the efficiency of the business model, he added.
If applicable, Pitango also “heavily considers” whether or not the startup has a strong path to regulatory approval. About 40% of the healthcare companies Pitango invests in require paths to 510k-type regulatory clearances, and 60% do not, Harel said.
“Due to the fact that we invest in the seed and A-stage, we do not have a hard and fast rule as to what level of proof we expect from a digital health or medical device company, nor for a personalized medicine or decentralized healthcare company. This is a judgment we make on a one-by-one basis, balancing risk and opportunity in our portfolio,” he explained.
He pointed out that Pitango is not afraid to invest in a company that is taking technology or business model risks at an early stage if their founding team is “fantastic.”
Being an Israeli healthcare fund, the majority of Pitango HealthTech II’s investments will likely be made in Israeli startups, but the firm is open to investing in companies based in other countries as well, Harel said. Pitango’s first healthcare fund invested 25-30% of its capital in non-Israeli startups. Some of the stateside companies it invested in include medication management platform Medisafe, caregiver support platform Homethrive, medical device maker Vertos Medical and healthcare cybersecurity startup CyberMDX.
Pitango has already invested capital from its new fund into two Israeli startups, though it did not disclose how much money was invested in each. The first is QuantHealth, an AI-powered platform to simulate clinical trials.
“The founders of QuantHealth left a deep impression on us. With little money raised and in a short amount of time, they were able to show astounding results in an area that is one of the ‘holy grails’ of clinical trial management, and that is the modeling/predicting of clinical trial structure and patient selection,” Harel said.
Through its clinical trial planning, the startup is able to generate insights that hasten the development of much-needed novel therapeutics, he added.
The other startup that has received funds from Pitango HealthTech II is Nevia Bio, which has developed a machine learning platform to enable the early detection of diseases via vaginal secretions analysis. Pitango invested in the company due to “the compelling nature of the early results, the vision for a simple approach to screening that could easily be available to women in the future, and the huge clinical, life-saving and economic value of the solution,” Harel explained.
In his view, the current environment is ripe with opportunities for healthcare investors. Much of this is thanks to pandemic-induced trends, such as the consumerization of healthcare, decentralization of care sites and rise of personalized medicine, he pointed out.
“There is much greater acceptance for fundamental need for change in 2023 than I ever recall in the past two decades — and it is only accelerating, and it will continue to now that digitization has been adopted broadly and AI and generative AI have begun to be used. Providers, payers and regulators are all in a mode of much greater flexibility when it comes to trying and adopting new tech and business models in healthcare,” Harel explained.
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