Last Updated on: 22nd November 2023, 05:35 pm
In the current landscape, privately held digital health companies seeking funding face significant hurdles. However, Merck Global Health Innovation Fund President, Bill Taranto, shared five specific strategies that can enhance their chances of success. Speaking at the Global Corporate Venturing Symposium in London, Europe’s premier corporate venturing and innovation event, Taranto outlined the courses of action that companies should consider.
PitchBook data revealed by Mr. Taranto demonstrated that during the first quarter of 2023, 10% of all corporate venture capital rounds raised by European-based companies resulted in down rounds, marking the highest percentage since 2020. Additionally, CB Insights’ analysis highlighted that European companies raised $10.4 billion in the same period, a substantial decline from the $29.5 billion raised in Q1 of 2022 and the $22.3 billion raised in Q1 of 2021.
“European startups operating in digital health and other sectors are navigating challenging times. However, there are reasons for optimism, particularly for companies willing to redefine their strategies,” stated Mr. Taranto. “This is a critical moment to deeply evaluate your approach in this environment,” he emphasised.
For companies with less than two years of cash reserves, implementing the following five strategies can increase their chances of weathering the current market volatility and securing additional funding:
- Start with a Transparent Evaluation of Your Current Position: Companies must conduct a comprehensive assessment of how each dollar spent contributes to building shareholder value.
- Strengthen the Company’s Resilience: High-burn rates and long runways are not conducive to success during economic downturns. Restrict expenditures to initiatives that drive the company towards significant value inflection points.
- Align with Your Investor Network: Gain a thorough understanding of the interests of existing investors and engage with them early in the process. Clearly identify potential investors, decision-makers, and those willing to invest at present.
- Explore All Alternatives: Dilution may not be detrimental to a company’s survival, whereas running out of funds can be catastrophic. Raising funds through a down round could ultimately help sustain the company.
- Foster an Attitude of Optimism: Market downturns have a way of distinguishing superior business plans and fortifying resilient companies. Employ every available means to strengthen the company’s position.
“Digital health continues to hold immense potential, as do companies that embrace these five strategies,” Taranto explained. “Healthcare systems worldwide still need to expand access to care, enhance capacity, reduce costs, and improve patient outcomes. Digital health innovations are instrumental in achieving these objectives and setting even more ambitious ones,” he concluded.
