A smattering of fundraising news from companies and investors around the Boston area, and beyond:

—Covestor, a Boston-based online investing marketplace, has raised $12.75 million in private investment. The Series B round came from Union Square Ventures, Spark Capital, Amadeus Capital Partners, and Bay Partners, the company said in a press release. Covestor has now raised a total of $28 million. The company lets individuals pick from featured money managers whose trades are “mirrored” in the users’ own stock portfolio, for a fee. Covestor relocated from New York to Boston last fall.

—Smart Lunches, a Boston startup that delivers lunches to kids at schools, daycare centers, and camps in the Northeast, has raised another $1.6 million in private investment. Investors include previous backers like Data Point Capital and Jonathan Kraft, and new investors such as Romulus Capital and Jennifer Lum. Data Point’s founder, former Shoebuy CEO Scott Savitz, is Smart Lunches’ executive chairman.

—Two Boston-area VC firms are investing in a next-generation video-game interface startup. Boston’s Spark Capital and Waltham, MA-based Matrix Partners were co-leaders of a $16 million Series A round in Irvine, CA-based Oculus VR. The startup is developing a virtual-reality headset called the Oculus Rift, which puts the onscreen action right in front of a gamer’s eyes rather than a standalone screen. The startup previously raised nearly $2.5 million toward building the devices through a Kickstarter campaign.

—CareCloud, a Miami-based company with a significant Boston office, says it has raised another $20 million in venture funding. The round was led by Tenaya Capital, which also has an office in Boston. CareCloud offers online healthcare software to manage electronic health records, medical billing, and medical practices. The company now has raised a total of $44 million.

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FiftyThree, the Seattle- and New York-based company behind one of the most successful iPad apps of the last year, has raised $15 million to expand its minimalist approach to mobile digital creativity tools.

The Series A funding round is being led by Andreessen Horowitz with new investors Thrive Capital and Twitter and Square co-founder Jack Dorsey, and existing investors High Line Venture Partners and SV Angel.

The investment allows FiftyThree—co-founded by a quartet of Microsoft veterans who worked on products ranging from Xbox to Photosynth to Courier to PowerPoint—”to expand our software, service, and hardware teams to take on bigger questions around collaboration and physical creation,” according to a company blog post.

Andreessen Horowitz investor Chris Dixon, who will become a board observer, writes that FiftyThree aims “to build the essential suite of mobile tools for creativity.”

The company’s blog post, attributed to its co-founders—at least one of whom, CEO Georg Petschnigg, worked on the Microsoft Office Suite—elaborates on the “bigger questions” FiftyThree is pursuing:

“TRUE COLLABORATION—Social media has changed the way we communicate, but real collaboration has been left behind. Still nothing has surpassed the simple act of sitting down in a room with a group of motivated people. We believe a breakthrough around collaboration will revolutionize the creative process. How we work together. How we discover new collaborators to work with.

“PHYSICAL CREATION—Tools have helped us evolve and we’ve evolved to use tools as a way to extend our ability to express something. And that doesn’t end at the touch screen. Moving beyond touch and into the physical world of accessories opens up creating with greater dexterity and expressiveness.”

FiftyThree has a foot in two cities vying—sometimes against each other—for position on the leader board of innovation hubs. The company’s Web site carries the tag line “Made in New York City”—a nod, perhaps, to one of Mayor Michael Bloomberg’s efforts to promote Big Apple tech and creative companies—”and Seattle.” The company says that the 12 employees in its New York office are focused on services and software, and that the 10 employees in its Seattle office are focused on hardware. But it’s not being very explicit yet about what aspects of hardware; in theory, it could be working on anything from fancy styli to a new design-oriented tablet device (perhaps the second coming of Courier?).

The latest investment in the profitable, two-year-old startup follows a small undisclosed seed funding round from Shana Fisher’s High Line Venture Partners in New York and Ron Conway’s SV Angel firm in San Francisco, a spokesperson says.

Dixon writes that FiftyThree “didn’t need to raise money, but decided that the opportunity was so large that it made sense to accelerate their efforts with additional capital and resources.”

The Paper app makes a very strong argument for the tablet as content creation platform, rather than just content consumer. FiftyThree is one of the startup companies in the Seattle area—others include Haiku Deck for iPad presentations, and Flowboard for “touch publishing”—attempting to put the create-versus-consume debate to rest.

