Investing in Early-Stage MedTech and Tech with Excelestar Founder Tasneem Dohadwala

0:00Hi, everyone. On the Builders podcast, I interview CEOs, entrepreneurs, authors, authors, and leaders about building businesses and building careers. And in today's episode, I speak with Tasneem Dohadwala about early stage investing in medtech and deep tech companies. Tasneem started her career at Lehman on the trading floor. She went to business school and then later on founded Excellestar Ventures. And for the last 15 years, she's been investing in companies, for the most part, early stage. And we talk about her thesis for investing, investing in minority-led and women-led companies, dealing with macroeconomic uncertainty, and a whole bunch of other really interesting topics.

0:40If you really like episodes about investing, you should also check out episode 51 with Stacey Saul. She runs her own venture studio here in Seattle, and also number 80 with Josh Payne, who operates a VC firm focused on commerce. Thanks.

1:00Hi, Tasneem. How are you? Good to see you. Hey, John. How are you? I am great. I'd like to start here. You're the founder of Excel Star Ventures. You do investments in med tech and deep tech. Maybe could you describe for the audience what types of investments you make at what stage company? And then maybe to orient the audience, an example of a recent investment in your thesis for funding that company. So we invest pretty early stage. So for our med tech companies, we're investing, you know, I would say right before they begin early feasibility trials or before they go into humans. So they could be still doing large animal testing.

1:40and for our tech companies, I would actually say they're a little bit more advanced. So we generally invest after a product has been developed and they've sort of gone through the early pilot phase of the company and they're figuring out product market fit. It's slightly different between the tech and the med tech companies, but we do definitely go in early when they're young companies and then we stick with them throughout the life cycle of sort of however long they're going to take until they exit, whether it be IPO or acquisition. And in terms of, you know, you mentioned deep tech versus med tech.

2:17So med tech basically are devices that we invest in devices that deliver therapy. So we're not investing in instrumentation or aids or surgical robots. We literally focus on devices that are delivering therapy. So just like a therapeutic delivers therapy, these devices deliver therapy. And then in terms of our tech portfolio, it's a little bit more broad than our med tech portfolio in what we're investing in. But we are looking for a solid, really disruptive technical advantage that the company has before investing in it. And as I said, we do look for product market fit. And across both of these segments, the market size is really important to us.

3:04So we're really looking at markets that are 750 million to a billion dollars plus. We feel like it's part of our thesis is you really need that large market to justify the amount of investment that's going to go in and then command the exit values that investors want to see. I want to ask one question about each. So on the med tech side, just so I make sure I understand an example. So diabetes runs in my family and would an insulin pump that, you know, is attached to your arm and delivers insulin, would that qualify as med tech for you? Yeah, yeah, definitely. So I can give you an example. So it's a little bit different.

3:44So I'm sort of picking it on purpose. One of our companies, it delivers a liquid embolic that has a flow ability that current liquid embolics do not have. And it is able to penetrate into the microvasculature incredibly deep, again, in depths that we don't have right now because the microvascular sure is so fine. And the reason that's important is because it cuts off all blood supply to hypervascularized tumors. And therefore the tumor doesn't get any more blood and therefore eventually becomes necrotic. So it's delivering a therapy through a device. Okay. And then a med tech thing that would, that wouldn't necessarily qualify is like an artificial hip that probably would not, would not fit for what we're doing, Or, for example, like a software that helps someone read echocardiograms more efficiently or a hospital software that helps them bring down their no-show rates more rapidly.

4:45So, like, we don't do health tech. We're not, you know, investing in robotic equipment that helps with, you know, surgical intervention. We're not investing in that. And then on the tech side, you said you have a little bit different criteria. Maybe for med tech, they're still in a testing phase. But for tech, you want to have seen a product market fit. How do you define that? What's an example of something that's met that versus hasn't met that in your mind? Well, that is definitely the$100 million question. Right, literally. How do you want to have product market fit? Right. But here's the way I look at it, is that each one of your tech opportunities has sort of a targeted customer or maybe one to three different types of target.

