Some venture capital firms invest in a hands-off manner. On the other hand, a true venture partner provides expertise, makes connections, and builds a pipeline, all with the goal of long-term growth.
Fremont, CA: While healthcare organizations’ and venture capital firms’ objectives may have changed during the Covid-19 outbreak, digital health startups are breaking venture capital records, raising $6.3 billion in the first half of the year. With so many newcomers, it is more important than ever to seek out a venture capital firm with the right connections and expertise. The process of evaluating a VC firm are:
Startups require a venture partner that can remain calm in either a bull or bear market. It is now more critical than ever for investors to rely on the data at their disposal – both from their research and from their networks – to identify market trends and make informed decisions. Going “with your gut” is even riskier in these times.
Payers, providers, brokers, employers, unions, and government agencies are all opportunities for startups to sell to a well-established organization with a loyal user base. However, each pitch has subtle differences, such as ROI expectations or the clinical and financial risk threshold. Venture partners are aware of these complexities and can guide startups to customers whose needs are most aligned with their vision.
A venture partner should provide balance to a digital health startup in two ways. The first requirement is a well-balanced team. A venture partner with scientists, data analysts, and operations specialists on its leadership team can provide a wide range of assistance, introduce founders to a more diverse professional network, and assess opportunities from various perspectives. Furthermore, a balanced team is less likely to be siloed as partners collaborate and make decisions based on consensus.
The second type is a balanced portfolio. Healthcare is frequently viewed as a group of billion-dollar markets rather than a single trillion-dollar market. If an investment firm focuses solely on one of these markets, it may experience tunnel vision. A company that has invested in a variety of these markets, such as consumer engagement care management, medical devices, and core IT infrastructure, has a comprehensive understanding of what is going on in healthcare and where the most opportunities for innovation can be found.
Partnership assists founders in filling gaps. Many startups have great technology but require assistance in carrying out their vision. This could include strengthening the senior management team, putting in place a governance structure, performing a financial or regulatory audit, assigning an investor to the Board of Directors, or all of the above. It requires time and dedication to create a successful business from scratch, but this level of collaboration allows a startup to prosper. It also demonstrates that a venture partner will not abandon ship when the going gets tough.
It is one thing for a venture capital firm to assist a startup in raising capital early on. But the real success comes from subsequent funding rounds and exits, which can only be achieved through a long-term partnership.
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