The importance of a strong team and its ability to execute a business plan are two key elements institutional investors are looking for when deciding whether to invest, a panel of experts at the Med-Tech World Summit said.
The panel was titled “What ROI do investors look for in the healthcare space,” and was made up of four senior executives in the investment field.
While the initial focus may be on the innovation, or the quality of the product, investors want to know how it will be taken to the next level and that can create issues for early-stage startups, the panelists said.
Giovanni Lauricella, co-founder and managing partner at Lifeblood Capital, said his company will usually be looking for “who are the believers?”
Lifeblood is a management consulting firm specializing in talent acquisition and fundraising strategies for MedTech startups.
Lauricella said if the founder is pitching an idea, the investors will want to know who is working alongside you and has a similar belief in the value prospect of your proposition.
It makes a difference if your team consists of specialists who are on board part time and don’t have the same level of investment in the company,
Shamik Parekh, an early stage healthtech investor at Octopus Ventures, also spoke about the importance of a solid team and its ability to gain traction with its proposed business plan.
Without the execution, “the ROI doesn’t come through,” he said.
Octopus has offices in London and New York and deploys about GBP200 million a year from seed to series B.
Parekh said his company usually works on a long-term horizon of about 8-10 years to realise its ROI, but there are distinct short-term performance targets along the way.
He said between funding rounds, he would expect the company to have gained enough traction to grow by two to three times at each stage.
Julia Prakapovich, general partner at the Interface Fund, said their investment criteria is based on three factors – product and market, team and measurement of risks.
She said they look at the personality of the founder and whether that person can not only sell to investors, but also to convince the team.
“We look at how agile and flexible the team is and how resilient it is.”
Lauricella pointed out that some founders are looking for investment to be able to bring that expertise into the company, which can create a “chicken and egg” situation. “It can be very tricky.”
One fix is potentially to provide equity in the company to bring on non-executive directors and other talent as a stepping stone before they can pitch to investors to get the money to build the team.
The investors also offered advice about pitching, stressing that the startup needs to know their audience and tailor their presentation accordingly.
“Your storytelling will change, based on the investor you are talking to,” said Cristiano Fontana, CEO and founder of Three Bridges M&C.