Latest / StartUp Health NOW Podcast / Raising Capital During a Pandemic

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Raising Capital During a Pandemic · StartUp Health NOW Podcast

• 0:00
  [on-hold music] There's a, a term, al- always be raising, and I, I don't think it's that.
• 0:17
  Uh, as a CEO, I think it's always be cultivating, so ABC, um, in that you're, you're looking for affinity and connection with people throughout your journey.
• 0:27
  Um, it's, it's not that you're, "Okay, I'm six months out and, and now I'm gonna, uh, look for investors."
• 0:32
  You're finding people each step of the way that you know have an alignment and that you start building a relationship, um, with.
• 0:39
  [upbeat music] Welcome to Startup Health Now, the podcast where we talk about the entrepreneurs shaping the future of health and the health moonshots they're working to achieve.
• 0:53
  I'm Logan Plaster, editor-in-chief at Startup Health. So, COVID-19 has presented a bit of a paradox to economists.
• 1:00
  Many have written about a K-shaped, a response to the pandemic, where some parts of the market expand and grow significantly while others contract.
• 1:09
  We've seen this contrast play out a bit in health innovation, where on one hand, digital health adoption is at historic highs. Telemedicine, remote monitoring, and digital therapeutics are exploding.
• 1:19
  At the same time, many investors are wary. We've heard stories of investors calling to hold off on wiring funds, of VCs halting new investments, and of angel investors deciding to significantly cut back check size.
• 1:32
  In other words, despite the obvious need for virtual care in a COVID world, raising money has come with major challenges in 2020.
• 1:40
  So, we decided to bring in two founders from the Startup Health family who had successfully raised millions in the middle of COVID to learn how they handled the bumps in the road.
• 1:49
  Our guests were Linda Brown-Ganzert, CEO and founder of Curatio, and Richard Hanbury, CEO and founder of Sana Health.
• 1:57
  Both joined Startup Health's Expert Office Hours recently to share their insights in a conversation moderated by Katia Hancock, Startup Health's investor network director.
• 2:06
  We learned a lot from what they went through, and we present the full session to you now. Hope you enjoy. [upbeat music] Well, it's great to be here with everybody today.
• 2:21
  Um, looking forward to today's discussion, um, with Richard Hanbury and Linda Brown-Ganzert from Sana Health and Curatio respectively.
• 2:31
  Um, you know, a lot of you are raising capital right now, um, or, or planning to in the near future. Um, you know, it's, it's a different landscape as, as you all know, than it ever has been.
• 2:42
  People are not having face-to-face meetings. Um, everything is remote. People have many, many different things that they're dealing with in their lives in addition to their jobs.
• 2:53
  Um, and so it's going to be really interesting to have this dialogue today with two health transformers who have closed rounds during the pandemic.
• 3:02
  Um, and I'll let them introduce themselves, um, and talk a little bit about, um, the rounds that they closed and, um, you know, what kinds of investors, and a little bit about the experience.
• 3:13
  Um, and we had a prep call yesterday, and there's a lot of lessons learned, a lot to unpack, um, that I think are helpful with or without a pandemic, but also with a pandemic.
• 3:23
  Um, so feel free to pop your questions in the chat as always. Um, why don't we kick off with you, Linda, to introduce yourself, um, and, you know, just give a high level,
• 3:33
  um, kind of overview of your experience, and you can keep it short to start, and then we'll unpack it, um, about raising your round, what it looked like, how it came together, and, and kinda how the pandemic w- made it a different experience than normal.
• 3:48
  Sure. Okay, great. Um, hi, everyone. Um, lovely to be virtually connected. So I'm, I'm Linda. I'm founder and CEO of Curatio, and, um, we closed our pre-Series A or post-seed, um, uh, early June.
• 4:02
  So, um, we were raising right as the pandemic started, um, and then as it started to kinda crest and, and we all started to realize [laughs] this is gonna be a, a, a serious issue.
• 4:13
  So, um, it was-- there were definitely some challenges, and I'm happy to, happy to run into them, but there were also some opportunities.
• 4:20
  Um, and so we had, uh, we had kicked off, um, socializing the round the previous fall, and we had won a pitch competition, which was really helpful too, um, and, uh, and came with a term sheet out of, out of Connecticut, great group, and went, um, went hard into the new year, starting in January, on a full-on sort of raise.
• 4:43
  Um, so we're socializing in, in November, December, came back after the holidays and went full bore into it. Um, lots-- I mean, you guys all know this, right?
• 4:54
  It's ha- I don't know, 101 to, you know, 10 to one, um, in terms of meetings to kinda connection rate.
• 5:02
  But, um, lots of meetings, lots of really good, um, momentum, lots of people interested in, in following and participating, but not leading.
