Betting on Bigger: What Matters in Today's Growth Equity Arena | LSI Europe '23

Transcription

Mrigasha Patel  0:05  
First of all, I'd really like to say thank you to Scott, Henry, and the full LSI team for pulling this together. This is not something that's for the faint of the heart. So thank you guys. We'll start with introductions. But before we dive into that, I'd like to give a take a macro perspective on sort of what the capital raising environment looks like, and share some stats. And so you know, with that being said, there is this, this theme, everyone feels like not enough capital floating around. And that's pretty standard, I think, for early stage companies, because they face a lot of difficulties raising capital. But you know, I shared it with the panel last night is, you know, we've seen in q1 and q2 2023, alone, about 130 deals around the world, in the private capital markets with, you know, about a billion and a half raised all together, right, so capital is out there. And so I'd like to, you know, kick this off by saying that, you know, startups and early stage companies should really not be defeated. Because if you do do, sort of, you know, the execution, and you've got the data and things required, things will pan out. So I'll turn it over for introductions, and then we can dive into some other market data. But why don't you start Gabe, and then we'll go down there.

Gabe Jones  1:21  
Okay, I'll go as the only non investor on the panel, I think, Gabe Jones, co founder of Proprio, which is a surgical navigation and data platform, built out of Seattle started seven years ago spun out of the University of Washington, we've raised about $80 million for the project, I want to thank our intro person for bringing up the Augmedix fundraise, which made me feel very competitive, because they're a competitor of ours, $43 million, Series B was closed, actually, in July of this year, which is the fourth fundraise for the company. We're building a platform for real time surgical navigation volumetrically, which is the first time that's been done. The product was FDA cleared, as someone mentioned in April. And so it's an exciting time to be able to layer on and build out that platform, look at surgical adjacencies and other applications in oncology, cranial major joint, but also the panel I was just on was looking at alternative revenue streams and data in particular, and how to monetize data. So if we get an opportunity to bring that into the fundraising story, both now and they go forward for propria, but also for other companies and how to raise money with those kinds of storylines, I'll try to weave that in as well.

Luc Marengere  2:29  
So Luc Marengere, I'm a managing partner and co owner of TVM Capital. TVM Capital operates both Europe we have an office in Munich, as well as North America through our office in, in Montreal, our our fund is we do a little bit book ends, we will do early stage therapeutics, because we have Eli Lilly as one of our major strategic investors but we also do later stage medical device imaging diagnostics as well. We'll stick with the latter given the relevance we we are a lead investor we can play lead or CO lead we do play nicely with with other people, we usually look for companies that are that are commercial. So companies that have some traction on the commercial side so that we can do we can do that level of due diligence and we won't take a clinical risk or regulatory risk. But we will take a commercial risk, the way we position ourselves is usually when companies become commercial. We're right below growth funds. So even though there's a there's there's a theme for this particular panel with with regards to growth funds, but we position ourselves just just before that, okay. So we we we tend to take our companies on the commercial side, both in Europe and the US. And and we take a very active role with these companies, given the experience that we have internally and well surrounded by a slew of of consultants as well.

Aneta Sottil  4:03  
Hi, everyone I'm Aneta Sottil. Andera Partners. For those of you who don't know us Andera Partners is the fund based in Paris in France. We invest globally in medtech and biotech, and around the third of our assets are invested in in biotech. Today, we manage around 4 billion in assets, and this particular strategy of Life Science venture, investing around 1 billion under management. And to give you an idea of our last fund that we currently deploying in medtech, as well as a 450 million euro fund. And we have started as over 20 years ago now as more than earliest stage investors and we didn't think mean ever to be a growth stage or late stage but as we founded companies and lead their series A and B and we quickly realized at our second or third fund that we just didn't have enough money to give them the runway in and to compensate them to get to the value inflection point. So we gradually raised bigger funds. And we today have a different strategy for the past 10 years, we've had a strategy of sort of early to late stage investors. So some of this those earliest startups, you know, exited very early on very successfully. Some of them, you know, we've started and led run ABC crossover IPO. And you know, we kind of exited at the at the later end. And so we have experience and we have capability today, to do early to late. And I think, well, we'll talk more about that. But this this sort of late or growth stage is becoming more more and more relevant, especially for medtech companies, I think even for early stage med tech companies, so we're excited to play in that segment,

