Insights from investors on connecting to capital during COVID-19

By JLABS
Articles
Insights from investors on connecting to capital during COVID-19

During the COVID-19 outbreak, healthcare start-ups can face compelling opportunities to pivot their technologies aimed to assist in the pandemic response as well as daunting challenges to their core businesses or technologies. To gain related insights from VCs and advice for founders and CEOs, we asked three of our valued JLABS @ Shanghai Investor Hub members to provide their perspectives on the current environment.

BioTrack Capital

BioTrack Capital- Jiacong GUO

Founded in 2017, BioTrack Capital is a dedicated healthcare venture capital firm focused on investing and incubating innovative life science companies in China.

http://www.biotrackcapital.com/bioTrack/mobile/en/

Q: From your own perspective, how are start-ups adjusting to the COVID-19 pandemic?

A: Tragically, some companies are having to reduce their pace. Many start-ups in China running multiple clinical trials are forced to scale back and reprioritize their timelines and clinical trials due to the limited patient pool and the difficulty accessing hospitals in China for some types of treatments. Companies really have to focus and reassess their advantage over competitors to make sure they can communicate their unique position. On the other hand, some companies do benefit from the virus outbreak such as diagnosis companies which happen to cater for the strong demand. Online healthcare is another beneficiary in this regard, since patients no longer have to go to hospitals and still make appointments with their doctors via the Internet.

Q: What kind of conversations are you having with portfolio companies about meeting milestones?

A: We certainly have milestones for our portfolio companies that we set out to achieve. Nowadays, we all have to adjust our expectations for the current situation because it’s very tough and when we defined the milestones, many of the challenges were never within the expectations for the companies to overcome. We work to have an environment with our portfolios to be understanding and to take a second look  to figure out how we can adapt to new  difficulties together. Cash burning is another major factor that we hope our portfolio companies to pay special attention to. Do make sure you have enough money for the following few months, during which time we would expect fund raising situation will be very challenging.

Q: What are you seeing companies do really well?

A: First is the ability to prioritize and switch gears quickly. Companies are adapting very quickly to new demands. Some pharmaceutical companies who were developing therapeutics against cancer in various modalities, but are now considering switching to the antiviral fields especially if they have unique and high-throughput technologies.

Verge HealthTech Fund

Verge HealthTech Fund- Joseph MOCANU

Verge HealthTech Fund is a seed stage venture capital fund that invests globally in solutions that expand healthcare access, quality and efficiency across emerging Asia.

http://vergehc.com/

Q: What’s your take on companies trying to pivot to incorporate COVID-19 into their potential solutions?

A: I think I have mixed feelings about this if it’s a fundamental business pivot. People battling non-communicable disease, for example, are still faced with many of the same challenges that existed pre-COVID-19. Start-ups have to be logical and pragmatic with how they spend their time. On the other hand, there are many companies that have great technology that on the surface may not be infectious disease or vaccine related but could greatly improve the managing of underlying conditions that improve survivability of COVID-19. If the companies deploy their technology to address a real unmet need during the COVID-19 pandemic such as prevention, chronic disease management, etc., it’s probably a very valuable thing for start-ups to do.

Q: How do you feel start-ups can differentiate themselves right now?

A: There’s a lot of bandwidth that’s focused on COVID-19, but we still look at non-COVID-19 related materials. Making really high-quality thought pieces in your respective area of health that demonstrates the thinking of the company, what you’re trying to solve, how you solve it are all really valuable and could come in the form of a Medium article, a short YouTube video clip, or LinkedIn post. One of the major challenges with moving to virtual is building trust when you can’t meet people face-to-face. In the absence of in-person meetings, start-ups should be thinking about the multiple angles by which they can engage investors and demonstrate knowledge and authority on their subject matter so they can build that trust. Through content creation, companies build a paper trail of high-quality and legitimate content to support their great hypothesis or method for solving a problem, and why they’re the right team to do it.

Q: What are three things that you would tell CEOs right now?

A: 1. Communicate. There are a number of companies that are doing a great job of reminding their audience that they are still doing good work. Engaging in more external communication to talk about their work, how the company is coping, and how they’re helping is not a bad thing to engage in.

2. Adapt to the changing business model. The world is kind of turned on its head now, so be very pragmatic and at the same time open-minded to some of the changes that might have to take place in your business.

3. Be conscientious about cash burn. Be very, very prudent and maybe slow some things down intentionally, and delay non-critical large expenditures until there’s a bit more clarity around how the world has shifted.

Qiming Venture Partners

Qiming Venture Partners- Kan CHEN

Founded in 2006, Qiming Venture Partners is a leading China venture capital firm. Currently Qiming Venture Partners manages seven US Dollar funds and five RMB funds and have invested in more than 360 companies including more than 100 companies in healthcare.

https://qimingvc.com/en

Q: What changes are you seeing for companies that are fundraising?

A: There are three aspects to this, the first is, some companies such as vaccine development companies are developing vaccines/therapeutics against COVID19 with much shortened development timeline. While that may accelerate their cash burn. these companies are also gaining momentum, drawing attention from investors and support from government.  The second type of company is one that is postponing their fundraising. Maybe the company has to postpone their clinical development and when they calculate the costs, they can delay fundraising. The third type of company is one that had planned to raise money in 2020 and because of the concerns around the virus, they may begin raising funds earlier than expected because they expect it’s going to take longer to raise the targeted amount of investment.

Q: Is there anything that has surprised you lately?

A: A lot of companies that are fundraising are still asking for a valuation pegged to before the outbreak. However, the economic situation is not the same given the stock market volatility and the valuation of assets is expected to decrease. So, I would suggest that CEOs look to fundraise enough money to survive without considering the valuation as much.

Q: What advice do you have for companies when it comes to considering if they should apply their technology to the COVID-19 pandemic?

A: Right now, there’s a lot of competition in this space. Most companies won’t actually make significant gains or benefit from trying to adapt their technology to COVID-19. CEOs should really consider what resources they are able to dedicate to the virus pandemic so that they make a valuable contribution, but also ensure that they’re able to keep their business going.

Q: Do you have any tips for companies as they pitch and present milestones?

A: Companies should really focus on progressing their business as much as possible. When communicating their plans, instead of focusing on all the things they want to achieve in the future, they need to emphasize what’s going well now and how they are working to build momentum during this challenging time. A focus on the fundamentals is really important right now.