Paper presents your work in a collection of notebooks that look a lot like Moleskine journals, with their tidy elastic bands—and the app has in many ways become the digital equivalent of the iconic Moleskine brand: a blank slate, favored by generations of writers and artists.

Apple selected Paper as its App of the Year for 2012. It has been downloaded 8 million times, the company says.

(The company gives Paper away for free, but users pay $1.99 per tool for drawing tools beyond a basic fountain pen.)

In a review of several notepaper apps a year ago, my colleague Wade Roush described Paper as “a minimalist’s dream. … [A]t a poetry slam, the guys from FiftyThree would be the ones off in the corner scribbling haiku.”

He also examined stylus use, noting that while the iPad is designed to work without one, there are times it comes in handy. “You get the benefit of a more controlled stroke, plus you sidestep fat finger syndrome,” Roush wrote.

Could this be the direction Paper is heading with its “physical creation” plans? Or is there more?

The company is staffed with veterans of successful products including Xbox 360 accessories and the Arc mouse from Microsoft, and the Sonos wireless home HiFi systems.

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Time travel. Invisibility cloaks. Quantum supercomputers?

QWave isn’t doing any of that stuff. But it’s a good way to begin a story that involves investments in quantum physics and materials science companies.

QWave, aka Quantum Wave Fund, is a young venture firm based loosely in Boston and Moscow. Started last year, it has raised nearly $40 million on its way to a targeted $100 million fund for investing in physics-based tech companies. And it’s announcing its first three investments today, totaling $7 million: in Estonian power electronics firm Clifton; optical-materials startup Nano-Meta Technologies in Indiana; and Centice, a North Carolina company that has technology for doing chemical substance recognition (of interest to both doctors and police).

The man behind QWave in Boston is a tad mysterious. His last name is Kouzmine, and his first name is either Sergey, Sergei, or Serguei, depending on whom you ask. (Sounds like a quantum superposition to me—I’m going to go with Serguei.)

Asked whether he’s based in Moscow or Boston, he says he’s based in airplanes. By the standards of the IRS or government agencies, he says, “I’m not resident of any country.” Translation: he spends a lot of time going between the U.S., Europe, and Russia.

Well, any mathematician or theorist will tell you airplanes are a pretty good place to get work done. In Kouzmine’s case, that means taking a top-down approach to identifying important trends in physics and technology; then figuring out who is doing the most commercially promising work in those areas; and then making contact with them.

In addition to the newly announced companies, he says, think of areas like materials for next-generation touchscreens and displays, solar panels, batteries, computer chips, security systems, and medical diagnostics.

Kouzmine (pictured) is a physicist by training, but he has amassed quite a bit of experience in startups and big companies, as well as in banking and investing. Plus he grew up in the Ural Mountains of Siberia, so anything is possible.

He is the managing partner of QWave, where he has three other partners. The team takes pride in understanding both the scientific and business/entrepreneurial sides of new technologies. “I love science, but we’re in the business of making money,” he says.

Of course it’s too early to say if their approach will work out financially. But their idea is to invest primarily in Series A rounds, typically putting in $3-5 million, for companies that are “capable to deliver technology and products to customers,” Kouzmine says. The companies should be able to be cash-flow positive in about three years, and be sellable in about five years, he says. The biggest value QWave brings, he adds, is to companies that are at the stage where they need to scale up production and development and do marketing.

A big challenge would seem to be that physics/materials companies need a lot more time and money than, say, software startups to potentially get big and profitable. It will be interesting to watch if Kouzmine’s firm finds a quantum path around that.

Although QWave hasn’t announced any investments in the Boston area, that might change soon. Kouzmine hints that some discussions are in the works. And he says Boston is a technical stronghold for his firm, especially with all the technologies coming out of MIT, Harvard, and other universities.

By contrast, he says Silicon Valley is “already overhyped,” at least in terms of materials science. “The East Coast is better than the West Coast” in that field, he says, especially in the Boston-DC corridor.

And thinking more globally, he says, “Americans tend to disregard European high tech” to their detriment. Meanwhile, he says Russian companies represent less than 5 percent of QWave’s pipeline, mostly because the culture of entrepreneurship is much stronger in the U.S. and Europe—and at least in the latter case, governments are very supportive of startups.

As for the more speculative, long-term quantum ideas out there, Kouzmine enjoys talking about them as much as any physicist. But he cautions that scientists don’t understand the basic nature of things like time, teleportation, or quantum computing well enough to make commercial bets yet.