Mrigasha Patel  5:58  
We'll do a deeper dive into one of Aneta's portfolio names, Axonics, later. Great story, and we were on the IPO so I can speak to that. So my name is Mrigasha Patel. I've done 14 years of medical devices. Unlike most people that leave banking to go to industry, I left industry to go to banking, don't ask me how that happened. But I've executed on about $25 billion worth of m&a, IPOs and some private capital advisory stuff mostly originated by other people. But now I'm starting to originate so on my own and really excited to represent HSBC here who's very new in the healthcare advisory space, especially medical devices, they've historically done a lot of marquee deals in oil and gas, industrials, chemicals, but tech and healthcare is now just emerging for the bank, given their new capabilities. And just a few months ago, we announced, you know, we're starting to support series A with some debt, debt type rounds as well, depending on you know, where we want to see companies go, but we're really backing innovation, and backing novel companies and therapeutic areas that we see high unmet need. And so with that, maybe I'll kick off sort of the macro perspective. So, you know, I talked about the private capital markets a little bit. So you know, there is capital, there's capital to be deployed. And it's happening, it's happening for companies that are executing well, that are delivering for their investors that have prior history of doing these types of transactions. And it's, you know, a little bit of a challenge for companies that are looking for, or very early stage capital, because the risk associated with it is quite high, right. So, you know, I always encourage entrepreneurs to get very creative around instruments that they're raising, it always doesn't have to be equity, you can look at a combination of debt and equity, you can look at, you know, their family offices, there are, there are smaller funds that are, you know, come emerging from founders that have exited their company. So, you know, there's like a broad group of capital out there for companies, which I encourage everybody to look at. Now, that's the private capital side, on the equity capital markets, we've seen this new class of medtech companies emerge call high growth medtech, and those are the class of call it 2018 to 2021, IPOs that went public during this, you know, pandemic, where we saw this big peak of just nothing but you know, standalone, single product medtech companies go public, now, they're trading on an LTM revenue basis at eight, eight, call it 8.5x, right. Whereas large cap medtech is about four and a half. Smid cap is three and a half and the s&p is at three. So if you look at the relative performance, right, it's still medtech is still outperforming the market. And in some ways, you could even argue that, you know, they're trading at Tech multiples. And so this is a really attractive space to be in, whether it's, you know, from an equity capital market standpoint, or a private capital market standpoint. And then the last thing I'll touch on is sort of the m&a transactions and what that's looking like, so year to date, within m&a volumes, including the one that got announced last night, Releviant, where we saw about, you know, 10 and a half billion dollars in total enterprise value, you know, being traded just by some large cap, medtech strategics. And the good news is for privately held companies, the multiples are still higher on the m&a front. So you know, the average multiple we saw was about 11 to 12x on an LTM revenue basis, which is still higher than the equity capital markets. What they're trading at right now. So you know, I'll start with that and kind of lay the lay the landscape out that you know, if you're a private company, you really whether whether you're a private company or a public company, you really want to build your company to be a standalone successful company. And then you know, the exit sort of will take care of, I don't want to say take care of itself, but you will be able to have options to explore. And you know, I'd love to kind of turn it over to the panel here and maybe start with a Netta. How do you see your portfolio companies evolve? And how do you support them and maybe provide some examples of, you know, stories that have worked, and some that haven't worked so great.

