Scaling Up: A Growth Stage Investing Roundtable | LSI USA ‘23

Transcription

Blake Matrone  0:07  

The panel is scaling up at grow stage investing roundtable. And with that, I'm just going to hand it over to our moderator, John Sampson. 

Jon Savleson  0:15  

Good afternoon, everybody. Thanks for attending. Real pleasure to be here. And thanks to LSI for putting on a great event. We've got some esteemed colleagues here on stage. And I'm hoping to just give us a little bit of direction as we're trying to talk about growth stage investing the state of the state of play right now what to be thinking about and looking forward to conversation, well, we'll leave 10 or 15 minutes at the end, really, if I can monitor my own, my own time to take questions. So please, please keep those or you can call, you can ask anytime. But we'd sure love to have some participation from from those in the audience. So just introductions. You know, John, you want to just introduce yourself and Dan, and then then we'll get going.

John Ryan  1:06  

Sure. Hi, everybody. My name is John Ryan. I've been a venture capital and private equity investor and healthcare for a little over 20 years, 25 years now. With JP Morgan, then, with Onset Ventures, and now with Wells Fargo strategic capital. I do various things in my spare time. One example is I'm on the board of directors of Sutter Health, which is a good way to kind of stay on top of what's going on with the hospitals and provider side of the business. It Wells Fargo strategic capital, where you can think of us like as the direct investing business for Wells Fargo. So we make direct investments into companies we have divisions that focus on other industries. But of course, one in healthcare and in healthcare, we invest in all sectors of healthcare, we generally invest between five and $50 million per transaction, we spent a little more time on equity investing, but we can provide debt capital as well. So we do both equity and debt investing. And in terms of our role, we usually lead a syndicate of investors, but we can follow another lead or be a solo investor as well. And from a stage perspective, we're looking to invest in commercial stage companies. So for companies that have are more in the life sciences areas, like medical devices, diagnostics, life science tools, etc. We're looking for companies that have FDA approved products that are commercially available, and then any stage later than that. And for healthcare services and healthcare information technology, we're looking for companies that have five to $10 million of revenue traction, and again, any stage later than that. So we've invested in companies so far that range from about 5 million to about a billion dollars in revenue.

Dan Nicholson  2:49  

Hi, good afternoon, Dan Nicholson with Jeffrey is a senior vice president covering med tech. I'm based in New York, I've been with the firm 12 years. Before that I spent some time at KPMG and CR Bard. It's good to be with you.

Jon Savleson  3:02  

And I'm John solace, and I'm vice chairman at Piper Sandler. I've started my career in med tech and then lost my way into finance 30 years at Piper really started my career covering medtech ended up opening our offices and few places around the world. ended up running our healthcare group ran global investment banking across the entire enterprise. And today in the role of vice chairman on a chair, our healthcare investment banking group with about 150 members. So great to be with you here. I thought I'd just make a couple of comments to kind of set the stage as to where we stand today in the med tech. Market. I think I'll have Dan kind of speak a little bit about maybe the the overall economic, you know, the economic condition right now. But with regard to medtech, I think we've gone through a decade of incredible growth, growth in in revenues and growth in markets and growth and valuation. If you've been around a long time, you kind of monitor the temperature of valuation growth companies, over the first two and a half decades of my career would not, it would not be untrue to say they kind of traded in a range of four to six times forward revenue. They were taken out at premiums to those valuations. And it was a bit of a sine wave for about 25 years and something happened in the middle of the last decade where we started to see valuations creep up, they started to creep up to seven then to nine and 11. And we're looking at our partnership in saying you know, what is this with valuations? I think some of that can be definitely attributed to lower cost of capital. But there's other things at play which was, you know, clearly liquidity COVID Put a almost overnight you know, negative on on valuations values in March of 2020, traded down 40%, but then rocketed to new heights. And we had every company in the world growing in the med tech space more than 15%. year on your trading on average at 16 times Ford revenue, kind of non economic in its value. And so where's that stand today? It stands at six times. So we've had a complete reversion. And I think sometimes if you're not watching, you don't realize that we've had this incredible run up and today run, you know, it's kind of run back to maybe more historic standard. So what that does is last year, after a record IPO year in 2021, we had zero IPOs in the US last year in the med tech space, m&a, which I don't think is all market driven. But there was half them in a done from the prior year, and really the lowest year in the last decade. So we've got, obviously, for investors when you have you know, this is cyclical, I don't think there's anything that's permanent about it. But when you have less realizations, I think it just puts a lot more scrutiny on how investors put their money to work. And now I think we come into into 2023. So that's a little bit of the backdrop, but we're talking about for growth stage, private medtech companies. And Dan, maybe you want to kind of just give us a question for