“Maybe our competitors,” he says, “but not us.”

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Civitas was spun out of Alkermes (NASDAQ: ALKS) two years ago based on technology that can deliver a precise, high dose of a drug through an inhaler. With a new round of cash from the Michael J. Fox Foundation and some promising data from a small clinical trial in hand, the startup based in Chelsea, MA, is closer to proving that technology can help improve a decades-old, yet flawed, drug for Parkinson’s Disease.

Civitas is announcing today that it has won a $1 million grant from the Michael J. Fox Foundation to support second mid-stage study for CVT-301, an inhalable version of levodopa, or L-dopa pills, that is administered via a device “about the size of a large felt-tipped pen,” according to CEO Glenn Batchelder.

The grant is the second Civitas has received from the foundation, adding to a previous grant of just over $300,000 awarded in November 2011, Batchelder says.

While the grant will help Civitas support the study, the CEO says it will still need more cash to run it, and Civitas plans to raise a Series B round to help. Civitas raised $25 million in 2011 from Canaan Partners, Longitude Capital, and Foundation Healthcare Partners.

Civitas is developing CVT-301 as an adjunct therapy to L-dopa pills, so patients can take a puff and gain quick relief from what’s known as “off episodes,” when their medications stop working and symptoms—such as tremors and stiffness—start to reappear.

This would be a lucrative niche for Civitas to grab if it is successful. A majority of Parkinson’s patients—more than 70 percent, according to Batchelder—take L-dopa pills to manage their symptoms. But the drug’s concentration levels in the bloodstream are erratic because large protein molecules from food can block L-dopa before it is absorbed in the intestines. Several other companies have tried, and failed, to deliver L-dopa to patients in other ways—skin patches, for example—without much success.

Still, the potential market is attractive. Roughly one million Americans and six million people worldwide are living with Parkinson’s, according to the Michael J. Fox Foundation.

Civitas believes it has the answer with its spray. By delivering the drug through an inhalable device, the idea is that CVT-301 will act faster than the pill form of L-dopa because it doesn’t work its way through the gut.

Civitas isn’t trying to replace cheap, generic L-dopa pills. Rather, it wants patients to use CVT-301 as a supplemental security blanket. When patients feel an episode coming on despite taking their pills, they’d use the spray, as needed, to rapidly quell the symptoms until their next scheduled dose of oral medication.

Civitas CEO Glenn Batchelder

“It’s for those moments where their meds fail them,” Batchelder says.

Civitas has a long way to go to earn that position in a chronic regimen, but the results so far have at least given it a shot. Civitas already has run a 24-patient mid-stage clinical trial, which it used to figure out the right dose of the drug, if CVT-301 is safe to use in Parkinson’s patients, how long the drug lasts, and to measure its effect on motor function. In that study, patients would take their morning medications, come into a testing site, and then randomly get either an inhalable placebo, a low (25 milligram) or high (50 milligram) dose of CVT-301, after one of their off episodes occurred. Investigators then monitored their safety, the plasma levels of L-dopa in their system, and their motor function over the next 180 minutes, according to Batchelder.

Civitas hasn’t revealed all the results of the study as of yet—it vaguely said in a statement today that it will unveil them at a “future scientific meeting”—but apparently they were good enough to move forward. Civitas said the data were positive, all the doses tested were generally safe and well tolerated, and that it has picked its dose level for the Phase 2b clinical trial.

Batchelder says that during the next study, patients will take CVT-301 home with them—or a placebo inhaler—and use it, as needed, during their off episodes. They’ll also be monitored in the clinic, like in the earlier mid-stage study, he says.

Civitas’ plan going forward, according to Batchelder, is to secure the Series B round to take it through the next clinical trial. At that point, the company would have the foundation to make a strategic move: potentially filing for an IPO or otherwise. Optimally, Civitas hopes to sign a partnership after the trial to get help selling the drug overseas while keeping its U.S. rights. Its ultimate goal is to show that the drug delivery technology can be applied to a number of other therapies.

“We see CVT-301 as the first of many products to follow,” Batchelder says.

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It has been a busy morning for Nina Nashif.

The CEO and founder of Chicago-based Healthbox is in town for the accelerator program’s second “innovation day” in Boston. Nine health IT startups will present their pitches this afternoon to a crowd of healthcare industry executives, entrepreneurs, and investors at the Revere Hotel near Boston Common.