5:31You know, there's like a customer profile. And let's just take an example. If you have three different types of customers that you believe your tech is going to, you know, you're going to be able to sell to, there's a value proposition there. We'd at least want to see that you have been able to sell to one of those three. You know, you've been able to execute on one of the use cases you believe to be really compelling. So if you're only selling to one use case, well, then I hope that you've sold to like at least a couple of customers in the same use case. So we see a repeatability or perhaps you've been able to sell to two customers, the two different use cases.

6:12But maybe you've only sold to like one per use case, which is OK. And also, have they gone from maybe a free pilot to a paid pilot or a paid pilot to now it's only going to be, you know, initially it was one department. Now they're going to do three departments. So like that depth of penetration within your customers is really important. So either the breadth across customers or the depth, those are the things that we're looking for. Obviously, if you have both breadth and depth, that's even better. I want to zoom out, I guess, for a minute and talk about the state that we're in. And without commenting on whether we like or hate the tariffs, I think we can all agree that economic uncertainty has increased over the last couple of weeks or months.

7:02And we're recording this in mid-April. How does economic uncertainty impact the different parts of your business, your investing? Does it create opportunities? Does it slow things down? What insights could you share with the audience about how it impacts your business and then how you navigate that? Sure. So I think holistically, downturns always are sort of a depression in the equity markets or just general consumer sentiment. However, we want to categorize the situation that we're currently in. I don't want to use the word, the R word, because there's a lot of debate whether we are in the R word or not.

7:44I really don't want to pontificate on that. Those low points in our market always provide opportunities for those that are willing to bear some risk. And they're able to sort of look, cut through the noise and have a very long-term perspective. There's always opportunities because my theory is going to be that capital will be more scarce than it would have been. I think we were thinking about 2025 being sort of a renaissance in capital spending and deals. And it doesn't seem to be a year that's perhaps shaping out to be like that. Things could change. And therefore, there are going to be companies that perhaps have to go longer than they were expecting because their exit isn't going to be happening in the near term like perhaps they had presented.

8:33I don't think any company is going to be going, taking their company public in these turbulent markets. I think there are actually some companies that have put their IPOs on hold. So when you start removing the exit possibilities for companies, there's sort of like a backlog in the VC world, right? If you don't have the exits, you can't show the returns. You can't necessarily, if you're raising a fund, you're going to have a harder time showing people your performance. or LPs haven't gotten their money back. And so they don't want to invest more into that asset class. In terms of acquisitions, I still think, for example, like the med tech sector in general is still doing well.

9:12I think it's very much our recession proof kind of an industry and which is great. However, I think what uncertainty brings is a little bit of, we're just going to wait on the sidelines to see what happens. And when you have that stalling, perhaps a deal that could have happened, an acquisition that could have happened may not just because in general, the sentiment is, you know, people are nervous and they're waiting. And so I do think that the forecast for acquisitions, IPOs, it's going to cause sort of a bit of a backlog and a stalling of the venture industry. And I think in general, I think your LPs are going to be more nervous now.

9:58Their portfolios have gone down dramatically and they're not feeling, I mean, in essence, venture is a risky asset class, definitely riskier than other asset classes like perhaps real estate. And so they may not want to reallocate more funds to venture. So companies, I would think, will have maybe a harder time raising funds. I think funds will have a harder time raising funds. And it's all a very sort of small ecosystem. So as soon as you become financially constrained on any side of that ecosystem, everyone's going to feel it a little bit. My career is in marketing, advertising, martech, those sorts of things.

10:40And what you're saying kind of resonates with me. We're not seeing really anything in the immediate term. However, let's say there becomes a general perception that the price of cars is going to increase because of parts and things like that. It creates a ripple effect on auto insurance because cars might be more expensive to repair, which might create a ripple effect on the interest in an auto insurance company doing advertising to bring on a new customer if they're unsure that it's going to be profitable or not. So kind of the same sort of things that sounds like happens in the investment world.

