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  • Sherman Williams and William Tonelli

AIN Ventures Perspective on Healthcare Dual-Use Technology Investing

Healthcare does not often come to mind when one thinks of a dual-use technology fund. At AIN Ventures, we think differently. The active-duty, reserves, and national guard military population in the United States currently sit at 2.4 million people. This number is dwarfed by the 19 million veterans living in the United States. This population, our “constituency,” if you will, has a range of healthcare issues that are at times similar and at other times unique relative to the general population. A high level of treatment for this population is essential for the security of the nation, both during and after service. The growing infrastructure around treating this population can only be described as massive. Further, the amount of money and number of people in place to service this population creates a range of opportunities for private companies to earn revenues. We are most interested in those private companies building technologies that will improve clinical outcomes for active-duty military and veterans. Specifically, we have chosen to focus on companies developing rapid diagnostics, connected–digital health devices, and advanced therapeutics at the pre-seed and seed stages.


Size of population


Greater than $200B+ is spent on treating the active-duty and veteran population every year. The Veterans Association Hospital System (VA) plays an especially unique role in the American healthcare system. The VA is the largest integrated healthcare system in the United States, treating ~9M personnel and providing care at 1,298 facilities around the country. The VA is the second largest agency in the U.S. government, only second to the Department of Defense (DoD). Uniquely, the VA is the largest trainer of healthcare professionals in the United States. Over 120,000 medical professionals graduate from VA programs annually. We would argue that the sheer size of operations at DoD Health and the VA represents a great testing ground for healthcare technologies that can be subsequently rolled out to the wider U.S. population and eventually, the world. Well-known innovations that have sprung from the VA include the cardiac pacemaker, antihypertensives, coronary bypass surgery, the standing wheelchair, and organ transplantation. With that said, DoD Health and the VA are ripe with inefficiencies, and companies inevitably have difficulty penetrating what can be described as a balkanized system.


We do not believe that you should solely focus on companies that have the ability to sell products to the VA and DoD Health. Sales cycles are long, opaque/difficult, and despite the aforementioned large numbers, group purchasing power is not necessarily exercised, juxtaposed to some civilian healthcare payer-provider systems. The Valley of Death issue that we have mentioned in past papers can be a real concern for healthcare companies also. In line with our other dual-use segments, we focus on companies that can both scale commercially and whose technologies can benefit our constituency.


Uniqueness of Our Constituency


The DoD is the largest employer in the U.S., and if the veteran population were treated as a monolithic minority bloc, it would represent one of the larger minority populations in the U.S., in line with the number of Asian Americans. This large population is much more diverse than the general U.S. population.


An example is that the DoD is the largest employer in the United States and the single largest employer of African American men. Today, the DoD is as diverse as it has ever been, with slightly greater than 43% of all personnel being either a racial or ethnic minority. Amongst these minority groups, African Americans are the most disproportionately represented (2.3x more likely to serve in the military than their white counterparts) relative to their general population size, and Hispanics are the fastest-growing minority population in the U.S. Military.


Because all veterans were originally active-duty military, these demographic trends hold true amongst recent veterans. The veteran population is more diverse than the general population and because the active-duty military population is increasingly becoming diverse, the veteran population will in-kind be increasingly diverse over time.



The result is that if we focus on healthcare issues that improve the clinical outcomes of our constituency, we will naturally focus on improving the healthcare outcomes of minority populations. We acknowledge that our constituent population is heavily skewed toward men, albeit minority men. We intend to be intentional about both investing into companies led by underestimated minorities and investing into companies that have a positive impact on underestimated minority communities. Our healthcare technology investment focus aligns nicely with this intention.


Investment Focus Areas


Healthcare has experienced an unprecedented shift in accessibility, reliability, and the method in which care is delivered. Technology often needs a catalyst for adoption, and in 2020 one of the largest catalysts in the last 100+ years occurred, the COVID-19 pandemic. Prior to 2020, digital healthcare, to include telehealth, was struggling for widespread adoption. This was despite the fact that digital health solutions, like telehealth, had the ability to significantly increase healthcare accessibility to Americans. Further, in-roads by advanced therapies such as genetic medicines, including mRNA therapies, were on a long and uncertain path toward in-human use. COVID-19 led to an irreversible change in accessibility, care delivery and treatment methods, i.e., advanced therapies. These seismic changes affected both the civilian, military and veteran populations alike. AIN Ventures is focusing our investments within these three large and rapidly growing areas: rapid diagnostics, connected – digital health devices, and advanced therapies).


The rapid diagnostics market is primarily centered around infectious diseases. It is a large and rapidly growing market, currently at ~$30B and growing at greater than 20% per year. Rapid diagnostics are extremely important to mission readiness and warfighter health. Until the 20th century, more soldiers died from disease in battlefield settings than in actual combat. Further, in austere and resource-constrained environments, neither complex lab equipment is viable nor is waiting multiple days for a diagnosis, and that is where rapid diagnostics are most applicable. The nature of rapid diagnostics makes them applicable not only in a military setting but also in resource-constrained emerging and developing markets, creating additional revenue opportunities for companies in this area.


Digital Health mainly constitutes the remote management of chronic conditions, but it also includes healthcare information technology solutions that can enhance active-duty military readiness and better manage veteran treatment. Further, digital health includes customized medicine solutions. Digital health solutions that align with military and veteran use-cases are also likely highly applicable to civilian use-cases, creating tremendous revenue opportunities.