John Ryan  6:40  

you, John. I'm just curious, when do companies switch from a revenue multiple to multiple

Jon Savleson  6:44  

well about the last year? I mean, that's, that's, I mean, where's the lifetime it because because what we saw is just a direct line of of revenue and revenue growth being the only metric of evaluation and those lines have crossed a little bit, what you've seen is the growth and profitable companies, almost having double the, the market returns over the last 18 months to pure revenue growth. So I think, you know, that's an indication of lower valuations cost of monies, more expensive. But look, I don't think growth is the name of the game, and it will continue to be, we're just I think, in an environment where where people have stopped and said, Wait a minute, I think bottom line actually has some, you know, has a lot of meaning. So Dan, maybe you know, the broader context.

Dan Nicholson  7:39  

Yeah, no, I think that those are, points are right on. So I think just generally, if you look at the market backdrop, a lot of headlines, it's been a really tough environment. You know, no, IPOs last year, this year, we were hoping that the second half of the year, we'd see a return to IPOs. But you know, the news out of the banking sector is obviously left things pretty challenged, and investors are keeping their money's on the sideline. I think in terms of the bright spots, though, there's a couple points here. One, I think, for folks who are looking to partner with strategics, they're always very well capitalized. And now you go from 16 times forward trading, multiples to six, everything seems like discount. So there's a ton of enthusiasm there. Those VC funds. You know, they've they've raised a ton of capital over the last two and a half years. So I think those folks are well capitalized. I think on balance, though, you need to check more boxes, stories need to be a little bit more developed than what's what they once were. And what, you know, at least on the deal side, what we're seeing is, you know, what used to take three conversations is now taking six, so the timelines are getting longer, but I think just generally speaking, within med tech, healthcare broadly, it's such a huge part of the economy, it's generally known to be very resistant and resilient. And, you know, I think in terms of capital available, it's still there. It's just going to take folks on a longer time and valuation pressure, you're gonna continue to see that, but in terms of ability to raise capital, you know, we're still pretty bullish on folks being able to get deals done just at a slower pace and more modest valuation.

Jon Savleson  9:26  

Maybe we could just go into just the categories, where does the where does the capital reside? And, you know, for growth investing, John, maybe, you know, by the way, Dan, and I only move money. John has it. So afterwards, you know, just we'll let you speak with him. John would have you

John Ryan  9:46  

Guys go to a whole bunch of investors and I'm only one I'm

Jon Savleson  9:50  

Just teasing. So what what do you see is the climate for the venture capital bucket in terms of growth, investing what any observations?

John Ryan  10:01  

Yeah, it's really difficult right now as which is, you know, obvious thing to everybody. But, but yeah, fundraising is always difficult. And it's particularly difficult now. You know, the good news for us with the fact that the IPOs aren't happening is that means those companies now need expansion, you know, private expansion capital, so more opportunities for an investor that has a strategy like we do. The still having said that, given the downturns in the market, I think all venture capital private equity type investors are being very cautious right now. So there are some investors that don't really aren't investing, there's few investors will say that they're not investing, because they, you know, they want to keep the deal flow up, and all that they don't want to be perceived as being out of the market. Some of them in reality, you know, are probably out of the market for the time being. And the investors that are investing are being cautious. I think, you know, we all know that investing through a down cycle. Makes sense, from, from a strategy perspective, but there's a difference between, you know, investing kind of through the down cycle versus catching a falling knife. And I think, you know, we're currently in an environment where it's kind of unclear where the markets are gonna settle out. And so that's got people being, you know, quite cautious. So there's not nothing happening. You can raise money, but, you know, it's a challenge, and it will take longer and, and more effort.