11:21Really, really interesting. Well, I'm, of course, hoping for economic certainty. Me too. And so we'll just cross our fingers for that. I wanted to ask deeper about the types of investments you make. So Accelstar has been around for 10 or 15 years, I think. Almost 15 years now. Oh, actually thinking about, yeah, almost 15 years. Love it. And in investing significantly in women-led, minority-led companies, achieving 50 % or more in both categories, I presume that was always a vision for your business. Since you started, do you think it's gotten easier or harder for minority-led companies to get funding?

12:03And then what would you recommend to founders, minorities, women to get the funding that they deserve? I think that there is more talk about it than there was 15 years ago. I think that there are funds that are, I mean, there's so many more funds out there now that say that they invest only in women or, you know, a certain percentage of women founders. There's definitely way more than there were 15 years ago. I do think that, and I've sort of talked about this before, that there's not still, those funds don't have a lot of money. So even though there's more funds out there, there's more awareness, I have yet to see the amount of dollars increasing tremendously.

12:47And then the other fact, I believe, is I'm not sure if it's still true, but I know it's true in 2024, that majority, even the larger funds, majority of the decision makers are still men. And there's definitely a lot of data that people like to invest in those that are like them. They're sort of mirrors of themselves. It's a natural comfort measure, I believe. And so when you have women that are not in sort of the decision-making power or don't have sizable amount of dollars, you're not really going to move that needle. And I think the same thing is for minority-led companies, right? We definitely have more awareness.

13:27We have more funds, but I'm not sure that we have more dollars. And in the end, these companies need dollars. I do find that my women-led companies have a much more difficult time raising. I mean, there's one exception I can think of, but generally they have a harder time raising funds than men do. I think there was actually a pretty in-depth research study done around the questions that women founders get asked versus men founders get asked and from women investors. So it doesn't really matter who is asking the question. It's that women get asked about sort of very much defensive protectionist type questions like, how are you going to manage your risk?

14:06Or why do you think this growth rate is reasonable versus men get asked questions that are very forward looking and visionary? So, you know, if, you know, achieving this growth allows you to achieve what milestone and that slight change in how you ask a question can change the type of answer you get back. So if you ask a sort of a defensive risk mitigating question, the answer is not going to be as exciting if you ask a question that's very forward looking sort of visionary focused. And that's why one of the advice that I always give our female founders is if you get one of those questions, the sort of defensive risk based questions, answer the question and then turn it.

14:52Turn it into that growth visionary type question. Take the opportunity to turn the narrative around so it reflects really the opportunity rather than how are you protecting the downside? I say this a little tongue in cheek, but it's almost like answering a question like a politician. Is that in that in that in that I'm going to communicate my vision, my most important things, no matter what you ask. Yes. Because that's really that's really where the business the business is going. That's interesting. What other types of things are you doing? Are you seeing others do to try to change the narrative or change the game for minority-led or women-led companies?

15:36Well, I think talking about it, number one, I think focusing on it, making it a source of pride in what I do and on our website. And every time I talk about it, I think you lift up the issue and you lift up the importance of it. It's actually rare now that when I see a leadership team, if there's no diversity represented on the leadership team, I do tend to very politely ask them what their recruiting plans are to bringing on diversity because there's an economic case to it, right? A diverse leadership team yields better economic outcomes. So as an investor, if you really look at it in a purely sort of capitalistic economic way, you want a diverse team because they have a higher likelihood of winning.

16:17I have not in very recent terms or even in the last few years ever gotten pushback for when I bring it up. There have been a few times where you get sort of excuses, oh, we've really tried very hard, but we just can't find anybody. And to me, that sounds like they need to try a little harder or be a little bit more creative in the way they're going about their recruiting. But in general, I'm actually very pleased by the type of diversity that we do see within the teams, which I do think has changed in the last 15 years. Do you think that a challenge that remains is board composition? Because diversity in the C-suite might not necessarily translate into diversity in the board.