You could be excused for not knowing who these startups are or what they represent. After all, dozens of healthcare accelerators have popped up in the past year or so, and with all the startups nibbling at the edges of truly gigantic problems in healthcare, it’s a super noisy sector.

That’s why I wanted to get to the top and see what Nashif (pictured) is seeing. Her training is in health administration and she’s a longtime business executive, having led international services and growth strategy at a Texas hospital, co-founded a wholesale business in New York, and served as vice president of Sg2, a healthcare analytics firm in London.

That was all before joining Sandbox Industries, a business incubator and venture capital firm in Chicago, and spinning out Healthbox as a separate entity.

Healthbox got started in Chicago in 2011-12, and in the past year it has expanded its three-month accelerator programs to Boston and London. Next up, interestingly, will be new programs in Jacksonville, FL, and Nashville, TN. And Nashif plans another session in Boston for early next year.

The biggest lesson learned so far, she says, is that “healthcare entrepreneurs need access to the industry, but just giving them access isn’t enough. We really need to help them refine their business model in the context of the industry.”

That means solving real problems, not going after perceived needs or operating at the fringe. “How do you make sure you’re building for the right stakeholder and you have a business model that will scale?” Nashif says.

One answer to that is pretty interesting and not obvious—especially for an accelerator. Healthbox is looking to diversify in terms of the stage of companies it accepts, Nashif says. I took this to mean admitting more established, later-stage companies as well as seed-stage startups—and it sounds like this is happening already.

As Nashif explains, Healthbox (and other programs) got started in part because of a seed-stage funding gap for young companies. … Next Page »

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Investors are betting on Seattle-area companies working on everything from uterine fibroids (Mirabilis Medica) to video storage and licensing (Ninu). Those companies, along with microscope camera maker Exo Labs and social decision-making platform Yabbly, raised capital recently. Meanwhile, car-sharing services are getting closer scrutiny from the city. The details:

—Mirabilis Medica has raised $4 million from GSR Ventures and existing investor Charter Life Sciences to continue research of an ultrasound technology for treating uterine fibroids. Along with the new investment, the Bothell, WA, company converted $3 million in debt to equity. Jens Quistgaard was also named CEO of Mirabilis Medica, which is conducting clinical trials outside of the U.S. and hopes to commercialize high-intensity focused ultrasound technology as a non-invasive treatment for fibroids.

—Exo Labs, a Seattle startup making a microscope camera that links to an iPad, has raised $836,000 from investors affiliated with Seattle Angel Conference, Seraph Capital Forum, and Alliance of Angels, among other individual investors. It also closed a successful Kickstarter co-development campaign over the weekend, raising $36,362 to put the Focus Microscope Camera in 40 schools for free. The startup, which we profiled in January, is working at the intersection of hardware and STEM education, and has now raised nearly $1.5 million in venture capital.

—Yabbly, which is building a platform for people to solicit and provide advice on everything from TVs to pre-schools, has raised $535,000 from angel investors including Rudy Gadre. The Seattle startup has attracted $1.3 million of investment since being founded early last year by Tom Leung. Yabbly describes itself as “a community for asking thoughtful questions where members help each other find the best product.” It represents a social approach to purchase decisions, in contrast to the data-driven one of another Seattle startup, Decide.com.

—Ninu Inc., a Seattle startup, has raised $500,000 to roll out a system for video and creative professionals to store, manage, and license their work. The Nimia platform—still in beta and running on Amazon Web Services—allows video producers to share and commercialize their content, either directly or through stock archives. It also offers a broader marketplace for buying and selling video content, that would compete with divisions of image-licensing giants Getty Images and Corbis.

—Seattle, like other cities, is grappling with how to square new “sharing economy” transportation companies—Lyft, Sidecar, and UBER—with legacy for-hire cab businesses, licensed and regulated by the city. The Seattle Times takes a closer look at the issue, reporting that the new services—which have contract drivers using their own vehicles to pick up passengers who flag them down via mobile devices—run afoul of city laws. But the city hasn’t tried to stop the ride-sharing services yet. Indeed, as Alexa Vaughn reports: “the City Council is open-minded about letting the companies stick around permanently.” The council aims to set a broad new policy on the issue covering both the new ride-sharing businesses and the legacy cab operators by the end of the summer. It is gathering information from the public on taxi use now through an online survey.