Jon Savleson  11:25  

Yeah, Dan, I don't know what your perspective is. And, you know, we could talk about the entire spectrum of investing. But, you know, we've had processes for med tech companies recently, where we've gone to 100 investors. And if I had to characterize it, you wouldn't be surprised that, you know, it's, it's where we invest only early, we invest, invest only late, and not many people want to invest kind of in the middle. So I think for growth, you know, commercialization, the commercialization capital, I think it that probably comes back or it's, it's a probably a better spot, that Mama Bear position where you're going into clinicals is a really tough spot. And so, you know, that you can expect out of 100, you're gonna get 90 of those answers. It's going early, I'm going late. And but I think

John Ryan  12:20  

that you're probably seeing what kind of something I was talking about a minute ago, which is there's some investors that in reality are not investing. But you know, they don't want to just say we're not investing. So instead, they're just, it's always too early or too late, or, you know, whatever.

Jon Savleson  12:32  

Well, fairpoint, Dan, any thoughts there? On the VC side?

Dan Nicholson  12:36  

Yeah, no, I think that's, that's spot on. I think that's also part of what happened with 2020 and 2021, right, where there was just an excess of capital, right? I think you could almost call it free money for large portion time, which is why you saw this huge spike up in the stock market, where there's just all these various different alternatives to investing. So there was naturally an exodus or a lack of need for that, that in between her in terms of that growth capital, where it's somewhere between zero and $10 million in revenue, there was, you know, really early stage folks who could be with a company for 10 to 15 years, and then folks who are ready to write a check for a crossover and want to take it public immediately. So I think, you know, just as, as the the capital cycle changes, and where money's needed, that'll continue to evolve. And, you know, folks tend to be, I think all of us, we sometimes we're a little prisoner of the moment, but you know, with that, we can also be pretty flexible in our, our viewpoint, and I think VCs are gonna start to do the same thing.

John Ryan  13:38  

I think there's also dynamic, there's trends that happen in all of healthcare, but there's also trends that happen within sectors. So you know, biotech is different for medical devices, different healthcare services, etc. In medical devices, specifically, it's been a really tough what decade or something, you know, there was a very robust community of venture capital investors in the medical device space, and they're kind of 1990s, you know, up into the 2000s through 2010, or something. And then, you know, we ran into a lot of difficulty with the FDA and reimbursement and the medical device venture community evaporated. I mean, you know, the vast majority of firms that had been investing in medical device companies don't exist anymore, or, you know, or they're kind of just managing out their old funds or whatever. And so the number of possible investors out there, it's just a lot smaller. I think there's some people that are coming back into the market now. And, you know, hopefully we see that come back, but, but we're still we're still really not out of that. So like when you say you go to 100 investors that what enters my mind is, you know, wow, I'm surprised there's 100 investors to go to.

Jon Savleson  14:43  

We made that up. No, no. Well, let's talk about corporates. And I mean, maybe my perspective there quickly would be across the med tech landscape. My guess is half have very, very active For venture and investing programs, some of them are very, very good at it. I think the other half are just waiting to get into it because I, you know, they're not they're altruistically. They, they invest around themes that are important to them. But they're very, very good investors. And I think, you know, they, they recognize their role if they're, if they're asking companies to get further along, in their development there, you know, in fact, what I said is, you know, today in the m&a market, you better have a bow on it. Like, they don't want dilution, they don't want the risk, you got to deliver it when they want it when they can really lever it against their own balance sheet. So good friend of mine, and know if he's in the room, but said less, like, when I got into this job in corporate development at at a, you know, a strategic, he said, I thought I thought I was gonna be doing m&a. But, you know, a large percentage of what we do is, is strategic investing. And, and I think they're for growth. I think that's, that's one of they've added, they're not going away. They're, they're well capitalized.