17:00How do you think about that? And when you're making investments, are you joining the board or are you helping to shape the board to produce those diversity and positive economic outcomes? I almost always at a certain, you know, once we reach a certain threshold, so we will lead deals, we will also be follow-ons, but we generally either want to be to have a board seat in many cases or then be a board observer. And as a board observer, I do find that our CEOs still treat us very much like board members. I mean, I think as a board observer, you can just sit back and observe, but that isn't the role that we play.

17:42I really like to get very in-depth understanding of the company before I invest. We have a really robust diligence process. We have sort of a quantitative and qualitative approach to it. So we get to know the company really well before getting in. And we try really hard to be value-add when we get there. And value-add doesn't mean going in and sort of operating with the CEO or in partnership. I mean, the CEO, it's their responsibility. We do not want to be doing anything operational, but we do want to be a thought partner with the CEO, especially if they're trying to sort of think about the strategic direction of the company or changing the strategic direction of the company, which as I'm sure you all know, with startups, the directions can change multiple times.

18:29And so you want to be able to be a thought partner in those situations. And in terms of board composition, while I love all the boards that I sit on and I love all of my colleagues that I sit on boards with, there is not a ton of diversity. I can think of one company that has a significant amount of diversity on it in terms of gender as well as ethnicity and race, but that's only one company. So I think we have some work to do there. It sounds like it. Tell me about the Boston startup community. I live in Seattle, about as far away from Boston in the U.S. you can get. And it's really rich in AI-focused startups right now.

19:09We have the Allen Institute is here. Microsoft, Google, Meta are in our backyard with giant campuses. What's the Boston startup community like? Where does it get its energy? How does it thrive? I'm sure you make a bunch of investments outside of Boston, but you probably have an advantage for companies that are based in Boston. I think Boston has a really rich profile of biotech, pharma, and medtech startups. Boston was one of the cities that really benefited from the tech bubble. So there is a lot of tech. But I think before, way back when, it was more sort of traditional tech, whether it be networking and communications.

19:50And I do think that there is a lot of now. So if you're thinking about this sort of new wave of tech investments, they are there is a lot of focus on AI. But it's interesting because it's not I would say I still see more like health tech with, you know, health care solutions with AI built in. So I think there's definitely a health care focus here, probably between all the academic institutions, you know, the academic medical institutions that we have as well as the universities. I find that it is easier to find sort of a healthcare-based deal than a tech deal. And I think in terms of our funders, I find that there is definitely a...

20:32There are tech funders here, lots of tech funders, but I wonder if they're willing to... They're more interested in going in later than, for example, if you were a tech funder in Silicon Valley. I think they're willing to maybe accept sort of an earlier profile investment than here in Boston. And how many of your investments are local, if you will, versus elsewhere in the U.S. and maybe international? I don't know the percentage. I would say drivable. And if you think about drivable in dollars committed, I would say it's about 70, 30 or 75. 25. Nice. Definitely a skew that's drivable. I want to ask about, go back to med tech and ask if there's any area that you're really optimistic and excited about.

21:33I can ask, I can give my selfish question. I mentioned diabetes runs in my family and been five years away from a cure for 30 years. So sort of my understanding of it. Is there any like disease, any type of therapy, anything that you just think is going to really explode to benefit consumers over the next decade, let's say? There's been a lot of work to personalize therapeutics recently. And I think that you're going to see the same trend in medical devices, whether it be using materials that allow for sort of manipulation. So it better fits the anatomy or ways to adjust the device based on how the disease is progressing.

22:22So whether it be using AI to then modulate the medical therapy that goes alongside with that device and, you know, giving sort of sensing data and using AI to sort of parse through that sensing data and give insights, whether it be changing. So for example, we have a cardiac shunt and as the disease and heart failure shifts, are you able to change the size of the shunt to better ascribe to how the disease is progressing? And so therefore able to sort of improve patient outcomes rather than having sort of a static one size fits all approach to the device. And I think that, again, we're going to see that through, you know, AI, through sensors, through materials.