Aneta Sottil  10:17  
Of course, I think I couldn't agree more. But I think this is something that all of you have heard. And everyone is saying that you need to kind of be independent and think of your future and, and still, there's a disconnect, because when we've fundraising as a company, when we when we are evaluating series, A or Series B opportunity, we look at an equity story, which is okay, we're gonna get in with this amount of money, we're gonna get the company from point A to B, and then there's a potential exit. And there's this sort of fixation on the potential exit that might or might not happen. That in a way, there's little reflection of what happens beyond, you know, there's no funding, there's no planning, there's no, we're not going to hire people for what's going to happen after the exit, because who cares. And in a way, I think what we've all seen in the past 10-20 years, especially with the med tech sector, being fairly consolidated, have recently acquired looking for top line growth. So mature revenue generating companies with minimal dilution, I mean, that's a trend not not an ultimate truth, but a trend. More and more companies now portfolio companies need to be able to go all the way. And to have the sort of mindset of you know, when when you just, maybe you're at your, you know, preclinical stage, maybe you just got a big win, because you have a good, you know, FDA response on the pre sub, or maybe you even, you know, get good data from your first patients. And you can't just sit on your laurels and say, Well, this is done, now someone's going to, you know, come in and pay me loads of money for this. It's a big mindset shift. And I admire entrepreneurs who are able to embrace it and do it, and really built the company and make sure they one step ahead of the game. And and that makes, you know, for a hell of a job, I think, is you not only to think about where your product is going, and how your your clinical data is evolving, but you need to think about how you syndicate is evolving, is that syndicate ready to take you further? How are you got to prepare for the next step, how your team is actually adapted or not adapted to the next stage of growth that you're going to embark on. It's not something that's natural to I think anyone but it's becoming critical, and really trying to help in that reflection and preparation. And in thinking, okay, you know, we might, our journey might end up just around the corner, but it might not. And if we prepare for this big acquisition just happening in a year from now, then if it doesn't happen, and odds are, it's not going to happen, we're not going to be ready. And we're not going to be able to execute it on fundraise or on the next stage of growth, or even commercial preparation. And I can give you examples from our portfolio companies. But before maybe I'll let Luc, add on. 

Luc Marengere  13:19  
Well, thank you. So there's clearly a lot of experience behind those words. And I would echo many of them. So let me share with you, you know, our approach. We've in 17 years of doing medical device, we've never had a company go public, right, these companies. So what we invest in companies, we tend to pick, as I've mentioned, companies that are that are already commercial to mid commercial. But what we do is we get into these companies with a clear mindset, that while we like to have visibility on who might buy this at some point, right, and what the triggers might lead to a strategic acquisition, but we get into these companies with the goal to build the best viable, differentiated and standalone entity that we can, right. So that kind of links with some of the comments made by a ninja but also regression, in that we don't get into a company and necessarily put a pin in that in three years from now. That's the m&a and it must happen. Chances are it's not going to happen like that. It's going to be probably delayed and if it does happen for reasons you have not even foreseen, right. So we syndicate like I've mentioned, we try very hard to be the last money into any one given company, okay? Because we want to build viable companies we put a lot of attention on manufacturing, if automation is needed, right and and quality Right, five years ago supply chain, you tell people that were going to really get into the details of your supply chain, people would, you know, their eyes would roll back? Well, what whatever for right? Today, it's a different reality. So we spend a lot of time on the front end, understanding, if the demand comes, right for you to become a 20 30 $40 million a year company, how are you going to meet that demand? Right, there are lots of ways you can kill a company, that's a great way to kill a company is drive up demand and falter. Right? So so we have that approach. And and in some ways, you have to take an educated guess, right, as to who's going to buy it and when, but the approach really is to build as as standalone, as viable an entity as we possibly can. And we can also give a whole bunch of examples along those lines as well. One area that I'd like to touch that regression I mentioned in terms of sources of capital, depending on where you look at companies, they are better structured, and sometimes not so well structured, from an investment architecture. Right. Sometimes angel investors and the terms that they've they've invested under, marry quite well, with what what VCs want to do, sometimes not. So I would say, just be careful before you go and get an angel round into your company, that things aren't the things remain, I'll say in a positive way that things remain compatible with with venture standard venture dynamics, okay. With regards to debt providers, I would say there's a bit of a cautionary tale there. Because while it may, it may sound attractive to take to take debt. It's not dilutive, that's usually the number one argument for a lot of people. But if you falter commercially, that debt becomes a real anchor around everyone's neck, because who do they turn to? When the when the financials numbers aren't there, they turn to the equity guys. And they go, you need to put more money into this thing to give me to be on the good side of my financial covenants. So there are pros and cons to things. But by and large, if you're going to consider as regression correctly points out, if you're going to consider the ecosystem, what's available to you, to finance your company. Try to maintain also not don't just look at the trees, try to look at the forest as well.

