How is fundraising for a healthcare startup different?

Vasudev Bailey / November, 2018


Vasudev (Vas) Bailey invests in disruptive tech, consumer and healthcare (therapeutic, diagnostic, device, digital) companies as a Partner at ARTIS Ventures. In this video, Vasudev shares three areas investors evaluate when looking into startups in the healthcare space.

Video transcript:

How is fundraising for a healthcare startup different from others?

The world of healthcare is quite broad. It can include a technology company, a device company, a diagnostic company or a therapeutic company. I am going to focus my answer on therapeutics as you bring them to market. I think there is an inherent need or a responsibility of someone starting a therapeutic company to tell the investor that what they’re working on is not going to have a binary outcome, which is to say that if the drug or the therapeutic that they work on works, they make a lot of money, or if it doesn’t work it is completely zero and the company it’s just shut down.

Part of that is to demonstrate the fact that you have a platform or a pipeline or perhaps the fact that you’ve developed enough processes and brought in enough IP along the way to make the company viable, even if the one indication is the drug or the therapy does not have the kind of success that you hoped it would.

What are the criteria for evaluating these therapeutic companies? There is a couple of things that I look for. The first thing is data. Do you have the scientific data to back the claims you’re making and does the data indicate that this can be promising – ‘I’ve never seen this before or is it truly novel?’

The second, and it is really important, people. Do you have the diversity of thought and leadership in your company? Do you have the operators, do you have the technical experts, do you have the people? Because it takes a diverse team to be able to bring a product to market – do you have that?

Thirdly, this is especially important to me. Are you building a company, and do you have the vision to build something and have the patience to build something long-term? Or are you looking for a quick flip? I’m not in the business of investing in quick flips because they rarely work. So, part of it is do you have the humility to surround yourself with the smartest people in the room, and to work on a very tough challenging problem? That if it works can change the way we live.

The world of healthcare it’s complicated, but it’s not just about the science working. Often times, I see companies where science or technology might be strong. The real question is does it have the chance to make it in today’s regulatory as well as the reimbursement landscape. Because the real question is so what ‘who’s going to pay for it’? We do have a fragmented provider system here and just because you come up with this cool technology that makes a doctor’s life easier the question is; do hospitals really care? Will they pay for it?

Or if you’re working on another breakthrough MoA in the world of pharmaceuticals or biotech. Does it matter? How crowded is space and will the insurance companies reimburse you for this and does it do significantly better than the standard of care? I think sometimes when people get into this world, they forget to ask these tough questions because they think that they are working on cutting-edge science. It’s unfortunate, I’m not saying that this is the right thing necessarily but as investors, you do have to look at the whole ecosystem to see if there’s a commercial viability to any scientific research that you’re actually working on.



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