John Ryan  16:08  

Yeah, I think that's a really good option in medical devices, as opposed to other as healthcare, I think to strategics are really good investors and, and good partners in that way. I think the other thing that's really important is, if you're raising money, to hear the point that John was making about valuations, you know, the world has changed, and valuations are different now. So if you go we all the time, you know, hear from people that say, like, hey, we'll give you a great deal, you can do you know, an investment at the same valuation as our last round, and it was in 2021. At what do you say 16 times revenue? Which, you know, that's not an attractive valuation, even if that was your last valuation. And so, when investors think that there's a mismatch and valuation frequently, you just say, well, I've got, you know, 20 things to work on. And I'm busy. And, you know, I just won't spend my time on that one. So I think it's prudent to go in with reasonable valuation expectations up front.

Jon Savleson  17:09  

Well, we, we talked about it, the three of us, I, I've just become pretty straightforward with the companies we work with that. Look around you, when valuations are down 64%, for growth, growth med tech companies, when you know, there has been a reset, probably in your own personal account, to just hold your breath and look at your other board members and think maybe it didn't happen to us, that is a bad place to start your private placement process. I think there's one of the best things you can do. And it's hard to have a valuation conversation amongst two people, it's really hard among six, but you got to have it, because nothing gets done well, in six to nine months, you need to go out to the market, embrace what the market is delivering in terms of messages, and and rip the band aid off and get your financing done. You got to have gas in the tank in this environment, because there are no gas stations along the way, potentially. So I think we've been really, from an advisory standpoint, trying to be really honest with our clients about that. Because just the slow drip of next month going, Oh, maybe we'll accept that in the next month. Maybe we'll set that. That is a, you know, everyone in this room knows how that goes. And it is not productive, because you will lose people along the way that are legitimate investors.

Dan Nicholson  18:33  

I think the other thing that got lost during 2020 21, with just excess capital was when you're raising a growth round, there's qualities other than cash in the door that are important to you, right, whether it's a strategic, do they have an angle? And can they actually help you with the other board members in terms of getting into certain institutions, right Centers of Excellence for your for your trial? You know, does a VC firm? Or, you know, do they have that Kol network that can open up doors for you help commercial ramp? Those things, I think generally got lost, because valuations just kept growing and growing where people, you know, instead of selling on qualities outside of the capital in the door, that kind of took a backseat and whatever the highest valuation was that you know, they want and it's hard to do that when multiples are 16 plus times, right? Because everyone's dilution, dilution sensitive, but I think as we enter this next phase, you know, kind of the softer qualities are going to become more important.

Jon Savleson  19:31  

Other Other types of investors, John, you've seen, you know, family offices, brands, other other sources?

John Ryan  19:38  

Yeah, there's like the institutional investors we talked about, and then the strategic thinker, good option. And then of course, there's like family offices, and I think that can be a great option. I haven't worked with a lot of the family offices. So I don't have a great list for you at this point. But I know I talked to a lot of companies that raise money from fans In the offices and seemed to have relatively good experience with that, and in particular, in healthcare, I think, or medical devices, there's a lot of all of us have health issues. And so we can relate to health care. And I think there's a lot of kind of family office type investors out there that care about certain disease states are, you know, other things are just doing good in the world and helping people and all that. And so I think if you can tell them a story about, you know, the good that you're doing, in addition to making good returns, like family offices are a good option.