Mrigasha Patel  17:56  
Okay. So Gabe, it would be interesting to hear your perspective on, you know, the recent round you did and sort of, to tie this back in what what were some things that worked during that round, and what were some things that didn't work would be probably helpful to discuss.

Gabe Jones  18:14  
So I'm gonna totally change what I was gonna say, because I want to tie it to what both of you just said, so bear with me, bear with me for a second. So rule of threes, I'll try to do also say something hopefully controversial, and maybe a little bit cute. And then something contextual. And then something practical, which will maybe four things. You can tell me whether they're useful or not at the end. So the maybe cute or controversial statement is wanting to be compassionate towards investors. And yes, a founder is saying that. And what I mean by that is the context is really important. And it's a difficult context for GPs, and people who have gone out and raised funds to invest in people like me, and companies like us to then go make capital calls. Not all that money is ready to be invested at a moment's notice, especially in a context like this. So you're talking to your investors you have investors too and saying, I believe this is a no brainer, very likely, you know, 1000, bagger, whatever term you want to use, this company is different. And so we should deploy that capital. Now, at a time when the market conditions are such that there's 5%, to be had anywhere, and you have five or six companies, at least in the US market that are on fire going to the moon, you know, just buying Nvidia stock a little while ago wouldn't have been a bad idea. There's four or five companies that are driving 80% of the US stock markets run up this year. So we can look at s&p, and NASDAQ in the broader market. But the reality is that a lot of very small number of companies are capturing at least that stock price increase in the value that comes with that as well. So that's the context. So they're having to answer those questions to their investors when they say, I think Gabes company is amazing, and we should put, you know, $10 million $20 million large checks behind this kind of company. So that's the context with compassion. And so then get into the answer to your question number three, I think, How can founders operate think and operate in that compassionate and contextual kind of environment? What we did specifically was, you know, think of our business with three columns, the clinical front end, surgical navigation system, best in class, that then, you know, if if you believe what Gabe says and what the team and the executive team lays out as a vision, we're gonna go kind of step by step through different surgical adjacencies. And these are big markets, US spine is 30 billion on a reimbursement basis, cranial is 8 billion, total knee replacement, which is our third target is 23 billion. You don't have to believe me, those are big markets, that if we can take the same platform, with hardware and software through those that's really big, and that that's easy, or fairly straightforward for investors to do a discounted cash flow assessment, and then maybe at a risk multiple for context and execution, as you said, which is really key. But when I start to talk about future revenue streams from things like data that we are very confident about, where we are capturing proprietary data, that we're exploring how to monetize a second and third time, in this context, it's very hard, I would say, please respond if you if you disagree, to put a risk multiple on that. And so it looks like 100% risk to me. Right? It doesn't feel like that to the founder in the company builder who is seeing the data, seeing how clinicians and other customers and potential partners are responding to it, and how it's addressing gaps. But it's early in that process. So I think for founders, we need to focus on the business at hand in the context of right now and the cost of capital to raise money in this context costs this much. And that gives you an opportunity to really focus really execute and potentially explore those future opportunities that might drive drive step changes in the value of the business as we build it together. But asking investors to bet on that second, or third bet today is well, I would say it's not it's not a great bet. 

