Following a couple of years of soaring valuations, venture capital investment levels have come back to earth. And as uncertain economic conditions continue to swirl, investors are taking an even harder look at companies before putting up funding.
“Investors are still there. They still have money that they want to spend in great assets, but they’re a little bit harder to convince that you are that great asset and they’re a little bit more hesitant to deploy capital. The bar is a little bit higher,” Kelsey Maguire, Managing Director, Sandbox Industries and the Blue Venture Fund, said during an Oliver Wyman Health Podcast.
Companies vying for funding should be strong in three areas: have a great management team, be in a market that has a need, and show that they can be profitable, Maquire told Oliver Wyman’s Akshay Agarway, MD. In this podcast, Maquire and Agarway dissect the macroeconomic and microeconomic trends impacting healthcare and investors.
“The conversations that you're having aren't, ‘What's the most amount of money I can raise at the highest valuation,’ but instead ‘What's the right amount of money for us to raise right now and what valuation that feels good for where we're sitting?’ Long term, that’s going to lead to healthier companies.”
“The most dollars will continue to flow to the largest markets … huge buckets of spend … cancer, or COPD, or conditions where there's still tremendous room for innovation. Things like primary care. If you add together all of the risk-based providers in primary care and look at what they are as a percentage of overall primary care in the US, it’s a tiny fraction.”
“There's opportunity for point solutions, but you're probably not going to get valued at $3 billion for doing something that's very specific in the small market. They'll have to get priced more rationally.”
“CEOs and other executives with a great track record are still going to be able to command premiums, even if they don't have product market fit, because people are going to take a risk on their track record.”
“The fundamental market business — and even emotional — reasons why we all invest in healthcare are still true … and there's just so much opportunity. I think people will continue to invest in healthcare. I think great companies will continue to get funding.”
Kelsey Maguire Managing Director, Sandbox Industries and the Blue Venture Fund
Akshay Agarwal, MD Head of UK and Ireland Health and Life Sciences, Oliver Wyman