Why Nanowear cofounder Venk Varadan isn’t chasing venture capital

In Silicon Valley, the typical startup playbook usually involves raising venture capital.

But, VCs, Nanowear CEO and cofounder Venk Varadan probably doesn’t want your money. I met Varadan on a breezy patio this summer at Brainstorm Tech, and one of the first things I learned about him was this: Despite founding a company that's a candidate for the Sand Hill Shuffle, Varadan just isn’t into raising venture capital.

Nanowear, which makes advanced wearables specifically for healthcare settings, has several hallmarks of a company that could attract venture dollars—and has. Per Crunchbase, Nanowear has raised $1.5 million, including a seed round in 2014 from Chamath Palihapitiya’s Social Capital and MAS Holdings. Varadan says that Nanowear has, to date, raised $20.5 million, but only a fraction of that has come from VCs at this point, as he's primarily focused on raising money from high-net-worth individuals and physicians.

So, what’s Varadan’s aversion to venture? Is he just loath to give up equity in his baby?

Nanowear develops wearable devices using textile-based nanotechnology to capture a wide range of biomarkers directly from the skin. Through AI, Nanowear devices can analyze this data to provide personalized diagnostics for heart, lung, and vascular health. To date, the company has notched four FDA approvals, including one earlier this year, for an undergarment that can estimate and track blood pressure.

"That's my father's invention," said Varadan, who cofounded the company in 2014 with his father, an academic with a long career at the intersection of engineering and neurosurgery. "I'm very emotionally tied to this, and I'm never going to give up on this. This is my family's legacy."

Nanowear's technology has a lot of moving parts and the company's business model is tied up in—and needs to be adaptable to—a high-inertia, labyrinthine industry. And Varadan found that, even when VCs have been interested in Nanowear, they haven't typically understood the challenges the startup faces. He's found that all but the most specialized VCs were ill-equipped to grasp core medtech challenges, even ones as fundamental as how complex getting paid in healthcare can really be.

"There are reimbursement issues, the legacy codes," said Varadan. "For a company like us, we'd have to get new codes, which involves collecting a lot of real-world evidence, building a multi-year relationship with Medicare and Medicaid in that funny building in Baltimore [where both programs are headquartered], which looks like one of those horror movie buildings when you walk through it. So, when VCs were asking, 'What’s your model?' in the first couple years, I was honest and said: We’re not sure yet, we can go three or four different ways."

Varadan says that "VCs hated that answer."

"That helped us understand that we have to find really, really smart money that’s not necessarily branded and is specific to our space and the complexities we need to endure," he said. "That really comes from operational experience, which some VCs have, but a lot are just ex-investment bankers or from private equity. So, they may be great at finance, but not necessarily able to wear the operational hat for what we do."

A number of Nanowear's competitors, like Eko Health and Biofourmis, have each raised more than $150 million in venture capital. So, it's not that Varadan isn't willing to re-explore the possibility of raising money from VCs. He's even pitched a few as of late—but hasn't felt like it's a good time or the right fit, in more ways than one. Varadan says he senses that the ZIRP era fallout is lingering.

"I feel like now when I'm going out to pitch VCs, they're not being honest with us," he said. "They're not telling us that our LPs have told them they're not doing any new investments this year, because we have to triage our existing portfolio companies that are overvalued and have no exit prospects...There ultimately has to be both vision alignment and cultural alignment. I haven't found that yet."

See you tomorrow,

Allie Garfinkle
Twitter: @agarfinks
Email: alexandra.garfinkle@fortune.com
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This story was originally featured on Fortune.com