Mrigasha Patel  21:52  
One of the themes I've noticed very often in med tech and I'm speaking from a completely US lens is, you know, we've got call it a dozen funds in the US that are fast followers of strategic investors, right? I mean, I don't want to put anyone on the spot or anything but there's, you know, a couple of funds that will you know, look at, okay, we've got Medtronic, Boston Abbott or somebody invested in the company, we're going to just follow because there's something about to happen an exit right. Now that to me, I'm curious to hear you know, Luke and Aneta as thoughts because you know, Axonics was, Axonics went public, right? And it wasn't a fast follower of anything, but we're just doing the right thing and fixing the technology. And Luke, to your point, you know, you've got some companies in your portfolio that can move markets, right on whether it's small scale or large scale, but you know, from if that's the type of investor you're looking for, be prepared to be disappointed, right? Because the strategics and I can, I can speak from my experience in that space. They do all the hard work. They do all the diligence, they know the market, they've, they've built careers out of moving markets, right moving, for example, Boston bought AtraTech way back in the day for I think, 300 some million, you're looking at 100 You're looking at a billion some point five business today within Boston, that's not a small thing. They might be slow, they might be extra cautious. But they've moved the market and created the left atrial appendage market, right. So those types of investors when you see these rounds, and you're like, Oh my God, how did they get the 50 60? It's, it's not really because they did the diligence, and they, you know, understood all of it, they just followed a strategic so I'm curious to hear right, like, how do you approach that type of a process when you're looking at companies that are emerging and don't maybe have that strategic capital?

Aneta Sottil  23:52  
Yes. Yes, there's, I think there's pros and cons for strategic capital. And I'm not gonna say anything controversial here, but obviously, often it comes with some strings attached some sort of relationship that is delicate to manage and often it doesn't mean that you're gonna get bought by that strategic try to you know, gonna you don't have any guarantee deep button a little bit of a check. And it helps it's, it can be a voice of confidence, but it can be something that you need to handle with, as we say in the venture with the concept. So basically, you just go very, very closely. Now, you know, the followers is good, we have the followers because we need a lot of money in medtech to get somewhere and it's good that these funds are there. Now we do not really have a requirement for strategic to come and give us confidence in a we would want them to be the natural buyers. In a way as we imagined the road from all the way from a prototype to you know first inhuman and then improve on commercialization. We need To have a belief that there can be exit windows on the way. So we want the strategics to be there and be able to get interested in technology, you know, even if we need to be prepared for a long, long run. So but but we don't have a requirement for them to be investors to be in the round. And in specific contexts in depends which strategic it is and what they require, we would think, okay, maybe it's going to be easier to do it without them. So I think it's very situation specific. And it's no no way that this is not our policy.

Luc Marengere  25:38  
No, thank you for for that. So from our side, what I can contribute to that particular segment is we're looking for transformative, we're looking for disruptive, right? So whatever it is that you're working on, whether it's an imaging technology, whether it's a it's a medical device, the standard medical device, right? In on the therapeutic side, we invest first in class, best in class, but mainly first in class, okay, we take a little bit that approach to the medical device side, right? So show me something that's transformative, this will be the new standard of care, that's really where we want to make our bets, right. And there are pros and cons to that, right, your your, you know, as they say, pioneers, get the arrows and settlers get the land, right. So there is some wisdom in being a fast follower. But we believe that you're gonna get the better multiples on something that is truly transformative. Now, with regards to strategics, we do not encourage our management teams to seek investments, by strategics, we'd rather keep it clean. And whenever we get to that promised land, when when the doors open and his beautiful, bright light, and it smells good, fine, we'll sell but we don't necessarily try to engineer and exit via a proactive investment by particular strategic in the company, right? Having said that, a lot of funds will have relationship at the fund level with with strategics to get advice, right and to bring awareness, but this is what you're working on. And then you have a relationship if ever you want to knock on that proverbial door. Right? So so so so the companies tend not to have strategic investors, even though the strategics in the last decade, have made it easier, right. I mean, I remember when they for two $3 million into your company, they were on the board, they had strategic rights, they had the access to commercial geographies, a right of first a right of first refusal, you know, the ultimate poison pill. I mean, now they've realized that that was a straight line to not making investments in companies.