• 5:11
  So we headed into the pandemic with, um, you know, some really strong soft circles behind us, but not a strong lead. Um, and so, uh, we were trying to kinda round that out.
• 5:23
  Uh, and so, um, it was interesting for, um, for us, and I, I can tell you more about how we structured it, but in a matter of days, um, you know, we went from being a nice-to-have solution to a need-to-have.
• 5:36
  And as we started to grapple with, "Oh my goodness, how are we gonna support outpatients? Um, how are we gonna address mental health? Um, how are we gonna impact adherence?
• 5:45
  How do we do, um, you know, navigation and support for patients at a distance?" Um, it, you know, it, it started to be apparent that Curatio, um, was, was a great solution, um, for that.
• 5:56
  So, um, you know, the round, we, we marched very firmly to a deadline.
• 6:01
  Um, uh-It felt quite critically that, um, in order to really be of best service to, um, the pandemic and the needs that we needed to get the round closed sooner than later.
• 6:14
  Um, and, you know, some timing considerations, um, you know, I think had we, um, had, had we taken a different approach to timing, um, we may have had some different options, but it was important to me that we, um, that we got, you know, back to work and, um, and back into supporting the pandemic as quickly as possible.
• 6:33
  Um, and so we, we had two, um, funds that wanted to partner and come in for the full round, made it really simple. We really liked the teams.
• 6:40
  It was a good fit, and that's what we ended up, um, closing, um, at the end of May. Awesome.
• 6:48
  Um, that-- there's a lot to unpack there, um, but I wanna give Richard a chance to introduce himself, um, and, and, and kind of give your, your high level as well. Certainly, thanks.
• 7:00
  Um, I'm Richard Hambury, CEO of Sign Health, and, uh, you know, it's just, it just occurred to me that this is expert office hours.
• 7:06
  I am certainly no expert in this, um, but I am now, uh, I, I, I've got thousands of mistakes to, to avoid, avoid making 'cause we've, we've done a lot of things wrong and, and learnt along the way.
• 7:20
  Um, so I'll try and pass on as many of those, many of the most important ones of those as we can. Um, we were, we were doing a rolling close. Um, uh, we were in talks with, uh, a big corporate.
• 7:33
  Um, we were under a, a no-shop clause, um, that went through the start of COVID, um, into when I was in hospital for open heart surgery, um, after that, and then two days before we were due to close with them, they pulled out.
• 7:50
  Um, and then two days later, I had a-another, um, completely new lead, um, who, um, allowed us to close a round. So we closed, uh, two so far,
• 8:01
  and we're now raising, um, a further three, um, because realistically, I think Q4 and in-into Q1 next year, uh, we're looking at some extremely unpleasant, um, macro situations that, that, that are, uh,
• 8:18
  possible, if not likely to evolve, uh, with political upheaval smashing into, um, economic problems, smashing into COVID. Um, so we're, yeah, so we're, so we're out raising more.
• 8:32
  Um, yeah, lots of, lots of lessons learned all the way around, all the things that are sort of more true, uh, than standard raising because of COVID. Um,
• 8:42
  some of the limitations, but I think there are actually, um, to Linda's point, more, uh, more things that are actually made easier because of COVID than, than, than there are, than there are overall problems, um, as long as you are, um,
• 8:58
  directly addressing people's concerns and, uh, using the advantage of COVID and Zoom, which is you can go through meetings and qualify people and have them qualify you more quickly than you could have done before.
• 9:13
  Um, so that's the high level. That's great. And, um, Jenny from Helpful, um, I'm gonna ask you to come off mute and ask your question because I was actually gonna go in this direction too. Both Richard- Yeah.
• 9:25
  And Linda ta- uh, talked about finding a lead. Um, and I-- that's really something that a lot of founders struggle with is, you know, I-- how can I find a lead? How can I find a lead?
• 9:37
  Um, Linda, do you wanna-- Or sorry, Jenny, do you wanna come off mute and, and just kind of expand on your question about finding a lead? Sure. Thanks. Yeah. So just, uh, I was, um, you're laying out your map.
• 9:49
  Your journey sounded a lot like, uh, our experience. Um, but we haven't cl- you know, we haven't, we haven't clo- we've sort of pulled back actually. And so especially lots of interest to, to follow, not to lead.
• 10:04
  And so just wondering, was part of it just, you know, great serendipity of, uh, the relevance of Curatio i- in the, in, uh, the midst of the pandemic, or were there other factors that helped you kinda unearth, uh, the leads to close your round?
• 10:20
  Yeah, it's a really good question. Um, I th- I think, uh, you know, finding a lead is hard, right?
• 10:26
  Because there's so much work, um, that they have to do, and they're taking the front role, and depends on what else they're, you know, working on, their deal flow and such.
• 10:34
  Um, I think in part that's why, um, we ended up choosing the two groups, um, that we did, because they could move quickly.