Jon Savleson  20:33  

Let's talk insiders for a second, I think one of the one of the preparations for a financing to is making sure your insiders in the right spot, may, you know, they they need to play a very strong role. And the best medtech investors do this extremely well, where they go into these processes with a show of strength, because nobody, I'm sure John, you get the call. And you ask that question, you do not want the Grand Ole, you know, where, where somebody is trying to pass, you know, the baton to you. How do you how do you evaluate that? Because I think insiders are really crucial in in growth stage investing,

John Ryan  21:08  

why one, one thing is just to have existing investors that can support the company over time. So if you're in a fortunate enough position to be able to choose your investors, then choose investors, they're gonna how you think you're gonna have dry powder for future financings. And, you know, so that when we get to a point like this, then your existing investors can continue to finance the business. So just over the last several days, and I was just done a call right before this panel, working on a financing for one of our portfolio companies, that will likely just include insiders and not a new investor currently. So that can be you know, a great source of capital, for sure.

Jon Savleson  21:46  

It's obvious, but you know, I think they, you know, interested in new investors want to hear from them. So it's not only showing that support, picking up the phone, and having that conversation that we love this company, this is where we're driving it to, here's our plan, you know, just being completely in sync with with, you know, the management is really important, because, you know, that's what a new investor wants to hear. And so I think, obviously, the, the best medtech investors know exactly how to do this, but I have experienced this and it is, man, well, you get when you don't know what you're doing with your insiders, it's a mess.

John Ryan  22:22  

Yeah, I think you're not, you're probably not gonna have it 100% sorted out when you first start raising money, because you don't know exactly, you know, where the total raise is going to come out and all that, but you should have had the conversation with each of your investors to at least get a general sense of what what their participation will be, so that when you get the question from a new investor, you can give them some kind of an answer. Rather than, you know, I don't know, or they're not going to participate.

Jon Savleson  22:47  

Let's go to IPO because you know, the valuation you're going to be looking for, it's gonna be determined by the exit. And that math has changed. And so, you know, first, maybe, Dan, Dan, speak to what you think. I mean, like, what, you know, Tuesday in March is not the IPO market, it's going to change. But what do you think that looks like now in, you know, the kind of 2023 and beyond? What do you need to be?

Dan Nicholson  23:14  

Yeah, so I think we're going back to what was, you know, pre 2020, in terms of contours needed, right. And typically, that's been 30 million run rate revenue, and then just an ability to to accurately forecast. So the whole beaten raise guidance thing is really important. If you kind of historically look at the pre 20, pre 2020 IPO classes, you know, over $30 million of run rate revenue has shown aftermarket performance of extreme success below that, right, you could just talk to any CFO, it's really hard to predict, forecasting guide the street. So on a quarter by quarter basis, you need to be able to show that five to 10% Beat and on your annual guidance, you know, showing that you're raising expectations, that that historically was the key to success. Obviously, when the stock market came out, we had folks going out with, you know, little to no revenue, and that's really hard to predict. There was a little bit of forgiveness with elective procedures being shut down during COVID. But generally speaking, Wall Street has reset thinking and it goes to John's earlier point of kind of the reset of, of growth to value. And, you know, that's generally how we're seeing folks think about it in terms of what the ramifications are and how they should be looking as a potential public company.

John Ryan  24:37  

Do you do a quick question on that? Do you have thoughts about cash burn or profitability metrics as it relates to an IPO? Does that matter?

Dan Nicholson  24:46  

Yeah. So I, again, I think it used to be you know, revenue growth presumes everything and you know, just focus on that, that revenue growth is still extremely important. But what investors are looking for now, from what we're hearing is one on gross margin, you need to give an understanding of what the optimal gross margin could look like for the business and kind of be on that track record for that. I think for an IPO, if you're under 50%, it gets a little challenging. And you need to be able to guide the street to what optimal gross margin could look like. And then on profitability, it doesn't need to be tomorrow or next year. But there needs to be a line of sight. And I think, you know, over the last 24 months, that wasn't necessarily the case. But now folks are looking to just understand when that date could be and make sure that that's a measured and conservative approach. And there's a line of sight to it.