Aneta Sottil  28:06  
Yeah. Can I can just, I wanted to go back to something you said earlier and politely disagree with my colleague on the panel on you, because he kind of touched on a different subject, which is first to market versus best to market or, you know, a second fast follower. And our experience, at least now portfolio is that we made money on the fast followers. Axonics is that you mentioned is fast follow after Medtronic coming with, you know, a better technology behind intercept that's been on the market forever. And in a way, I think that's that's one where, across funds, unfortunately, we'll have different different views and different politics and different strategies for us today. You know, a first to market approach, but there isn't a channel to develop it ourselves. And even with the, you know, the big money we have and syndicated with our colleagues in, you know, getting hundreds of millions roundtable, we see it as a very, very difficult thing to do. And when we thinking about, you know, taking the company, what really matters when you go big? Well, what really matters when you when you approach the growth area. I mean, I can I can give some more examples from academics, I think it's a public story. Everyone knows it. Everyone knows Ray Cohen and, you know, just some things that they've done particularly well, really, really well, excellence all through, you know, I mean, when Ray Cohen hired his 100 sales reps, all of them would be introducing themselves with exactly the same line. Right? Exactly. Same punctuation and Clinical Strategy was executed perfectly. No one had anything to say about the studies that were done, as you should be, you know, that. There were right people brought on board early enough. And there were sort of verticals of excellence. Hands and a lot of money to make this a success. And ultimately, you know, first year of launch 100 million in sales. Great, right, growing very quickly, 3 billion market cap today. But a fast follower, I think, you know, hadn't been a first to market story, I don't know that with this budget, and even with this amount of investment and, and savviness and whatnot, you'd be able to get there. So I think it's an important thing to think about and how you execute when you first and transformative, you probably need to be smart about it and look for some sort of synergy somewhere in the way. So that's their house digression. 

Luc Marengere  30:42  
And that's a very valid point. And I'm glad that I couched my answer by saying there are pros and cons. Right, to the approaches. And you're totally right. You know, one one of the challenges that we are facing right now, in fact, and I suspect we will face more and more with a first to market a transformative product, right? Is CMS decision to provide a code? Right, and we and have that reimburse property, right, because you you guys may, I'm sure, you know, with the IRA in the United States, right, so the IRA impacts right now in September there, they've selected 1010, big blockbuster therapeutic drugs, and CMS. So So the analogy is, you guys know the expression, you give a three year old a hammer, everything looks like a nail. Right? CMS has a congressional hammer right now. Right? So that so so they're, they're going to hammer the prices on therapeutics, they will also and we've seen it happen already taking a very stringent approach at providing codes, and then also a stringent approach at how that code will now reimbursed. Alright, so the medical device site is not subject to the the inflation and Reduction Act, as therapeutics are. But there, there could be ripple effects of that, perhaps even an unintended, right, with CMS, deciding on codes. So that's one. That's one challenge, arguing with my strategy of being transformative and right and first to market on things, but you have to be prepared for it, at least be aware that you're likely going to hit that challenge, and then how to circumvent

