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My funding story: xWave Technologies

Posted: Fri 20th Jan 2023

Mitchell O’Gorman is the CEO of xWave Technologies. xWave is on a mission to save lives by ensuring that patients get the best tests first.

xWave was founded in 2020 by a team of radiologists who wanted to create intelligent solutions for the problems they were facing daily at work. Their xRefer solution is a cloud-based clinical decision support system to help radiology teams in vetting referrals more efficiently.

As part of Enterprise Nation's Access to Finance programme, we've been asking business founders to tell us about their experiences of getting funding. Here, Mitchell tells Enterprise Nation about xWave's funding story to date and his business consultant expertise.

Where did xWave's finance journey begin?

The earliest round was a friends and family round to get things started. The 'pre' pre-seed round would have been around €600,000.

Again, it was primarily friends or family and colleagues, particularly medical professionals who work in that space, because they want to fund the solutions that are going to make their day to day better. That's obviously a good resource of early funding.

That early funding enabled them to hire me. The founders were working on it on a part-time basis and really, you need somebody to come in full time to take the lead on it.

So they brought me in, and it also funded the build of our first version of our clinical decisions platform. We went out and worked with a third party called Threadable, who are based in Dogpatch Labs, and they built it for us.

That's kind of phase one – get enough money in so that you can build something that's deployable. Phase two is deploy it wherever you can, and then it's just a race to product market fit. What we did then was we raised €1.3 million, which has gotten us to today.

Where did the €1.3 million come from? Did you go to VCs at that stage?

We received €250,000 from Enterprise Ireland through the High Potential Start-Up funding – they are an unbelievable resource for early stage businesses in Ireland, and we're very, very lucky to have them.

I went to both the Local Enterprise Office and Enterprise Ireland and we were picked up by Enterprise Ireland as they saw the international potential of it.

To get the rest of the money – the €1 million plus – we thought we were going to need to go to VCs. So we started having conversations with the usual suspect in Ireland – Elkstone , Frontline and ACT – people we knew who had capital to deploy. We also spoke to a couple of UK-based VCs and some European ones too.

We needed money because what we had to do at that stage was to prove that product market fit. We needed 'runway' to be able to deploy the solution that we'd built from our pre-seed stage.

It's not necessarily all about the leveraging of the VCs networks, or in particular having their intellectual capital to help you scale right, at that stage. Primarily it's about money.

And as we had those initial conversations, we also went out to our existing investors. And they came back so strongly that they took all of the round, which was amazing and unexpected.

We brought in a couple of additional private investors again, healthcare investors primarily, but the bulk of the round was taken by our existing investors.

Sounds like a lot of people on your cap table. How do you deal with the logistics/terms of that?

There are a number of people on our cap table now, a number of private investors, but that's fine. It's not really complicated – you work with your legal team to do up your terms. We use an external team.

Have you started your next round?

We've just launched before Christmas, and are calling it a 'seed plus round' of €3 million. The reason that we've done that is because the UK market is now open to us in a big way – NHS England is actually funding the rollout of what we do, and the HSE is very supportive of what we do.

This time, we're definitely going to use institutional capital or VC investors. This is where we need their capital, their network and their knowledge to scale. We would say that we're just on the cusp of scaling and obviously, this is what they do – they help businesses go from start-up to scale-up.

This is where they become really, really valuable and they can use their networks to help you recruit the right people – particularly at the senior management levels. And they can use their experience and expertise to enable you to avoid some of the pitfalls of upscaling.

Have you kept in touch with the VCs since your initial talks with them or has that door closed now?

We've kept in touch with all of them. Those initial conversations that I had with VCs, when we were doing our previous round, were quite positive.

I went back to them and said we've managed to raise from our existing investors. By the way, that's a good sign that the right people are already investing and seeing enough potential here.

I send the VCs quarterly updates, any big news and things that have been happening. It's a hugely valuable thing to do, because it's really hard to get into investors cold.

Having those relationships warmed up, having them follow your journey on Twitter or LinkedIn as well as the emails that you give, it means that you're not starting off cold when you re-engage with them. The discussions are more advanced when you engage with them again.

With all the private investors, and now bringing in the VCs, how do you make sure there's enough equity to go around for future rounds?

You have to be very, very careful at all stages, and we have been, not to overdilute and give away too much equity. Because you need to keep equity for moving forward.

And also, any VC coming in, they're going to want to see that the founders of the business have enough equity. It's a red flag for them if the founders don't.

They want founders who are really passionate, of course, but also who have skin in the game and are going to really work their socks off to make this thing successful. That's another thing that you need to be aware of.

We are seeing a lot of stress in the tech sector in Ireland at the moment, does this raise concerns when you are looking for funding?

There's a lot of money in Ireland at the moment, there is a lot of capital - a lot of VCs did big raises just before the dampening down of the market happened – and really, they're crying out for opportunities to deploy.

There are also private investors who have been involved in a few big exits in Ireland over the last few years that maybe made a few quid that they are looking to reinvest.

So, there is money out there for the right thing, but really what's happened is, I think that the valuations have kind of become more realistic compared to where they were a year or two ago.

There is a lot more realism there, so it's not as easy, but for the right thing, and hopefully we are the right thing, the money is there.

VIDEO: Securing angel investment

In this webinar, Johnny Harte chairs a panel discussion with HBAN's Niamh Sterling, a small business founder who has secured angel investment:

Other webinars in the series

How to access finance and leasing / Join an accelerator and get funded / Invoice finance and revenue-based financing

When you're talking to VCs, obviously you need to think that down the line there will be an exit. Is this something you're personally considering at this stage?

You have to think about your exit strategy. And of course, it might change, a lot of different things can happen. But you must have an answer for any investor coming in, because they want their money back – some want a 10-times or 20-times return on their investments.

They need to be able to see number one, that the market is big enough, so that you're going to be able to grow your revenues. And to a point that you'll be able to have a good exit.

And number two, that you're actually providing something that's complimentary, and to typical buyers within the market, to 'the big players'. So you do have to think about it – it's either a strategic buy-out, an IPO or whatever. But there has to be a liquidity event for your investors.

When you're having those chats with VCs, they're going to ask and you need to have your answers ready.

What's the dream?

The mission will stay the same from a business perspective, but really where we want to go is bringing AI into play, helping clinicians determine the right pathway into all healthcare for patients.

We're starting off with radiology, but we're going to be broadening it out to diagnostics – this work is already underway. We have an AI partnership with University College Dublin, where we're based, and with ceADAR, the Irish Centre for Applied AI.

What we want to do is really be the gateway for all healthcare. Because 80% of all healthcare visits involve at least one scan and at least one diagnosis.

The first step is diagnosing the patient, and there's actually so much wrong at that first step in terms of misdiagnosis, delayed diagnosis, not signposting things. So the dream for us is to be that gateway into all healthcare.