John Ryan  25:36  

I have a thought on that prompted a thought, which is even when it comes to raising private capital, you know, when you're raising money for your company, over time, through the earlier rounds of financing, through product development, and clinical trials, and regulatory and reimbursement, you know, and all of that, the things you need to know really well are different, you know, you need to know what your, your patent position is, and your product, and then you know, the clinical data and all that, of course. But as you get to more growth financing, where you're starting to get more into commercialization, it's really important for you to understand commercialization metrics that are going to be important that investors are looking at at that stage of the business. So, you know, kind of the bottoms up analysis of like, you know, how many reps do you need? And what's their productivity per rep, and you know, all of those kinds of numbers. So just when you go out to raise money, think about if your what stage the business is at, and make sure you you know, kind of know that part of it, well.

Jon Savleson  26:40  

And I'll just, I think we also before we leave the topic, Spax, because I'm sure there's been a lot of conversation about that. But that's an enormously evolved. Marketplace, I think you got to be very careful about what you're considering. Many, many of those trusts are empty, and they're not assets. They're They're almost liabilities in some some regards, because other than orchestra, biomedical, which is Dan and my firm, probably thus success in the last 12 months, you know, but tremendous business, you know, partners, tremendous, you know, new business model, well financed great opportunities. That was a different matter. But nonetheless, what we saw two years ago, were two valuation markets emerge, what the real world would pay, and then what the Spac world would pay. And that never really existed, there are not two worlds for valuation, there's one and they were going to merge and they weren't going to merge in the middle of the pack market was going to collapse on top of the IPO market, and it has happened. And so now you've got the you don't have that that valuation opportunity, the capital probably isn't in those trusts. So I think they become vehicles, but you got to be really careful what what you asked for, and it you got to have gotten that have enough capital in you know, I think that's what we took into account. I think, orchestras, you know, thus shining star and the entire capital markets, because we thought about that pretty hard. And so it can be a vehicle, but I think what was two years ago is probably gone. So I don't know, Dan, if you have anything else, but it can be an enormous waste of time for a private company to go down that path if you don't really know what you're asking for.

Dan Nicholson  28:30  

Yeah, I think that's well said. And the only thing I'd add on to it is that the SEC is a heightened focus on it. So even if you announced the deal at six months thereafter, than when it'll eventually close, and markets can certainly change, a lot of things can happen. So as you're starting to pursue certain options, just keep that in mind, right? You can, you know, strike something on paper with a spec, but it could be, you know, many months. So raising a private round might not be a wall of worse alternative, because at the end of the day could take, you know, six to eight months from the time you actually inked an LOI with us back to actually getting money in the bank.

Jon Savleson  29:06  

So we've been here before, we're going to be here again, but you know, this, these don't last forever. If you've been around long enough, it'd be but you know, I think we've got we've got some waters to kind of to get through but maybe for fun, John, like, what's really what are the big themes? What is really investable? What do you think's really working? Inside medtech? What what categories?

John Ryan  29:29  

Yeah, I don't know that I have a category like therapeutic categories or, you know, clinical categories. I think it's more of kind of the fundamentals of you know, that we think about the making good investment. So it's, you know, things like a big market and a product that makes a big difference in the patients that it's treating and, you know, solid clinical data and you know, all those kinds of basic metrics, good management, etc. That are the things we really look Got, we're not looking specifically, you know, we're not zeroed in specifically on cardiology, or orthopedics or whatever the case may be, because there's good investments to be had across the spectrum of, of areas of healthcare.

Jon Savleson  30:15  

Danny thoughts?

Dan Nicholson  30:16  

Yeah. So I think, you know, those parameters certainly make sense and hold true kind of across most VCs and strategics. I think two areas that that come up quite frequently is clinical decision support and remote patient monitoring. I think that's an area for strategics, where they see, you know, that technology, some, some folks do better than others. So if you're able to do that, as an early stage company be a little bit more nimble. I think they see that as you know, great revenue, synergies, cost synergies. And the other piece is, when folks think about services, they almost think of it as almost an annual renewable and similar to consumables, as we start to move to a potentially more recessionary phase of the economy, capital equipment comes a little less in favor with the large strategics. So if you're able to give a some type of service offering pay per click, that, that holds really well in those conversations when they're having their investment committee meetings.

