![]() The accelerator was set up by chief executive Cameron Teitelman, who formed two startups while studying at Stanford and saw the need for better support, together with Stanford University and its health system Stanford Hospital & Clinics. At that point, expectations were that the fund may invest as much as $200m – a formidable figure. The fund size, notably, was always uncapped and had invested $31.4m in 82 companies within a year and a half of launching. StartX was launched in 2009 to support early to late-stage companies, followed by the fund’s creation in 2013 to support portfolio businesses. During discovery – the pre-trial procedure in which each party can obtain evidence from the other through a series of actions such as requesting documents – MedWhat said it uncovered tax fraud committed by Stanford University and the person who was, allegedly, actually in charge of running the fund.Īt this point, it is worth understanding some of the accelerator and fund’s history. Caixa Capital purportedly deleted documents on MedWhat after the partner leading the investments left in 2016.Īstonishingly, matters became significantly worse for Stanford-StartX Fund and Stanford University itself earlier this month. Regent Capital has been accused of misleading MedWhat over interest in a series A commitment only to gain access to the company’s IP for a competing investment in China, while Caixa Capital allegedly used its investments in MedWhat to collect venture capital funds from the Spanish government. Stanford and IncWell allegedly both convinced other MedWhat shareholders to side against Devesa and refrain from exercising their conversion rights. ![]() MedWhat has also claimed that all plaintiffs breached their convertible note contracts and committed securities fraud by obstructing the notes’ conversion in a qualifying financing round. Venture capital firm IncWell, meanwhile, has been accused not only of enticing some MedWhat engineers to leave for a competitor without MedWhat’s knowledge, but in a much more serious allegation has supposedly also committed wire fraud by impersonating MedWhat chief executive Arturo Devesa in an effort to gain illegal access to financial information from MedWhat’s account with First Republic Bank. Investors then allegedly exploited MedWhat’s proprietary information to support the Sensely investments. MedWhat’s allegations are serious – among other things, the company said Stanford University and fellow complainant Magic Stone Alternative Investments had backed rival medical assistant developer Sensely without disclosing the move during due diligence. The court sent the case to a mediation panel in May but talks to find an amicable solution fell apart quickly, and in June MedWhat followed by filing a countersuit on eight counts – breach of contract, breach of fiduciary duty, securities fraud, wire fraud, unfair business practice, injurious falsehood, intellectual property (IP) infringement and blackmail. StartX was joined by fellow plaintiffs Caixa Capital, the corporate venturing arm of financial services firm La Caixa, Regent Capital Ventures and Startcaps Ventures, though details of the allegations remained under wraps. ![]() Problems emerged when the fund filed a lawsuit against the startup last April asking for repayment of its investments, plus interest, that it had made in the form of convertible debt. Stanford-StartX Fund has been embroiled in a legal battle with one of its portfolio companies, US-based virtual medical assistant developer MedWhat, which participated in the accelerator in 2013 and obtained $560,000 in a 2014 seed round backed by the fund, which returned in 20 to inject additional undisclosed amounts of capital. There is a less palatable explanation for the sudden shutdown however. The program has increasingly engaged with Fortune 500 companies to support their innovation efforts, though StartX did not reveal how exactly its new model will work. Officially, the fund is being wound down because the accelerator has reached financial stability and will shift to a different funding model. ![]() Stanford-StartX Fund, the investment vehicle operated by Stanford University’s affiliate accelerator and backed by the institution, announced on Friday that it would stop making new investments come June 30 after six years of supporting startups. It appears that 2019 is going to be a much more tumultuous ride than last year – after all, it is not every day that the university venturing ecosystem loses one of its most influential investors. ![]()
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