Three investors offer insights on current and future funding outlook for health and life science sectors
Three Tennessee-based funds – one from each grand division of the Volunteer State – described the ways that COVID-19 has impacted their operations during yesterday’s morning session on the second day of the virtual “36|86 Entrepreneurship Festival” organized by Launch Tennessee.
Titled “Funding Health and Life Sciences in a Post-Pandemic World,” the session was moderated by Eller Mallchok, Managing Director at Jumpstart Foundry in Nashville (upper right), and featured Jan Bouten, Partner at Innova Memphis (upper left); David Adair, Co-Founder and Managing Director of Solas BioVentures in Chattanooga (lower right); and Navid Farzad, Partner at Frist Cressey Ventures in Nashville (lower left).
From any changes in due diligence to trends in deal flow and thoughts on the future, the three panelists provided good insights for consideration by those seeking investment capital.
“It (COVID) doesn’t change how we approach due diligence,” Adair said. “With COVID, it has impacted the research side with labs having been closed. Time is money.” The result is Solas BioVentures putting even more emphasis on the management team as it makes investment decisions.
The other two panelists agreed. “Our investment thesis is largely intact,” Farzad said, with Bouten adding, “We definitely look through a different lens at every deal.” He said that Innova is placing more emphasis on go-to-market strategies, particularly as companies experience limited access to many healthcare facilities. As such, Bouten explained that the firm is very interested in companies that exhibit “novel ways to get to the customer.”
All agreed that they are seeing a spike in deals that are tied in one way or another to COVID. Noting that Solas BioVentures is “seeing some of the crazy stuff,” Adair added that the firm is being very selective in any responses.
“It largely doesn’t matter whether there’s a tagline around COVID or not,” Farzad said in terms of his firm’s examination of deals.
Bouten offered a somewhat sobering outlook, explaining that funding is “getting very tight for some companies” and many with good opportunities will not survive if they don’t secure investment capital by the end of the year.
In response to a subsequent question from Mallchok, Adair talked about the disconnect between innovation and funding. “What we are seeing is really great deals but not the money to fund them,” he said.
Looking into his crystal ball, Bouten said that he hoped that virtual technologies like Zoom would prove to coastal venture firms that they can look for deals in a much broader geography than they traditionally have.
Farzad observed that Frist Cressey Ventures had not yet closed a deal without an in-person meeting with the key management team, then asked the key question, “When do you check that box?”
What advice did the three offer for entrepreneurs seeking funding?
- Bouten said it was what he always advises: “Do your homework and assume it’s going to take three months longer than you thought.”
- Farzad said it was important for entrepreneurs to really understand their long-term strategy options. “Think about the menu of potential paths ahead of you,” he said.
- Adair urged people to not be afraid. “Great ideas will stand the test of time,” he said. “Some of the greatest things in life have come from pandemics,” citing the work of Isaac Newton and William Shakespeare.
