Where to Find Investors for Healthcare Companies

Leading venture funds that invest in innovative healthcare companies

Q.   I am the CEO of a revenue-generating health information company. Our web based tools are sold to corporations. We've already raised some angel funds and now want to pursue venture funds. We're also looking for a fund that can help us define our strategies, perhaps identify some strategic partners for us to pursue too. Can you give us a short list of funding candidates?

A.   A "short list?" Yikes, I'd rather you ask for a long list because then I know you are realistic about the fundraising challenge ahead of you!

Raising money requires considerable research and perseverance. Too often entrepreneurs reach disheartening, premature "I can't raise money" conclusions because they target the wrong venture funds at the start of their solicitation effort.

So what's my best, time-saving recommendation? To avoid receiving an inbox full of fast turn-downs, you have to match your company's business plan and funding needs to each venture fund's published investment criteria. If you match the fund's goals, then send in a business plan. If not, save yourself some time and angst and move on to other fund targets.

The good news is venture funds have done well in health care investing. Venture fund managers tend to invest in patentable technologies and companies that have a good chance of being bought out by larger healthcare players such as pharmaceutical companies.

But not all venture funds that invest in medical technologies are the same. Venture funds such as Alliance Technology, Bear Stearns Health Innoventures, YFY Bioscience, MVM Life Science Partners, Alta Biopharm Partners, New Leaf Venture Partners, Ascent Biomedical Ventures, H.I.G. Partners, Triathlon Medical Ventures, Oxford BioScience Partners and Baird Venture Partners have a history of investing in pharmaceutically-oriented "life sciences" or "bio-tech" companies. Because your company falls into the general health services field, these funds are less likely to invest in your company.

However, venture funds such as Three Arch Partners, Flagship Ventures, KB Partners, Versant Ventures, Alloy Ventures, Boston Millennia Partners, New Enterprise Associates, Bay City Capital, Aberdare Ventures, Venturi Group, MPM Capital, Invest Care, 3i, Psilos Group, Boston Millennia Partners, Sanderling Ventures, Seedling Enterprises, and ABS Ventures may be a better match for your business because they invest in "broad" healthcare technologies.

Another avenue for your pre-solicitation research is funds like Benchmark Capital, Matrix Partners or Sigma Partners that invest in the field of enterprise software.

Here are some other venture fund matching strategies:

• Look for funds that invest in "early stage" companies.
• Don't address your business plan to the time-strapped head of the venture fund, often called the managing partner. Rather, send your plan to the partner who specializes in your industry and is most likely to be intrigued by your accomplishments.
• Talk to the targeted partner's administrative assistant for guidance on sending executive summaries, scheduling first conference calls and engaging the partner's analyst. Entrepreneurs who are effective in raising money understand that they have to adapt to the investor's time table.

Regarding your company's need for strategic planning assistance, it is true that venture fund managers like to have a voice at board meetings and contribute to strategic discussions. And venture funds that regularly invest in raw startups or seed stage businesses expect they will have to contribute to They also like to open doors to help their portfolio companies establish new sales and technology alliances.

But it's not the venture fund investor's job to research strategy for a company that is already generating revenues. If potential investors suspect that a management team is too indecisive, they will quickly turn their attention to other more confident, well-directed entrepreneurs. In VC-speak, the jockey has to guide the horse to the finish line.

TakeCommand Action Step

If you receive a negative response to your funding pitch, take the time to ask the fund manager to suggest names of other funding candidates.

Do you want to find reliable investors for your business? Write to Susan at susan@takecommand.org for great funding references and tips especially designed for startup entrepreneurs, sole proprietors and fast growth companies.

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