• 10:42
  They made that commitment to us, um, that as a lead, they would move through due dill in six weeks, um, and that they closed on a hundred percent of their term sheets. Mm.
• 10:53
  And, you know, I, I didn't even think, um, to ask that question.
• 10:58
  I ask a whole bunch of other questions when I'm qualifying, um, a, a fund or an investor to see if it's a fit before we, you know, we, we take each other's time.
• 11:08
  Um, but that's a really important question to ask is, you know, what percentage of your term sheets have you closed on, and how long did that take?
• 11:16
  Because I knew that the faster that we could get back to the work at hand and being of service to people around the world during this pandemic, the more, more traction, um, we would have in, in, in growth.
• 11:29
  And so it was a bit of a trade-off, um, because it wasn't necessarily the strongest term sheet, but it-- with that commitment of, um, timing and, um, and a hundred percent close, that kind of sealed, um, sealed the deal.
• 11:43
  But now I know too to look for that kind of lead, right? The, the kind of lead that wants to lead, um, you know, prides themselves on closing, is founder-friendly, um, and efficient.
• 11:56
  And so, um, I mean, that was, it, it-- for us, it was looking at who was in front of us, the term sheets we had, and where we think we could move fastest, um, not necessarily the highest valuation.
• 12:09
  Um, and that's what was maybe a bit different during a pandemic, 'cause maybe in a different time, we would've said, "Okay, well, let's take the time, work with the highest, um, valuation." But, but we didn't.
• 12:19
  Um, we decided to move quickly on it.Can, can I just ask a quick follow-on? Uh, do you think without the pandemic, um, those two would have, uh, been stepping up in the way that they did, or was it sort of situational?
• 12:35
  Hmm. So we got to know them before the pandemic, so I knew that they liked the team, they liked the leadership, they liked the solution. So that was all there.
• 12:46
  Um, but certainly, um, you know, we had even more interest after we closed, um, with people not knowing that we had a term sheet just, you know, just because of the market need.
• 13:00
  Um, uh, so I, I don't know if that answers your question, but, um, it, it was, it, it was interesting.
• 13:07
  Um, I remember, I remember Pauline and the Startup Health gang always talk a- about marching towards that timeline, and setting the timeline, driving the process, and certainly, um, the pandemic helped with that, um, and, and setting that date.
• 13:24
  Thanks. And we talked about that, um, a bit yesterday, Linda, about creating-- even if it's an artificial deadline, you know, creating urgency, creating scarcity.
• 13:36
  Um, do you feel like that helped get those leads to the table, the fact that there was a deadline? Yeah, absolutely. I mean, we're, we're all human, right?
• 13:45
  [laughs] And so I-- we just seem to work better towards, um, towards a deadline. And, you know, as, as entrepreneurs, like, time is our most precious resource, right?
• 13:55
  As a CEO, your time is the most precious thing, and so you can just be, you know, as you all know, you can be caught up in fundraising for months and months.
• 14:03
  Um, so I think it's really important, and, and Startup Health always says this, right? Like, you know, um, march towards a timeline, um, you know, be a buyer, not a seller, right? Uh, interview who you wanna work with.
• 14:15
  Um, this is as much about what's gonna work for your company as, as it is on, uh, what's gonna work for the fund. Absolutely. And that mindset can really shift the conversation.
• 14:27
  Um, Natalie, why don't you come off mute and ask your question? Hi. Hi, Linda. Thanks for, uh, speaking with us today. Can you guys hear me okay? Yes. Yeah. Okay. Okay, great.
• 14:42
  Uh, you, you mentioned the, um, the, uh-- what was the timeframe when you, when you say you asked, uh, how many term sheets have you closed on recently? Did you say six weeks?
• 14:55
  Did you say-- Did you give a timeframe to that?
• 15:00
  Um, so there's two parts to that question that you wanna ask, is, um, the first part is, of the term sheets that you've put out, let's say in the past year or the past quarter, depending on the size of the fund- Yeah...
• 15:11
  what percentage have you closed? And then how long does it take you to go through due dil? Okay. Awesome. Thank you. Great. Um, so Richard, I wanna unpack a couple things that you talked about.
• 15:27
  Um, one is, um, simple, which is you mentioned the no-shop clause. You agreed to a no-shop clause that was too long. Um, you now have a lot of perspective about how long you think it should have been.
• 15:42
  Can you share your thoughts around that? I think that can be really helpful for folks. Yeah. I mean, so, so we, we signed one that was ninety days, um, and we thought we were gonna be, um, well closed within that time.
• 15:56
  Um, if your runway is not much more than ninety days, you can't do that. Um, you know, there, there is a, um-- So, so, so just, just to back up a bit, anybody
• 16:11
  who doesn't have a specific large benefit from, um, having corporates as a lead, um, my advice was just don't do it.