Jon Savleson  31:16  

Yeah, and I think I couldn't agree with you more, John, and there are great investment opportunities we're seeing across the board, whether it's robotics or structural heart, or, you know, patient monitoring is a mega theme. You know, there's just so many, but if you look at it, you know, we just roll in the United States, we're gonna spend four and a half trillion dollars this year, and three and a half trillion dollars of that is labor. So one, if labor doesn't play into your theme, you better figure that out. Because either, you know, eliminating, you know, visits to hospital or readmissions, or labor some somewhere I think that's, that's the, that is really the opportunity for the old there is unlimited opportunity in the med tech industry for arresting that three and a half trillion, because that's, that is there, it's not going to go down. But it can it can shift, I think that's, to me why I'm so optimistic, really about the next 10 or 20 years, all these things are going to be tremendous drivers of growth for for the med tech industry.

John Ryan  32:18  

Yeah, that's key. And it's been been the case for a while but continues to be, which is 10 costs our health care system is is super valuable. And important. That's a key part of our investing thesis. So it used to be the case here and develop a new product and you charge more for it, and you tell your customers that they're gonna save money over five years or something like that, you know, that doesn't really work anymore, you need to generate an ROI immediately now. So, you know, whatever you provide needs to be less expensive than the alternative, you know, right up front. And, you know, like, that makes it much more attractive.

Jon Savleson  32:50  

So any questions, we avoided the bank, the bank question, any questions for the audience while we have a few minutes?

Dan Nicholson  33:12  

Yeah, I generally, it tends to vary on what type of transaction, but if you're talking about maybe a private capital raise, you know, during the height of things we were seeing, raises be able to be executed within three months, I think now, it's probably closer to six months. And sometimes it's a bit longer. Everything's always situation specific in terms of where a company is at in their, in their capital cycle and what the insiders are, are composed of right, obviously, if it's a founder on businesses, first institutional capital, that tank tends to take a little bit longer, but if there's already institutional capital within the capital structure, they, you know, there's a easier way of people opening up doors, etc. So it varies, but that's just a general parameter. Is that helpful?

Jon Savleson  34:02  

And I think that extra three months is one reticence of you know, there's just a, there's cautionary environment, but I think valuation I'll come back to what I said before. You know, I have fielded a lot of calls were from well known VCs to say John really liked this a follow this for a long time. I just don't want to embarrass the company. And with my, my term sheet, that tells you something. So I think that's what you don't want to spend six months figuring out, you know, take your medicine, I hate to say it that way, but that that is that that can hurt you if you if you just play it out too long.

John Ryan  34:42  

Yeah, I agree with that. 100%. But I think another thought is just to do your best try to understand what's going on with the investor because, you know, investors get really busy. I mean, I was working, you know, kind of 24/7 on an acquisition financing for the two weeks up until a week Go. And then last week I've been spent trying to finance one of our existing portfolio companies and sort of last three weeks, I just haven't had a chance to kind of think about anything other than those two projects. And so frequently, investors won't engage on an opportunity really just because they're busy. And so, you know, when you, when you do talk to them, you know, I would encourage you to try to dig into that and understand a little better, like, Okay, you're not engaging with us now, because you're just too busy. And we should, you know, come back to you in a certain amount of time, or you know, that not a fit. No, it's not a fit, just let me know, so don't waste my time.

Dan Nicholson  35:37  

Yeah, and I think the other thing too, right. Investment Committee meetings are a lot easier when all the stocks are going up. Right. So now, everything is, you know, you have to be really buttoned up, there's extra committee meetings, etc. So there's just the level of diligence that happened in 21. And 22, was a lot less than what we're seeing now. And that's just people generally be more conservative. I mean, we all are in our own lives. So it's, you know, it's only a natural expectation that investment committees would be as well.

Jon Savleson  36:06  

All right. Really appreciate your attention. And thanks again to LSI for it for having us today. Appreciate. Thank you everybody's time