Gabe Jones  32:35  
that try to link these topics. I'll try to do it quickly. And with two to three topics, trying to link them. So the first was the strategics. And whether to target that early. I think we got that wrong early on. We were a little too excited, because Medtronic and others were very excited about our technology. And then the prospect of them joining the board became more and more real, and the kind of market signaling that could come from something like that, what if they decide not to re up on the next round or participate in a future round? Well, then you sort of logically go to Well, let's go get two of them, maybe two competitors, and Medtronic and a striker or orange j&j to participate, which just adds complexity to the whole picture. And then just imagine you're a new investor coming in, you're going to talk to them, and then they just have a disproportionate ability to signal any future capital raise. So we decided not to do that I think there was the right decision. Going into the market, we're about to see with respect to strategics. There's PitchBook projects 50,000 US already venture backed companies will be raising money, new rounds in 2024. 50,000. The past previous highest number was between 18 and 19,000, at the heady days of 2019-2020. So in all the contexts we laid out before, and the decision making process of two different investors who have slightly different views on things. Now you've got 50,000, just US companies that have already raised rounds and have probably raised notes or extensions from existing investors coming out for fresh powder, and new rounds. So I would say it's a target rich environment. So any founder that's thinking about raising money in 2024, or 2025, needs to understand that context, when they make decisions about whether to build and launch a platform, pull other products onto their platform, pursue a best in class or a new standard of care type of a strategy. You know, in our case, we have the best technology and new standard of care takes a while to establish that. But to your point, having the best technology and being first mover is not always the best. Can you link it to a reimbursement strategy? I think founders today contemplating fundraisers within the next 24 months need to, frankly master all those topics and put them in the context of investors making decisions in a very target rich environment, which is about to get very crowded and noisy.

Mrigasha Patel  34:48  
Yeah, I mean, that's interesting. You mentioned that because a lot of the existing you know, capital raises that I mentioned in q1 q2, came from existing investors. Right, not from new investors. So you know, on that note, it would be great if you could help the panel and you know, even the audience understand what did you do to complete your recent round? Right? What type of universe did you target? And then maybe some of those decisions that you talked about, you know, whether to include a strategic or not, you know, how did all of that sort of come full circle, and you ended up syndicating the recent round? 

Gabe Jones  35:26  
Yeah, well, we're talking about an 18 month fundraising process. 

Mrigasha Patel  35:30  
Well you didn't have me as your banker. That's right. I didn't know either.

Gabe Jones  35:34  
So I'm grateful to meet you. Now, this was a process of testing out the models and different types of investors and going sort of door to door through who would be a good fit, long term, but in that framework that I provided earlier with the immediate clinical benefit, the potential to be best in class, and to be disruptive, but much of that growth ahead of us. So as you said, Luc like right before, what we would traditionally call the growth phase, post FDA clearance, you know, book sales, and little bit of revenue on the horizon, and a lot more potentially beyond that. But you've got to run a risk multiple against that. So it just got to be a very difficult time for investors to, to place that risk multiple and write a lead investment check. So we, you know, you have to get creative in those environments, you do talk to, to family offices, you talk to family offices, who care in particular about these topics. Maybe they have some familiar reason to care, in particular, something like scoliosis, a case that were directly addressing, and have unfair advantages in solving that clinical problem. Finding investors who deeply care about that specific problem is time consuming, because the information isn't available to you. And a lot of it comes through, frankly, founder networks, and having conversations with other CEOs and other founders, and, frankly, tightening the ranks and helping each other out. And then relying on your existing investors and their LP basis as well. Look, this is a time to do creative deal making. And the ones who survive will be the ones who have a chance to thrive. I would encourage founders to use all those tools. Go ahead, Luc.

Luc Marengere  37:09  
Maybe I can add to that. So to begin with, thank you, Gabrielle for mentioning that. Investors VCs have have bosses too, right? We have Masters as well. And the point that I want to make related to this, which could bring a an interesting financial financing dynamic in the next two to three years. So we're a vintage 2018-2019 Fund, the last fund raised just just right around 500 million. The final close was June 2020. So we never had a closing dinner, we can close that. And everybody was having a martini at home with with on

Gabe Jones  37:51  
On zoom that was 

Luc Marengere  37:54  
So now we've gone through COVID The investments that we made in 2021 2020 22, because of the the the supply chain issues, access to people, you know, longer sales cycle than people initially anticipated. Everything got punted forward 12 to 18 months, right. Our investors, our LPs are going tick tock now, we're out of COVID. That excuse is long gone. Right? So tick tock on returning capital. Right. So what what are we doing with the last 15 months of our investment period? Is we're targeting later stage investments, right. And I'm just wondering if you've had experiences like that, and I don't know if you've seen it as well. But I'm wondering if the next couple of years will drive fund like ours to invest now, instead of invest in companies that have a million or two in revenues? Now we're looking at five, six $8 million in revenues. Right. Will that create a bit of a vacuum for for earlier stage investors? 