• 16:23
  Um, as, uh, i- if, if there is a specific, "This would completely transform our business in the way that we want to transform it, and we're certain about that, and we have the data that proves that's the right way to do it," um, that's a, that's a, that's, you know, obviously that's a good way to go.
• 16:39
  Um, we had a corporate that agreed with what we thought we wanted,
• 16:45
  but we weren't naive enough to know-- to think that we knew the answers, and therefore we were like, "Unless the data and market feedback says differently." The market data did say differently, and they didn't care.
• 16:57
  Um, they wanted to do what their objectives were, regardless of what risk that put the company at. So, so, so, so super care on that front. Um,
• 17:09
  I do think to Linda's point about, um, questions, it's, it's important to have your cheat sheet, um, you know, on your computer screen next to your, uh, next to your Zoom ready, um, so that you don't just get carried away with the process of answering their questions, and that you do, do drill down into exactly what is gonna make sense for you, because that is, um, absolutely gonna speed up, um, uh, speed up the, the, the overall process.
• 17:41
  Um, so the-- Yeah, so on the no-shop clause, it's like, okay, if someone wants three months, why do they want three months? Are they actually anticipating that it's gonna take them that long?
• 17:52
  Um, you know, I-- now looking back, I should have said, "Okay, thirty days, and we can renew at thirty days, um, as long as we've made enough progress towards the, the, the final goal that we, we both believe we are gonna get there."
• 18:07
  Um, ninety days just allowed them to be, um, typically corporate in the way they were approaching it.
• 18:17
  So can you share any other red flags, um, you know, hindsight is twenty/twenty, that you wish you had paid attention to?
• 18:25
  I mean, this was obviously a potential investor that wasted a lot of your time, and it, you know, you fortunately found another lead at the last minute, but could have gone the other way.So anything else that you, you, you look back, yep Yeah, absolutely.
• 18:41
  Absolutely. So, so the, so, um, one VC said to me, "You never know what a VC's thinking anyway." Um, but generally speaking, as a huge overall, um, uh, um, generalization,
• 19:00
  corporates have a ton more political stuff going on behind the scenes than you will ever know. And the VCs, generally speaking, have a much more straightforward motivation of what they're doing and why they're doing it.
• 19:16
  Um, so, you know, the, the, the first, the first of all is p- the, the corporates are a lot trickier, uh, situation to deal with.
• 19:25
  But the broader one is, the, there's a saying that every time I ignore it, I get bitten really badly by it, which is, the way someone does one thing is the way they do everything.
• 19:36
  So th- this, this is sort of like, you know, everyone knows this from sort of, uh, pre-COVID dating world of, you know, if, if your date is being rude to the waitstaff, sooner or later they're gonna be rude to you.
• 19:47
  Um, if someone is negotiating in a way that you go, "Oh, crap, I wouldn't wanna deal with this in the boardroom," walk away immediately [laughs] because it's absolutely not gonna get any better.
• 19:58
  We- I kidded myself really naively to think, "Oh, well, this is being driven by their lawyer. This isn't, this, this, you know, she's being, th- this particular person is being helpful in other circumstances.
• 20:09
  So, you know, I'll expect her to be helpful, you know, when things move forward, and we're just gonna get through this negotiation." 100% wrong. People will always act in the way that they're acting to you right now.
• 20:21
  It might take u-until there is a, a crunch point, but if someone is being difficult to negotiate with and doing a death by a thousand cuts, they will do that to you afterwards as well. So yeah, it just...
• 20:34
  And, and, and it's a, you know, for a startup, especially when we're cash strapped, part of the reason why I didn't see the danger early enough was I was like, "Great, big corporate with flashy name. Wonderful. Woo-ha."
• 20:46
  Um, you know, instant credibility, um, solving all these other problems. Uh, no. Um, you know, we are all CEOs. Um, and therefore, we are the experts in what our company can and can't do.
• 21:03
  Yes, lots of people have got other advi- uh, uh, lot, other advice, which we should always, um, listen to and then ignore if we don't like it or, or we figure out how to test their ad- uh, advice.
• 21:16
  But ultimately, we all know our businesses better than anybody else ever looking in from the outside, and I forgot that.
• 21:25
  Um, I, I allowed myself to go, "Okay, well, they must know this, this, and this about this disease indication." No, they didn't. They just, th- they were just being driven by particular needs. Um, and they're human.
• 21:38
  And to you, it's, you know, to all of us, it's our life and soul, and we all care about it a ton more than anybody else ever will. Um, and so yeah, the, the trust your gut thing is like y- you have to do it.
• 21:53
  Um, and even, like looking back now, I wish I'd gone, "You know what? I don't have an alternative lined up, but I can't get an alternative unless I ditch this."