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What happens when you bring Silicon Valley business and product-design thinking to bear on problems faced by content creators, publishers, and average citizens looking for more powerful ways to communicate? That’s the question under investigation at Matter, a San Francisco-based venture accelerator born from the public media sector. It’s not the Bay Area’s first media-focused accelerator (Media Camp, operated by Turner Broadcasting and Warner Bros., holds that title), but it’s the only one with backing from non-profits like San Francisco public broadcaster KQED and the Knight Foundation.

Matter had its coming out party in December and today it graduated its first class of six startups, in a two-hour demo day event at the accelerator’s hip garage space a block away from South Park in SoMa. As venture and angel investors looked on, teams pitched ideas ranging from a crowdsourced spoken-word narration service for text publishers (SpokenLayer) to a network for instant video journalism in news hotspots like Egypt or Turkey (OpenWatch).

“Entrepreneurs will leverage technology to create the future of storytelling,” Matter managing director Corey Ford said in his introduction. The common mission of startups admited to Matter’s program is “to educate and inspire but also connect and empower, in a way that is human-centered, prototype-driven, and seeking sustainable business models.”

SpokenLayer's whiteboard at Matter

Ford says Matter received hundreds of applications for its first class of six startups, which each received $50,000 in funding and five months of mentoring and product development help. Following the typical accelerator model, Matter brought in experienced entrepreneurs and executives for a weekly speaker series, and held weekly sharing sessions where the startups critiqued one another’s work. One unusual feature: a monthly “design review” attended by advisors from outside Matter. Ford called it a “mini Demo Day” intended to help companies weed out bad ideas quickly.

In the end, I’d say some of the Mattter startups exemplified the accelerator’s education and empowerment better than others. Only one or two of the Matter startups would have been out of place as part of a mainstream technology accelerator like Y Combinator, TechStars, or 500 Startups (I’m thinking of OpenWatch and perhaps Zeega).

When I commented to Matter founding partner Jake Shapiro, the CEO of the Public Radio Exchange, that some of the companies looked to me like pure enterprise plays, rather than products of a public-media mindset, he acknowledged that “there’s always going to be that tension” inside Matter—which must, after all, earn a return on its investments. But even the enterprise-oriented companies enrolled at Matter are providing services that are of interest to public media organizations like KQED, Shapiro added.

Here’s a rundown of the six companies in the first group—what Ford called “Matter 1.” All of the companies said they’re seeking seed funding in amounts varying from $500,000 to $1.2 million. (Matter’s second run starts in October; applications are open now.)

SpokenLayer 

The premise at SpokenLayer is that there’s too much text-based content hitting the Web every day to read it all the old-fashioned way. If more of it were available in spoken-word form, audiences could listen during times when they’re not at a screen (e.g. on a commuter train, stuck in traffic, or cooking in the kitchen). So the New York-based startup, led by CEO Will Mayo, is striving to “take great content from the Web, narrate it with real people, and make it accessible on any platform,” in Mayo’s words.

The core of the service is a global crowdsourcing network that allows the company to produce an audio recording of a news article within 26 minutes of its publication on the Web. At The New Republic, SpokenLayer’s first publishing partner, Web traffic data showed that 58 percent of people who started consuming the audio versions of the magazine’s online articles listened all the way through—compared to about 10 percent for the text versions. Mayo announced in his talk that SpokenLayer has just four more publishing partners: Fast Company, Narratively, Tablet magazine, and TimeOut New York. Eventually, the company plans to offer a self-service version for smaller publishers.

Inkfold

If you know Inkfold through its existing product, a personalized news reader app for iPhones and iPads, forget all that. Co-founder Daniel Davis says the app was Inkfold’s MVP, or minimum viable product, and that joining Matter gave his team the opportunity to “dig much deeper and find the real pain point” for people who consume text content on mobile devices.

That pain: the difficulty of organizing and pursuing all of the content people find out about from their friends via e-mailed links. What readers need, Davis says, is “a product that finds these links and prints them in one place that is convenient to read and comment on.”

Through a Gmail plugin that’s currently in private beta testing, Inkfold scans a user’s incoming e-mail and assembles linked content inside a clean, mobile-friendly interface resembling Pocket or Instapaper. When you finish reading an article in Inkfold, the person who sent you the link will be notified, and it’s easy to send back comments pegged to specific passages from the text. That “closes the loop” and makes the service inherently viral, Davis says.

“Lost links are missed connections,” Davis says. In fact, the content links that people share by e-mail amounts to an informal but important social network—a sort of reading circle. “We all have it; Inkfold merely exposes it,” Davis says.

