Building a startup is hard enough but growing one in a category marred with Theranos-sized stigma is a new level of challenge. Vital Bio seems up for the test.
The Toronto-based startup is building a machine, VitalOne, that can perform more than 50 blood tests — covering nearly all of those considered routine — and get patient results back in 20 minutes, not multiple days. Co-founder and CEO Vasu Nadella said that he got interested in the space because he and his co-founders have watched family members deal with chronic illness and know that being able to get quick diagnostic results is crucial for treatment.
Plus, Nadella wanted to know why companies couldn’t seem to get the solution to this problem right. While Theranos failed for a variety of reasons, the other companies trying to build these quicker blood diagnostic tools had yet to ship products. He thought maybe he could crack the code.
The startup launched in 2019 and built quietly until it debuted its device at the American Association of Clinical Chemistry’s annual meeting — the industry’s “Super Bowl” — last Monday. Vital Bio also announced that it had raised $48 million in venture funding from Labcorp, Inovia Capital, Lachy Groom and Sam Altman, among others.
Nadella said the company has focused on making sure that its device produces accurate results and that when it does drift, they know how to prevent it from impacting the final diagnosis. He said the company waited to start talking about what it was up to until it felt it had enough to back up its claims.
“We knew we didn’t want to come out without really good data,” Nadella told TechCrunch+. “We didn’t want to even try to ask for credit before we felt that we had something worth showing off that is far enough along.”
This funding announcement seems notable. It’s not only quite a chunk of change for a company that is still in late development, but it’s also the type of startup that inherently scales much slower than most venture capital timelines. It’s also in a category that many investors aren’t giving a second chance.
I think the continued skepticism for the sector is because there has been failure but not yet success. When you think of other categories that have seen spectacular collapses like crypto with FTX, the reason that explosion didn’t tank the entire industry is because it already had success stories like Coinbase that investors could point to as a sign of confidence.
Blood diagnostics didn’t have that before Theranos dissolved, and it still doesn’t have that. But maybe Vital Bio could become that success story, forming the tide that lifts all boats in the category.
It’s a shame it has to be like that. Theranos didn’t fail because it was a bad idea — it was a great idea, actually. It failed due to fraud and setting itself up for unrealistic timelines based on how long it takes to develop its technology.
“It does suck,” Nadella said. “The addressable market of investors is a lot smaller than it should be given the opportunity size. We have made this much progress. We aren’t going to use it as an excuse to go slower. There are really high-quality people out there that do get it.”
The other thing that stood out about this deal is the venture support for a product with an incredibly long life cycle. Traditionally, while some VCs focused on categories like deep tech or drug development were happy to invest in companies with longer horizons, most weren’t. It seems that Vital is the latest company showing that’s starting to change.
Nadella said that it’s hard to raise in a category like this because many of the stages of development look like there hasn’t been any real progress and there isn’t revenue or commercialization until that happens. But we’ve seen investors get increasingly interested in these long-term projects. Markets like space and climate have sparked investors to flock to projects, some of which are a decade away from producing revenue.
This is largely a good thing because the VC model of getting a good return in a few short years just doesn’t cut it for many industries. Plus it means more money is going to solve harder problems that probably need capital the most, which isn’t a bad thing, just a slower thing.
I do feel for Vital, though. It’s crazy to think that its progress will be compared to a criminal and attached to a category that carries a large stigma. But if and when they find success, it will make the victory that much sweeter.
“We are trying to be totally different than anything you might imagine with Theranos,” Nadella said. “We are extremely transparent with demos. There is a webcam where you can see your own blood getting tested. We are feeling really comfortable.”