• 22:03
  And looking back now, had that deal gone ahead, it would have already killed our company. We would've just been a dead man walking, and that was only six weeks ago. So yeah. Wow. Trust your selves, everyone.
• 22:19
  [laughs] Yeah. Trust yourselves- That's a good- And try and prove or disprove any advice you're given. It's such a good reminder. You know, go, go with your gut. Don't ignore it.
• 22:29
  Um, Alpita Shah, why don't you come off mute and ask your question? Hi. So, um, I just wanted to see how we can create an investor funnel to approach, like, how do you,
• 22:43
  um, nail down which, which, uh, investors to approach and, you know, uh, any, any, uh, guidelines on those?
• 22:56
  Um, my, my, my simple one on that, and then, and then obviously for, um, Linda to, to jump in, is basically, um, we did a lot of... So we, we ended up doing sort of a long rolling close and then a first close. Um,
• 23:11
  the existing investors did a lot, and our second lead ended up coming from one of our smallest and most helpful investors saying, "Oh, you should talk to these guys." Um,
• 23:24
  in COVID, because you haven't got the face-to-face,
• 23:28
  um, an existing investor, however small, saying, you know, "I, I like these guys, and I've been an investor for a year, and I've seen them do X," that is epically more valuable than, um, uh, than, than, than a cold intro.
• 23:44
  So, you know, loo- look... So my, my, my top advice is do, do a better job than we did of looking after your, all of your smallest investors and getting any intro you can.
• 23:56
  Because even if they give you an intro that is not a really good fit, and you speak to those people and you say, and you figure out in the first 10 minutes that they're not a great fit,
• 24:07
  those people then introducing you to someone else is still better than any kind of cold call. Um, so yeah, u- use, use your network, even if it's not perfect, and then get into the, the be- the better deals.
• 24:22
  So would you say, uh, LinkedIn, or what, what, um, uh, what would be the best way to get the network or, uh, form the network?
• 24:32
  Um, so, um, so, so start with, I, I mean, personally start with your cap tableUm, then your employees and who they know. Um, then, I mean, and, and, and, and it is--
• 24:45
  and, and, and here on Startup Health, you know, go through companies that are similar to you and ask them, you know, "Who are the people that you spoke to that, um, you think we might be a good fit for?"
• 24:56
  You know, we're all, we're all here to help each other, and everyone's, um, everyone, you know, who is on a call like this is, is, is willing.
• 25:04
  Um, and if you can get that down to, like, a brief in-- Like, the, the key thing for asking for help from anyone is make it really short and really easily actionable, so someone can look at your email and in ten seconds go, "Oh, they should talk to this person or that person."
• 25:22
  Like, if you can make it that simple, then you can ask for a lot more help than you, you probably realize you can, and I'd definitely start there.
• 25:30
  And then some of these sort of, um, events like Respi, where you can shotgun, uh, your approach with a lot of people, end up with a couple of people who are interesting, and then ask those people, "Who do you think we're a good fit for?"
• 25:44
  I do, I do have a really strong belief that if you are going to spend an hour of your time with an investor, um, they owe you honesty,
• 25:56
  um, on why they're saying no, and if they think there is anybody who is-- who might be a better fit for them, that they give it to you. Um, I now-- I, I, I, I s- I didn't used to do this, but now I'm pretty brutal.
• 26:11
  I tell people, if they're not gonna, if they're-- And I tell them politely, but I tell them, "If you're not gonna tell you-- me your specific things that you don't like and specific things that would be the right milestones in the next round for you to be interested in the next round, then I'm literally not going to talk to you ever again, because you've just wasted an hour of my time."
• 26:30
  And I do it as politely as I can the first time, but then I get, like, "No, no, no, you're fobbing me off with a 'you're not quite there yet' kind of stuff." And the best investors will never do this anyway.
• 26:42
  The best investors will always give you something useful in their response. Um, but I th- I really think it is, you know, we need to value our time in a way that says, "No, no, no, no.
• 26:52
  I've spent an hour of my time with you, therefore you owe me, you owe me an honest answer."
• 26:57
  'Cause most of the time they're not giving an honest answer, not because-- I mean, the, the theory is that they're afraid of offending people, therefore they wouldn't be interested in the next round.
• 27:05
  Unfort-- I, I think that answer is frankly BS. It's laziness and lack of time. People are just trying to churn through a lot of numbers, and you're just another bit of noise.
• 27:15
  So there is no harm at all in saying, "No, no, no, I, I, I really want your honest opinion here, um, because that's gonna help me, and otherwise I've just wasted an hour of my time.
• 27:26
  And if you do this and you're honest with me, I'll tell the next entrepreneur that I talk to that you gave honest feedback. It's valuable." Does that answer your question? I think that's- Um, yes.