OpenWatch 

History couldn’t have manufactured a better real-world use case for OpenWatch than the citizen uprisings raging right now in Istanbul over the planned demolition of Gezi Park. OpenWatch organizes stories like this into “investigations” open to anyone who wants to contribute first-hand video reports.

The technical heart of OpenWatch is a video streaming system that can collect live video from iOS and Android phones and republish it in seconds for others to watch on their phones. Co-founder Rich Jones calls it “the fastest way to get video online.” To put the platform to use, the company identifies “agents” on the ground—there are currently 650 of them across 42 countries—who can be activated on a free or paid basis to … Next Page »

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Optimum Energy and Visualant collected significant funding in the last week, while Planetary Resources announced a stretch goal for its Kickstarter campaign, Chirpify expanded beyond PayPal, and Amazon delivered groceries to L.A. Read on for details:

—Optimum Energy, a Seattle company that helps building managers run heating and cooling systems more efficiently, has raised $12.2 million in an equity sale. The funding comes from Navitas Capital, a new investor, and Columbia Pacific Capital Management, according to GeekWire. In an interview last month, Optimum CEO Matthew Frey said there is a huge opportunity in building energy management as large companies shift from a facility-by-facility approach to enterprise-wide strategies for procurement, management, and maintenance of HVAC assets. Optimum’s solution helps dynamically distribute heating and cooling loads in large buildings across various pieces of equipment, using the least-cost assets first. The company has more than doubled its staff in the last year to more than 60 people, Frey says.

—Visualant, a Seattle company making technology to identify chemical substances, has raised $5 million from Special Situations Technology Fund. Visualant, a public company traded over the counter, will use the funding to strengthen its balance sheet, purchase a subsidiary, and as working capital for commercialization of its ChromaID technology. The company aims to license the technology—which measures light reflected off a substance to identify its composition—to device and application developers in fields such as security, environmental cleanup, and healthcare. It plans to begin shipment of a developer kit this summer.

—With 17 days still to go, Planetary Resources has raised close to $900,000 in a Kickstarter campaign to support what it calls the world’s first space telescope open to the public—at least members of the public who support it, and nearly 9,900 have so far. With its $1 million goal clearly in reach, the Bellevue, WA, company says if supporters hit a goal of $2 million by June 30, it will outfit its ARKYD 100 space telescope with enhanced stability systems to aid in the detection of planets beyond the solar system. It also pledges to carve out time for the telescope to search for these planets, and allow students, researchers, and citizen scientists to do the looking. The company acknowledges that the stability upgrades would “allow for better measurement of the spin-properties of asteroids.” Planetary Resources’ primary mission is to find, claim, and ultimately mine asteroids.

—Chirpify, which allows financial transactions directly within social media platforms Twitter, Facebook, and Instagram, has expanded its payment options to include credit and debit cards, and automated bank payments. Until now, the Portland, OR, startup—whose backers include Seattle-based Voyager Capital—had only handled payments via PayPal. After setting up a Chirpify account, people can reply to social media posts—a tweet from a musician about a new album, for example—with the word “buy” to make a purchase. Meanwhile, Gravity Payments, a Seattle-based credit card processor, says it will provide PayPal access to its merchant customers.

—As expected, Amazon is bringing its grocery delivery service to Los Angeles. My colleague Curt Woodward wrote last week about the connection between the expansion of AmazonFresh and its deals with states over sales tax collection.

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What does an ex-Facebook tycoon with a degree in electrical engineering know about fixing the U.S. healthcare system?

Well, Chamath Palihapitiya knows that healthcare is in need of some drastic reinvention, and that to some extent, this will involve training people to think and behave in new ways—in much the same way Facebook has trained us to think differently about how we spend time online and communicate with our friends.

He’s not afraid to ruffle a few feathers in the process. That’s a good thing, because many of the companies he’s investing in through his Silicon Valley-based venture fund, the Social+Capital Partnership, are out to fundamentally shift the balance of power in healthcare and upend the way diseases get diagnosed and treated—or ideally, prevented. “Empower the edges,” Palihapitiya says. “That is the way you build a multi-gajillion-dollar company.”

Palihapitiya, 36, is famous mainly for having overseen the development of the Facebook Platform, and for coming up with ways to recruit new users during a period when the Facebook community grew from 50 million people to 750 million. When the social network went public in early 2012, Palihapitiya’s shares made him “a centimillionaire several times over,” according to BusinessWeek. He’s plowed much of the money back into the Social+Capital Partnership, which has also raised funds from Silicon Valley luminaries like Reid Hoffman, John Doerr, and Peter Thiel and invests mainly in healthcare, education, and financial services.

