“Be human” – Founders reveal how to secure “real” investment for your startup

Original source here.

Getting your business off the ground may require hard work, determination and grit. But the truth is, it also requires money. We asked some successful health tech entrepreneurs to reveal how they secured investment – and maintained healthy investor relations…

Investment is often a make-or-break for a young business or startup – and when you’re in a sector such as health tech, you likely need a “knee up” to help you enter the playing field with your competitors. But how you go about getting investment, and how well you maintain investor relations, is an art form which can only be learned from the experts.

Livia Ng, Founder & CEO of Neuroute, warns that you should not attempt to get investors’ attention without a solid plan. Speaking to Health Tech World, she said: “I believe that you should not approach any development activity in an early-stage startup without a clear experimental plan.

“There should be a clear hypothesis (who is your segment, where are they likely to be, how will you reach them etc.), clear areas that require assumption testing, thorough plan for assumption testing and feedback loop for validation.

Investment for health tech

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Livia believes that it’s easier to provide value in a niche area such as health tech, where people are looking specifically for your solution.

She continued: “If you are building a platform for measuring the lifetime of plants with AI, it will be easiest to raise from a plant AI fund, second easiest to raise from an agri-tech fund and hardest to raise from a tech fund.”

Grace Gimson, founder and CEO of Holly Health said the health tech sector could prove easier with certain types of funding from the government. She said: “It’s easier to get government funding like Innovate UK grant funds, but it may well be tougher to get VC investment as there are not enough European funds that specialise in, or are currently excited by, health technologies”

The investor relationship

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Holly Health raised pre-seed investments totalling £890,000 late 2020 to early 2022. This came from various angel investors, and Kima Ventures.

Following this, the company saw further funding of £545,000 (in 2022) for their Health Ageing project work, in partnership with Age UK Lewisham and Southwark.

Grace told Health Tech World that her top tip for securing such great investment is to just “be human”.

She added: “It’s a transactional relationship, but built between humans. Ultimately a VC will be investing in who you are and whether they believe you are the person to guide your company all the way to success”

For startups who are just at the beginning of the journey, Grace advised: “Before spending too much time reaching out to VC funds, first seek angel investment from value-add angel investors who ideally know and understand your industry very well.

“This will help in more ways than the funding alone. Seeking investment from VC funds in the UK, right off the bat, may not be the most sensible use of time, especially in the current economic climate.

Investment is an uphill battle (at first)

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Grace added: “Gaining external funding as an early stage startup can feel like an uphill battle. But ultimately, we know of these challenges going in, and it’s just part of the daily complexities of company building.

“If you have the drive, passion and skills to build a product or service that solves a significant problem, go ahead and demonstrate what you can do, keep backing yourself, look after your health and prevent yourself from burning out, and eventually the funding to keep moving forward will fall into place.

Charlotte Guzzo is co-founder and COO of Sano Genetics, a Series A health tech startup specialising in genetic disease research that has raised a total of $14.9 million. She said: “Make sure you thoroughly understand the market and your competitors.

“Then you need to work out a very clear way to articulate how your business adds value in this context.

“Investors want to know how large the market opportunity is, and they want to understand how your business is disruptive, one of a kind, and better than whatever else is already out there.

“Expect rejection – it comes with the territory – but always ask for feedback so you can learn from it. The good news is that health tech is attracting huge attention from VCs at the moment, so you’ve already got a head start.”

It’s “not about generating capital”

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Investor-backed longevity science company Human Edge managed to secure over £1m in new equity financing. CEO and founder Dr Marcus Ranney said: “Raising money is not about generating capital.

“It’s about generating the right capital. It’s the right partnership that you want to get into with the investment fund, because they’re going to provide you mentorship, intelligence, and support–not just in good times, but during bad times as well.

He added: “So as a founder, it’s very important that you choose your partner correctly and that applies to those who are giving you capital as well.

“In our case, it was of course, the fact that Bharat Innovation Fund is such a premier fund around technology, that they understand the enterprise world.

Moral and ethical principles

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Dr Ranney pointed out that it’s important to maintain “moral and ethical principles” around the fundraising process.