• 27:40
  That was great, great insight. Thank you. Yeah. And if you check the chat, Alpita, there, there is, um, if you haven't looked at it recently, the Startup Health IQ database, um, does track the VC fundings in our space.
• 27:55
  So you can also look, as Unity said, in the past twelve months and even six months, um, you know, which investments have happened in your category, in your size, break down, you know, which VCs you should be targeting.
• 28:07
  So it's a good starting point, um, in terms of building your funnel. Linda, did you wanna add something there? Just a few things, um, to Richard's great points.
• 28:16
  Um, there's a, there's a, a term, always be raising, and I, I don't think it's that, uh, as a CEO.
• 28:22
  I think it's always be cultivating, so ABC, um, in that you're, you're looking for affinity and connection with people throughout your journey.
• 28:32
  Um, it's, it's not that you're, "Okay, I'm six months out and, and now I'm gonna, uh, look for investors."
• 28:37
  You're finding people each step of the way that you know have an alignment and that you start building a relationship, um, with. And then you keep them updated, right?
• 28:47
  So, you know, whether it's a quarterly report or sharing good news, you know, bring them along on your journey.
• 28:54
  And then to Richard's point, I mean, start in, you know, sort of concentric circles where, you know, you've got Startup Health, you've got your cap table, um, you hopefully have your circle, which is super valuable, and then start building out from, from there.
• 29:07
  You know, so often we go wide first and then down, and we start with, you know, we do our practice pitches on who would be on our A list ins- instead of, um, you know, trying out some Bs and, and Cs.
• 29:20
  So, um, you know, make, um, build those relationships constantly. You know, keep people updated. Bring them along in the journey.
• 29:28
  Um, be disciplined, um, which I have work to do on, on creating that, whether it's in Excel or a CRM, on, on charting that and, um, understanding, you know, when the relationship started, what they're interested in, um, and then, um, making sure that you, as you're building that network, that you're, um, making direct asks of, of, of that network for, it, you know, whether it's introductions or, or other, um, other help that you need.
• 30:01
  Thanks, Linda. Awesome. Um, okay. And, um, Natalie has a question about revenue minimums. Um, either Richard or Linda or even Barry could chime in on that one since we, we see so many term sheets.
• 30:18
  Um, Natalie, do you wanna, um, come off mute and expand on your question? Yes. I'm just thinking, um, about what is the consensus of what a four to five-year revenue EBITDA,
• 30:35
  uh, financials minimum, which would make a digital health company VC investable as opposed to-Not VC investable
• 30:51
  Um, I'll give a very quick answer, and Linda will probably give a, a, a much more, um, useful answer. But my quick answer would be, um,
• 31:00
  that question, as in everything else, will depend very largely on the size and the mechanics of the fund
• 31:08
  because, um, you know, a t- a, a five hundred million dollar fund is gonna need to see a certain size for any individual investment so that their one out of ten, uh, pays back their fund.
• 31:20
  Whereas, you know, a twenty million dollar fund might have a totally different-- I, I would expect to have a totally different horizon of what matters to them. Um, and so, you know,
• 31:32
  y- y- you should-- I, I-- my, my opinion is that you should be asking that question by average si- by the size of the fund. Linda, do, did you wanna chime in on that? Yeah.
• 31:49
  I, I think it depends what type of offering, you know, service, um, product, SaaS, not SaaS. Like I, I think it does, um, it does vary.
• 31:58
  Uh, so in SaaS there's a, there's a model that's roughly used, and there's some good reading. If, um-- I can share it if anyone's interested.
• 32:06
  Um, but I think, you know, to, to Richard's point, everybody wants to see the hockey stick, in-including you.
• 32:12
  Um, but I, I think there's two things, um, is the-- you know, be realistic in, in where you think the next year you're going to be, and, and then, and then be increasingly optimistic.
• 32:23
  But you, you wanna kinda ground, um, where you really are and build that trust because, you know, if, if you're, if you're forming a relationship and you're like, "Oh yeah, we're gonna ten x revenue next year," and, um, and, and let's say someone believes that, and then you get in and you can't deliver on it, you've just fractured a lot of, um, a lot of trust and relationship, um, value that you've, that you've built there.
• 32:45
  So it does. It depends on what kind of business you are. There is a lot of good, um, investor types of documents of how do you value this type of business, this type of business, and it's worth reading, right?
• 32:56
  It's worth getting into their mindset to see what they're looking at. Um, and, you know, that's how to qualify too.
• 33:02
  Like, so often you'll get that associate, you know, that wants an hour of your time and, um, you know, they're just doing their job.
• 33:08
  And so your job is to find out right away, like, you know, what, what are they looking for? Are they looking for ten million ARR? It's too early. You know, nice to make a connection, have a five-minute chat, but move on.
