Gali Health (June 2019)

Deal Abstract

https://www.seedinvest.com/gali.health/seed

Alexa/Siri/Google Now for individuals facing chronic health conditions. Has a moble app in beta and will be rolling out a Healthome Platform post-funding. This is pre-revenue, with the beta version scheduled for Q2. Plans to make money from pharma partnerships and freemium personalized programs.

Decision

No: not my specialty.

Why Investing/Passing

  1. No revenue, no product in the market, serving a niche field that I don’t know much about. I googled Illumina and found myself with more confusion than clarity when trying to understand this ecosystem.
  2. Burning 230k in 2017 then 384k in 2018 to build an app that doesn’t have revenues is an industry that I’m not comfortable.
  3. Fundamentally, while I believe that this may be a great product, I’m struggling to see how this becomes a great business. That said, if anyone can figure it out, it seems this team is it.

The 6 Calacanis Characteristics (91 161 18)

Passed on 2/6.

CheckPass/Fail
1. A startup that is based in SVPass: (San Francisco, CA)
2. Has at least 2 founders Fail
3. Has product in the market Fail
4. 6 months of continuous user growth or 6 months of revenue.Fail
5. Notable investors?Maybe?
6. Post-funding, will have 18 months of runway Pass: burn rate is $4.3k/mth, at $250k raise this is 58 months.

Burned 230k in 2017 then 384k in 2018. Monthly burn at present is 32k/month. At $178k already fundraised, this is 5.56 months, if they hit the 900k, that’s 28 months. That said, biotech seems like it’s always at risk of being a giant money sink.

Gali Financial Summary (Hosted link.)

The 7 Thiel Questions (ETMPDDS)

  1. The Engineering question:
    • Bad: Not seeing how this beats Apple Health, or any other software behemoth who decides to turn their Eye of Sauron to this space.
  2. The Timing question
    • Bad: not sure why this is a great time to start a AI solution for chronic disease patients. The AI might be right, but that’s already a big if. In addition, I don’t expect (nor would want) for there to suddenly be a precipice of explosions in users with chronic health problems. Though now that I’ve written that, maybe the founder is going from the demographic perspective (aging boomers.)
  3. The monopoly question
    • Bad: Uncertain. Maybe once Gali can dominate the chronic disease AI treatment place, it would then expand to all health for all people. But that seems more at the whim of Google, Apple, maybe Amazon.
  4. The people question: 
    • Good: the founder seems very well-positioned to execute on this.
  5. The distribution question
    • Bad: why would other partners in the space want to help distribute Gali? It is a consumer app, but as a B2C2B, that doesn’t seem like a strong positioning for distribution.
  6. The durability question
    • Bad: the data is the most durable part of this business, but it seems like this is more of an aggregator of other sensors. Unlike Apple/Google who own the hardware and OS side of collecting data, not seeing how Gali wouldn’t be at their mercy.
  7. *What is the hopeful secret?: 
    • After figuring out how to nail the very niche market of chronic healthcare patients, the company can then rapidly scale and become a painkiller (not a vitamin) in the treatment space. Ideal case is becoming the Mint.com of healthcare, becoming a trusted aggregator that has more power than any of the individual sources.

What has to go right for the startup to return money on investment:

  1. Absolutely nails the value prop to individuals living with chronic conditions.
  2. Aggregates and is able to combine the different data into genuinely distinguished and useful insight.
  3. Can move fast enough and develop/exercise core competencies that make copying unlikely/too slow, and get acquired.

What the Risks Are

  1. Novelty of the data
  2. Relying on partners for collection of data
  3. Focusing on a niche market with questionable value prop and scalability

Financials (References)

  • Total Amount Raised: US $178,000
    Total Round Size: US $900,000
    Raise Description:  Seed
    Minimum Investment:  US $1,000 per investor
    Security Type:  Crowd Note
    Valuation Cap:  US $12,000,000
    Offering Type:   Side by Side Offering
  • Security Type:Preferred Equity
  • Share price:US $0.25585
  • Pre-money valuation:US $3,000,000
  • Option pool:10.0%
  • Liquidation preference:1.0x
  • Closing conditions:While Gali Health has set an overall target minimum of US $100,000 for the round, Gali Health must raise at least US $25,000 of that amount through the Regulation CF portion of their raise before being able to conduct a close on any investments below $20,000. For further information please refer to Gali Health’s Form C.

Updates

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