He continued: “I think every founder believes that their industry is the hardest of all. We all come from a position of observer bias.

“So I don’t think that any one industry or vertical is more difficult than the other.

“The main thing is that the founder should have the true conviction in loving the problem and not being attached to the solution – because when you love the problem, then irrespective of the ups and downs, you will continuously evolve and ideate and adapt to coming up with the right solutions for that problem.”

Define your USP

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Lottie co-founder Chris Donnelly told us that your UsP has to be solid in order to get valuable investor interest. He said:

“Make sure you can share exactly what makes your business unique. It’s one of the most valuable and important steps that will not only benefit your investment process, but it’ll be at the core of your business.

At Lottie, we wanted to bring transparency to the social care sector – and make the process of finding a care home simple. We communicated our mission, and this is something that has helped us secure investment, but also to hire the right people.

Staying ahead of the market is also key – and make sure you communicate these insights with your investors.”

Business affairs in a recession

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Chris continued: “It’s hard to predict the impact that the coming recession will have. However, we’re already seeing the impact of the cost of living and rising energy prices everywhere. Businesses are struggling every day to maintain costs – including the elderly care sector. We’re seeing the impact first-hand on care homes struggling with the energy crisis.

Since the pandemic, there has been a huge spike in entrepreneurial spirit across the UK.

Over the last 12 months, Lottie’s new research has found online searches for business start-ups have surged across the country:

• 90% increase in online searches on Google for ‘business startup ideas’
• 50% increase in online searches on Google for ‘business startup costs’
• 23% increase in online searches on Google for ‘startup up a business’

“The coming recession may mean it’s more challenging for new businesses – but this shouldn’t dampen your entrepreneurial spirit. It simply means you’ll have to be realistic.

“Many of the greatest businesses of today were born in recessions and so I always say that this is an opportunity for entrepreneurship.

Make sure your business is financially viable and the problem you’re trying to solve is still apparent. The recession will affect how people spend their money (and rightly so).

He added: “Also, look for any support from the government – as you may be entitled to government grants for starting a new business.”

Spread your net wide

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Co-founder and CCO of an early stage health tech startup earswitch warned that investment in such a sector was “harder than expected” – but that it gets better in time.

He said: “Spread your net wide. Don’t just focus on investors that suit you now ticket size wise, but those who maybe interested later as they can be a great source of introductions.

“We have three monthly meetings with a few bigger VCs just to update them on progress.

He added: “Find fantastic advisors and network like hell on things like LI etc. A great advisor we had for a year then became a lead Angel for us and introduced us to other investors. Having him on the team sheet really helped open doors.

“Lastly, keep testing your narrative. Don’t produce one deck and keep banging on with it if it’s not hitting home. Test other approaches, change the order until it does”.
Garry’s tips on maintaining investor relations

Keep them updated. Produce, share an update report and run an online investor update every Q after close.

Involve them. Off the back of the update do ask your investors questions, meet them if practical and use their expertise. Our band of Angels all have incredible, relevant experience and generally really want to help.

Be memorable. Post close, we tracked down a v specific bottle of fizz called ‘I’m All Ears’ and sent a bottle to all of our investors as a thank you.

Health tech – a high-risk sector

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Cancer care health tech company OncoHost has reported huge investment success – a total of $46m.

When asked about investor relations, CEO Ofer Sharon told Health Tech World: “Be honest with your investors, sell your company but don’t sell dreams that won’t come to fruition.

“Investors need to understand there will be upsides and downsides, and so transparency is key. This entire process will be ongoing and so send regular updates not only when you feel it is expected.

“This open communication will help more than you know.

He added: “(Health tech) is definitely a more difficult sector to get investment. It is a high-risk sector with a lot of unknowns and can often be harder to see the endpoint and predict success. However wonderful the technology may be, there are many outside factors that must be factored in, such as the regulatory environment, which is often slow and cumbersome.

“There are multiple steps when developing and introducing solutions and, while the route from approval to commercialization are clear, you have almost no control of the timelines.

“The positive is that it is completely resistant to market trends and falls because the need is always there.”