• 33:20
  Um, so you'll, you'll find that, um,
• 33:24
  like the more you just get into their mindset, and to Richard's point, what they need to return, 'cause their job is to make those returns, um, the better you can align, um, with, with what, what they need.
• 33:36
  And the small- And related to that, we-- Oh, go ahead, Linda. Well, I'm just seeing here, small fund, smaller return expected in general. I think not necessarily. Um, yeah, not necessarily.
• 33:48
  And it depends on too, um, you know, how much dilution you're taking, where they're coming in, um, in your development. Um, yeah. And, and Barry just said also depends on stage of investment.
• 34:04
  Um, you know, and, and in terms of five year, uh, a lot of funds that we talk to, um, you know, they're just looking for even your most recent ARR and what you hit last year.
• 34:16
  Um, but really they're looking for year over year growth. Um, like Linda said, they wanna see that hockey stick.
• 34:21
  So, um, I wouldn't say there's an industry standard for a number because the types of products, um, and business models vary so much. Um,
• 34:32
  there was a good expert office hours earlier this, this year with Andrew Isaacs around valuations too.
• 34:38
  If you, if you were on that one or if you weren't, um, there's a post about it on Health Transformer with some really good, um, tangible tips about how to-- how VCs evaluate deals and set valuations.
• 34:51
  Um, so that's worth, that's worth checking out along this vein as well.
• 34:55
  Um, you know, there's something I, I would love to talk to you about, Linda, and we briefly talked, touched on this at the end of our call, um, yesterday.
• 35:04
  You know, last year, two thousand and nineteen, um, there was a record broken of, um, percentage of female founders that got VC funding, and that record was two point eight percent, so that's pretty freaking sad.
• 35:19
  Um, I actually saw an article that said, "A record was broken," which is, like, wrong way to put it.
• 35:25
  Um, but, you know, congratulations to you, Linda, because you're one of those female founders, and it's a sad reality that it is harder for women to raise venture capital than men.
• 35:36
  Um, and I would love for you to share, um, anything you learned that you think was particularly helpful, um, as a female.
• 35:44
  Obviously you're a, a phenomenal CEO regardless of gender, um, but what, what was your experience like, um, relative to being a female founder, um, raising capital?
• 35:57
  And, and anything that you could share with your fellow female founders. Yeah. For sure. I mean, there's, there's definitely, um, there's definitely a lot of challenges, um, and, uh, and, and, and sexism still out there.
• 36:11
  Um, I, I think we're-- we have a, a great set of investors and a wonderful board and, um, just really fantastic people.
• 36:19
  But, you know, back to that point is it's you're as much of a buyer as a, as a seller, and you're looking, um, for that affinity. Um, I mean, that said, it's really, really hard.
• 36:28
  And, you know, sometimes I just felt like I was in a Pokemon game, and I didn't know any of the characters. I didn't have any of the cards, I didn't have any of the power, and I was completely out of my element.
• 36:38
  And our first two raises that we did, I did on my own. Um, and that was, that was hard and, um, and, and lonely, but also easier because we were earlier on in the company.
• 36:49
  Um, soAnd, you know, I probably should've learned this after the first time.
• 36:53
  The second time, I'm like, "Okay, this is a team sport, and I need to build a great team, um, around me in terms of doing, uh, doing this next round."
• 37:03
  So, um, I had, you know, one, one board member in particular who was just phenomenal and finance background, and he, he had my back, um, the entire time. Really good legal counsel,
• 37:14
  um, that just, uh, leaned in, you know, answered a lot of my stupid questions. Um, a great partnership with our chief growth officer and, um, and bringing him into the mix.
• 37:23
  Um, so, you know, took a very different kind of team approach.
• 37:26
  And, you know, previously I thought, "Well, I don't wanna detract anyone from working on the business, and, you know, I'll just tough it out and go it on my own." And, um, I don't think that's, that's the way to do it.
• 37:37
  And the reason why, and this is what dawned on me, is, um, this might sound really simple, but investing is all about relationships and, um, whether you trust someone or not. And there's that...
• 37:51
  W- we still have that lizard part in the back of our brain that is always assessing, um, you know, that risk trust. Is this, is this someone, um, is this a safe situation or not? Can I relate to this or not?
• 38:05
  Is this different or the same? And as much as we try, even the most, um, aware investor is, is still looking for that common ground.
• 38:14
  And so when you create a team approach to fundraising, you're broadening the connection. You're broadening the sameness, because you might be, um, the only woman, or you bring another woman into the team.
• 38:27
  Um, but they'll also diversify. Diversifying gender, diversifying culture, diversifying background and age. Because the more you can see that, the more you're gonna connect, um, and form those trusted relationships.
• 38:39
  Um, so that was a really key learning point, and it's, you know, it's human nature, right? We're all looking to de-risk any situation. It's survival. Um, and we don't realize our brains are doing it, um, but they are.