Gabe Jones  39:02  
I think so.

Luc Marengere  39:02  
You know, right, right on the cusp of getting FDA approval or early commercials, you know, they're gonna go Eureka, I'm approved. I've got clinical data, and X luminary sites have purchased my thing. But now when I want to raise money, it's crickets.

Gabe Jones  39:20  
Yeah, I think when you couple that with the realities, the valuation context and write downs at some funds assess, especially emerging fund managers who raised a bunch of money in that timeframe, right, this wasn't your first vintage you've been in the game for a while. So your your investors know that about your track record. Well, somebody just raised a 100 to $400 million first or second fund. And then they had they got very heavy and 2019 2020. Now they're, they're gonna have to come back to their investors and raise another round. They're gonna behave very differently if they're still in the game in 2025 2026. I think you're absolutely right. So the carpet is getting the rug is getting pulled out and you're gonna see new definitions of growth stage. new definitions of I mean, not cashflow positive, but what's appealing about the quality of the revenue that these companies have margins get really, really important, the repeatability of the business ARR becomes extremely important how sticky the businesses think there's going to be multiples on those kind of numbers as well.

Aneta Sottil  40:15  
I would I would echo everything that's been said, I think it's been a bit of a Death Valley where you get your FDA approval, and then you have no capital then good luck to you. It, I think, was the takeaway takeaways, fundraising now, when you're running your people to study probably give you a good, good buffer to prepare your commercial launch? Because everyone's going to be sick? Well, is it going to take or not, is the market adoption actually going to happen? And we've seen so many stories, all of us now portfolios and mean amongst companies of products that come to market and get to one to 3 million in revenue, and then never get beyond a 10 or 20. And this just isn't sustainable long term. So it's, it's I think it's the most difficult, at least for myself, it's the most difficult parts of the the growth phase, to get comfortable round, it's even more comfortable to get, you know, to take on clinical risk and regulatory risk, and to take on this early commercial risk, when you're actually testing your channel and seeing what it takes and seeing whether your sales strategy will work and whether your remboursement will be in place and all that. There's, there's been there's been many, many failures there. And I think what matters today, in sort of in the growth area is to be prepared, and have this as derisked as possible. So in a way, develop a channel that's party there, at least, with the reimbursement that's derisked early on, if possible, and prepare for it really prepare for it and had it with, you know, face it with with a lot of funds in the bank. That's, that's my only advice for companies going down that route. 

Mrigasha Patel  42:09  
On that on that note, that's, I mean, you know, we've, I know, we're coming up on time. But you know, that's really something that I want to echo is that, you know, if you're building your company to the best possible standalone company, there's a lot that you can do with it, right. But if you're already I've met tons of companies like, you know, they they don't have, they don't have GLP data, they don't have a product, they don't have anything, but they're out marketing and talking to strategics and, you know, having all this discussions and then when I opened the box up and due diligence on them, there's a there's benchtop testing data at best, right? You don't want to be in that position. But if you kind of execute to these risk milestones that Luc Aneta and Gabe have talked about today, I think, you know, your story becomes a little bit more, more, has more of a backbone, right when you're deciding when you're kind of coming out to become a big bigger company and going for the bigger rounds and things like that. So you know, I'll leave it at that but if any last few words will give you know, we'll give the next panel some time to come on and go from there looks at.

Gabe Jones  43:16  
Luc says this is execution time. Stay small limit burn, extend runway if you can. 

Luc Marengere  43:22  
Focus, focus, 

Gabe Jones  43:23  
That's right.

Aneta Sottil  43:25  
And then prepare for the for the for the next phase, make sure you've got the right people on board to take you through the next phase of growth. Good luck. Thank you.

Mrigasha Patel  43:36  
Thanks, everyone.