23:09But that level of personalization to medical devices, I think, is going to take medical devices to a different level and in such a way that it will be, if not the same or better therapeutic input than, for example, like oral therapies or whatever it may be. Wow, sounds very, very exciting. It is, yeah. I want to move backwards. You have a lot of experience. people might be asking, how did you become a founder? And you have a lot of experience in financial services industry. I read on the sell side of places like Lehman, other places. What was that experience like? And then how did it shape how you approached founding of Accelistar and sort of the rest of your career?

23:50So I started my career at Lehman Brothers, which on the sales and trading floor. And it was probably the most frenzied type of experience. I mean, it was just buzzing with energy. I mean, the pace of work there, I mean, and I assume that's the case probably in most trading floors, but it was a really fast paced environment. And you get there when you're in your early 20s and you learn to think like that and you learn to move like that. And you either like it and you thrive or you don't like it and you leave. And I loved it and I thrived. And I was there for the amount of time that made sense. And then I went back to business school, which was sort of always my intention.

24:38And that allowed me to sort of sit through and think about how did I want to change what I was doing. And I think I started in equities. I love the story behind each stock, even today. I think about the story between, you know, in each stock and how is it going to do and how is it going to fare and how our macro factor is going to impact that stock. And if you take that stock as a microcosm of my companies, essentially that's what we're looking at, right? We look at an opportunity and we think about how is this opportunity going to fare over the several years that it's going to try to come to market?

25:16How is it going to change the landscape it's moving into? How are competitive dynamics going to impact it? And what do we need to do to be successful? So you've seen the stories of hundreds or thousands or tens of thousands of equities over the course of your career. And I'm kind of curious as to the pie chart of quantitative versus qualitative pattern recognition because I imagine that there are these certain kind of like spidey sense that you have based on all the stories you've been exposed to, all the founders you've talked to, all the equity stories, the macro environment. It kind of comes all together in a beautiful mind sort of way.

25:58Maybe you could talk about that. So in equities, right? Like in public market companies, you have so much financial data, right? You are able to see things that make sense financially. And if you put in perspective with macro indicators, you know, if you have a consumer company, you kind of have a sense based on what's going on in the macro world, how that consumer company may do depending on where they are and whether they're disposable or sort of discretionary or wherever it may be, right? The interesting thing in startup companies is I would say whatever financial projections in general they give you, they're not really relevant, right?

26:35Because most of these companies, while you do want to think about how are they using the funds that you're investing, how are they thinking about their expenses? Are they being realistic about their expenses? They're not going to have any revenue for a really long time. They may actually never have revenue for the entire life cycle of the company while we're invested. I mean, it's very possible, right? Because we get in so early that it takes a really long time for revenue to be even meaningful. Even our tech companies, the revenue isn't really meaningful. That isn't sort of what determines value.

27:06So we'll always do a forecast model. We'll always think about the financial aspects of the deal. As in a lot of things I think about financially when I'm doing a deal is, does this amount of money that they're trying to raise actually get them what they need to hit their milestone for the next race. So a lot of times, this unfortunately has come up a couple of times when companies want to do a bridge. And I said, well, okay, you want to do a$2 million bridge. How long does that$2 million buy you? What are you getting from that$2 million bridge? And how is that changing the story of your company such that now you'll be able to raise additional funds off of what you create, that value you created in the$2 million bridge?

27:53And if you can't articulate that, I say you're bridging to nowhere. You're just bridging to the oblivion. You're just going to keep bridging. The bridge has to have a defined value creation that's happening through the bridge that enables another investor to come to the table to now invest additional funds in the next round. So in some ways, the financials, when I make an investment decision, they're important and we look at it. But the thing that we look at is we actually have a qualitative and a quantitative approach to our investing diligence. So I've created a quantitative matrix that we actually rank all of our companies on several factors and we actually score them.