The Fenwick & West interview with Chamath Palihapitiya (right).

I interviewed Palihapitiya on stage last Friday at Fenwick & West’s Digital Health Investor Summit in Mountain View, CA, organized by Rock Health. As you’ll see below, his attitude toward the healthcare establishment falls somewhere between irreverence and contempt. “The software is crap, the services are crap, the people are crap,” he says.

So alongside their investments in classic tech startups like Treehouse Island or Survey Monkey, Palihipitiya and his partners Mamoon Hamid and Ted Maidenberg are putting money into three kinds of healthcare companies that they hope can make things less crappy. Palihipitiya (it’s pronounced Polly-hop-i-TEE-ya) labels them “crawl,” “walk,” and “run.”

In the first category are companies like medical billing tracker startup Simplee that hope to make interacting with the system a little less painful. In the second are startups like Glooko, Asthmapolis, and Neurotrack that have ambitious long-term plans to build big subscription-based businesses around better technologies for monitoring and controlling chronic conditions like diabetes, asthma, and Alzheimer’s.

Finally, there are the Hail Mary passes—the companies like nanotech-diagnostics startup Integrated Plasmonics that, if their risky and unproven technologies prove effective, could completely change the economics of the business. It’s clear from talking to Palihapitiya that he loves these “run” companies the best—perhaps because they appeal to his personality as a gambler. To attend the Fenwick & West event, Palihapitiya flew in for the day from Las Vegas, where he was in the early rounds of the World Series of Poker. (In the 2012 series, he placed 101st out of a main draw of 7,000 players.)

Here’s an edited transcript of our conversation.

Xconomy: For those in the audience who might not be completely up to speed on the Social+Capital Partnership, I wanted to start by asking you to describe the firm’s model. To what extent are you trying to fix things about the venture model that you considered to be out of date, or broken?

Chamath Palihapitiya: I think when I was leaving Facebook, my biggest realization was that the appetite for risk has changed, and the types of stuff that really intelligent people are working on has also changed, from really ambitious things to a lot of marginally stupid things. And maybe I was partly responsible for it as well. Building the Facebook Platform was supposed to be this great thing, and the first thing that happens is a bunch of people throwing shit at each other. That’s probably not the first ambition of what we were intending.

The point is, when I went to start this thing, the biggest thing I wanted to do was go back to some more interesting sides of technology—interesting things that were more technically difficult, but meaningful if they worked. So I kind of needed to rewire how everything worked.

The most important thing you have to rewire is your incentives. A lot of your incentives are driven by the people who are giving you money. So I made sure I put the most money [into the fund], so that I’m most at risk if this thing doesn’t work. And the second thing was, I went to individuals and really eschewed the traditional limited [partners], because I think that they are well meaning, but a pension is grinding it out trying to get 7 or 8 percent to meet an obligation for a bunch of people that are about to retire. And so their incentives to take a bunch of risk are very different from my own appetite to take risk, and I just didn’t want to be affected by those people. And so I just went to individuals, except in the case of a couple of specific limiteds. And my passion for healthcare came from one of our specific limited investors, which is the Mayo Clinic.

So that’s what we did—we rewired how the economics work, we rewired who the money comes from, we rewired everything, even our offices. We all sort of work in a bullpen the way we used to work at Facebook, and it’s just about building stuff. We don’t hire traditional business people. We only hire engineers. For EIRs, we only have engineers in residence, we don’t have executives. So it’s just going back to a more technically biased form of ambitious product building.

X: Does the firm work differently from other venture firms? Are you able to move faster, close deals faster?

CP: That’s my understanding, based on people I’ve talked to. It’s only myself and three other partners. We spend enough time together that we’re always in sync. We’ve made really big decisions in a matter of days, like $20, $30, $40 million checks in a couple of days. That’s potentially neither good nor bad, but it’s at least fast.

And I think often times what you can do is, you can basically get things done quickly. The model of venture right now is just a pain in the ass. Anybody who is any good will try to create an auction, because they don’t really understand what the asset class at its best can really do for people. And that’s because most people in the asset class are not actually very value-add. They are basically value-useless. They are just hyper-educated. They don’t really know what they’re doing. So they can’t … Next Page »

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