• 38:51
  And so the more, I think, you can just come to terms with that, and then through your success as a female founder start changing things, then, then away we go.
• 39:01
  But it's easier to change things from a position of strength. Um, so that was my approach. I just want- That's so true. One little to add to that. Go ahead, Richard.
• 39:11
  Um, w- because, because we're going after fibromyalgia, um, I, I, I've spoken to kind of, kind of a lot of, um, uh, people who've, uh, VCC focus on, um, companies that deal with women's health.
• 39:28
  Um, and there are a couple of those that we specifically did not get the investment from, uh, because of my gender. So, um, on the flip side of the coin, um, you know,
• 39:43
  i- if you find yourself in that position, um, absolutely make sure you know exactly who any potential investors are in your area who focus on women founders, um, and because you'll find that there are a chunk that actually have mandates that they're not allowed to invest not on women founders.
• 40:04
  Um, and even outside of that, if you had an experience of it being tough, um, which I presume all of you have based on, on, on some of the things Linda said, um, you know, uh, just target the, target the women, um, uh, VCs and, and, and, you know, because they will have experienced other people who've experienced your position, and more importantly, they will know the value that you have gained in terms of your own knowledge and ability because of having those, those difficulties.
• 40:38
  Um, and I'm saying this as a disabled person. We, we get this benefit.
• 40:41
  People kind of assume that, oh, life is really hard for a disabled person, and therefore you must have a degree of competence above the average, unless they're gonna dismiss you out of hand.
• 40:50
  So either way, you know, don't necessarily assume it works against you, but look for the ways that it could help you. Great.
• 41:01
  Um, and, you know, along this same topic, we talked yesterday, both Linda and Richard, you talked about the people that you wrapped around you as, as the team and to help you with your raise.
• 41:13
  Um, and w- a couple things that, um, and Richard, maybe you can comment.
• 41:18
  Um, it's complementary to what Linda said, but, um, you know, having people who have done a lot of deals, um, at the table, on your side of the table, um, can you talk about that and, and what that brought to the, to the table?
• 41:34
  I said table a lot, but go for it. [laughs] Yeah, certainly. So, so, so we, we, we, we've, we've, we've had helpful board members, um, people who, um, are around.
• 41:45
  Um, but then more recently, I've had one guy who, um, has done a very large number of biotech deals and been an operator.
• 41:54
  Um, and now we're gonna, we're gonna pay him, um, a not insubstantial amount of shares to be, um, a, uh, a, an independent board... Well, a, a board member that's representing the common stock.
• 42:09
  Um, and oh my God, is he adding way more value than the percentage of shares that we're giving him, even though that looks large from a market percentage. Um, uh, so
• 42:22
  it's really important to have someone on your side who's done a lot of deals, who is prepared to spend time with you advising you. There's just no, um, there's no substitute for that.
• 42:36
  Yeah, and it doesn't necessarily need to be someone in your particular area. It just needs someone who's done a lot of health deals overall.
• 42:45
  Um, just, you have that person in your, in, in, in the people that you can call in the, in a, in a, in, in any point of negotiations, 'cause it really, really matters.
• 42:54
  Um, we had that in our lawyers to a certain degree as well, but you need this to someone who's not, um, on the clock every time you call them. Yeah, totally agree.
• 43:05
  Um, we've found that a lot, um, in our fundraising at StartUp Health. Um, first of all, we've got, we've got Barry crying full-time, so we're lucky there.
• 43:14
  Um, but also have had folks advising us who, you know, when people see so many deals, and that's their bread and butter, there's a...
• 43:21
  We talked about, there's this pattern recognition, um, and they can really help you identify flags, um, you know, at, kind of at every step of the way. Um, Linda, do you have anything to add on that topic? Yeah.
• 43:33
  I w- I would just say if you can, um, like having a, a good relationship with your board or your advisor group, um, if you don't have a board yet, is, is really important. And that board can be, um, an...
• 43:46
  For, for me, one, one particular individual who's got a finance background, has been through a ton of this.
• 43:51
  Um, because the board has-- They can, in a way, not, not be the bad cop, [laughs] but they can, you know, if they know you, they know the business, they can reflect back maybe some things that you're not seeing or some blind spots.
• 44:03
  So, um, you know, bring them into your team, or bring that person on your board or advisory group that's got that finance background, has been through it, um, and can help you avoid some big mistakes.
• 44:17
  [upbeat music] StartUp Health invests in health transformers from around the world who are committed to achieving audacious health moonshots.
• 44:28
  If you wanna learn how you can join this community of entrepreneurs, or if you wanna connect with one of our three hundred and thirty companies, go to startuphealth.com. Thanks for listening to "StartUp Health NOW."
• 44:39
  We'll be back next week. [upbeat music]