Amongst our healthcare focus areas, advanced therapies may be the least obvious. When we reference advanced therapies, we are mainly focused on synthetic biology. In 2018 the DoD issued a technical assessment to increase force-wide awareness of synthetic biology. Synthetic biology can be used for good, like creating hardware products that are self-healing, but it can also be used for bad, i.e., a bioweapon used by a nation-state or terrorist. Most importantly, advanced therapies can be used to rapidly treat diseases that military personnel contract, and get them back into the fighting force. The ability to do so provides a war-fighting entity an advantage over an adversary, particularly in a protracted conflict. There is the ability of these companies to provide novel treatments for disease states that in some cases were untreatable, and in other cases, disease states can now be treated one-time vs. repeated treatments that come with a heavier time and cost burden. While the growth of this market is less than our other two focus areas, we believe this will change over time as technology improves. AIN is excited to identify and invest into the top founders within this space.


Note on Behavioral Health Change


We must give a special shout-out to telehealth, and other interactive forms of patient-provider communication, to include software apps, text messaging, etc., which have increased dramatically because of the COVID-19 pandemic. The reason this is important is because of the change in behavioral health that it brings about. Healthwise, our constituency is in the elite of Americans during the typical time frame that people join the military, ages 17-24. Less than a quarter of Americans in this age group are eligible for military service due to health, education, and criminality issues. Amongst these issues, poor health is the biggest disqualifier, and the top healthcare issues include obesity, asthma, poor eyesight or hearing problems, and mental health issues. Due to the nature of their service, many of those that do serve face declining health. While some issues are simply unavoidable, many of these health issues could be mitigated by behavioral health changes. The aforementioned behavioral interventions through telehealth, text messaging and software apps are a relatively new phenomenon (~15 years old) that has the ability to significantly improve care from a behavioral health standpoint. Further, the military’s high suicide rate, and interventions to prevent this, means that the active-duty military and veteran population are outstanding testing grounds for behavioral health interventions, particularly mental health interventions.


AIN Healthcare Investments


We have already begun to invest in our unique, but rapidly growing, niche within the healthcare landscape.


Bright Uro. Bright Uro, led by Derek Herrera, was AIN Ventures’ first investment in 2022. First, Derek is a unicorn human, and he is exemplary of what we mean at AIN Ventures when we say we focus mainly on the team when coming to an investment decision. Derek has overcome tremendous challenges, and Bright Uro is his second medical technology startup. There were early signs that Derek would demonstrate this ability, considering he was a U.S. Naval Academy Graduate and a Marine Corps Special Operations Officer. Bright Uro is developing a connected device that is able to perform urological sensing for those with lower urinary tract disorders. Uniquely, the Company aims to perform a urodynamics exam outside a clinical setting, the first of its kind to do so. This novel solution significantly improves upon the incumbent diagnostic offering, brings about cost savings to urologists, and because the device can be used outside a clinical setting, it can actually increase the amount of revenue urologists generate.


ProtonIntel. Our second healthcare technology investment is ProtonIntel. The Company is developing the world’s first continuous potassium monitor that is designed to be used outside a clinical setting. Potassium levels in blood are the first indicator that kidney disease may be setting in or worsening. People with low potassium levels release less insulin, have higher blood sugar levels, and are more likely to get Type 2 diabetes relative to those with normal potassium levels. This early indicator of potassium levels is key for our constituency. 1 in 6 military veterans are on dialysis for kidney failure, which is greater than the general U.S. population. Further, ProtonIntel’s device can be used as an early indicator for Chronic Heart Failure (CHF), another condition affecting veterans at a higher rate than the general U.S. population. We note that chronic kidney disease (CKD) and CHF afflict minority populations at a far higher rate than non-minority populations. This is particularly true when it comes to African-Americans and CKD. African Americans contract CKD at a rate that is slightly greater than 3x higher than the U.S. Caucasian population. We note that the high rate of CKD and CHF amongst the veteran population is likely correlated with the disproportionate number of minorities within the veteran population. Sahan Ranamukha, a second-time medical technology founder, leads ProtonIntel. He is supported by a team of hardware, sensor, and software experts, some of whom have co-founding startup experience of their own.


We have already made a couple of healthcare technology investments, and we are excited to make several more as we invest into healthcare technology that sits at the intersection of dual-use and deep technology. We believe our investment focus areas of rapid diagnostics, connected devices and advanced therapies will not only improve the clinical outcome of our constituency but also play a role in improving outcomes for all humans.


Recent Tailwinds for AIN’s Healthcare Technology Investment Focus


At AIN we are also excited by the recent creation of the Advanced Research Projects Agency for Health (ARPA – H). This organization will sit within the U.S. Department of Health and Human Services and is designed to advance high-potential, high-impact biomedical and health research. If predecessor ARPA agencies such as DARPA and ARPA-E are any indication, ARPA-H should advance technologies that can eventually transform into companies that AIN Ventures can and will invest into. Of the large ARPA organizations, one of the most recent ARPA – E, founded in 2009, has provided $3B in funding to more than 1,300 projects. Of these 1,300 projects, 190 have gone on to raise $10B in private-sector funding, and 25 of these projects have had a combined exit value of $21B. This demonstrates the catalyst function that government funding can have on non-core defense dual-use technologies. At AIN Ventures, while we acknowledge that historical performance is no indication of future performance, we do believe ARPA – H has a shot at similar success as that of DARPA and ARPA-E. Spending on ARPA-H was recently approved in the Biden Administration’s $1.7 Trillion spending bill to the tune of $1.5B.


AIN Ventures is committed to early-stage healthcare technology investing. Our focus areas are growing rapidly, and we are excited to bring our unique, dual-use lens/perspective to this ecosystem at the pre-seed and seed stages. If you are a founder building in one of these areas, we are excited to speak with you.


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