At an event last August featuring pitches from startups, EnsoData co-founder Chris Fernandez told audience members that his company was hoping to raise $300,000 in a seed funding round.
EnsoData, whose software uses machine learning algorithms to help clinicians score sleep data and diagnose patients with sleep apnea and other disorders, has now realized that dream—and then some.
The Madison, WI-based startup says it’s raised $550,000 in equity financing in a seed round led by HealthX Ventures, with some individual investors also participating.
“By using technology from EnsoData, clinicians will be able to automate what has historically been a very manual and tedious review process to quickly gain insights and provide more personalized, proactive, and preventative care for their patients,” Mark Bakken, managing partner of HealthX Ventures, said in a statement.
Bakken will be joining EnsoData’s board of directors, Fernandez says in an interview.
The new financing is the first major outside injection of cash into the pre-revenue company, Fernandez says. EnsoData received a $12,000 grant from the Y Combinator Fellowship program, which the startup graduated from in November, he says. But other than that, all of the money used to fund EnsoData’s operations to this point has come from consulting work he and his co-founder Sam Rusk have done on the side.
There appears to be a market for the type of software EnsoData is developing. ResMed (NYSE: RMD), a San Diego-based company whose products include devices that help with sleep disorder management, conducted a survey of 179 sleep clinics last year and found that 86 percent of them weren’t using any form of computer-assisted or automated scoring. About 3.5 million diagnostic sleep tests are ordered annually in the U.S., according to a report from NovaSom, which helps facilitate at-home sleep tests.
EnsoData is still in the early stages on the path to commercialization. Rusk says he and Fernandez are working to assemble a group of regulatory experts to serve as advisors as the startup pursues a 510(k) clearance from the Food and Drug Administration. Fernandez says the hope is to have that group in place by the end of April. EnsoData would then send the FDA its submission, which would probably take the regulator three to five months to review, he says.
“We are definitely shooting to get clearance this year,” Fernandez says. “After the FDA has signed off that [the software] is safe to use, we can go in and let [healthcare workers] start using it in a real clinic environment, and let them realize all the time savings that it can enable.”
EnsoData plans to use some of the new money to add employees focused on sales and data science, according to a news release. Currently, Fernandez and Rusk are the company’s sole employees.
Fernandez says that the focus for the next 12 months—if not longer—will be on the startup’s first software application, which is called EnsoSleep. Eventually, he says, the technology could be rejiggered to analyze data that’s not related to sleep disorders.
“We know that there’s a lot of important processes in healthcare that involve repetitious review of waveform data,” Fernandez says. “We’ve been talking to physicians with different specialties, and we’re building up a set of ideas for next applications.”
He mentions critical care, diabetes care, cardiology, and urology as potential areas of future interest, but says his company “does not have a firm commitment to what exactly our second application is right now.”
EnsoData will likely stick to software, Fernandez says, rather than trying to develop an integrated device to help diagnose sleep apnea. He says that in addition to ResMed, some of the big players in the current market are Philips Respironics, Compumedics, and Natus Medical (NASDAQ: BABY). All four companies engineer the hardware for devices used to conduct sleep tests, and also develop software to access and store data collected by the machines, Fernandez says.
“The kind of integration we’re going for is so that the users don’t have to switch between different software apps,” he says. “We’ll basically try to add a button so that they can submit the data to EnsoData to be analyzed, we send back the results in the native file format, and they can review the results in the native software.”
Asked whether those integration efforts would occur through partnerships or through a strategic sale to a larger, more established business, Fernandez says it’s a little too early to tell.
An eventual exit would translate into a payday for HealthX Ventures, whose offices are in a downtown Madison building that also houses three other venture funds, and to which EnsoData recently relocated.
HealthX was one of the participants in Redox’s $3.5 million Series A round, announced in October; Redox helps software developers integrate with patient record-keeping systems used at hospitals and clinics. Other Madison-based companies members of HealthX’s team have invested in include Catalyze, Forward Health Group, Healthfinch, and HealthMyne.