Co-founder and managing partner Healthy.Capital
Healthy.Capital invests in young, promising Dutch companies focusing on the Health & Care sector with their innovative solutions. In 2022, the second fund started with a size of 20 million
Thom Nefkens and Ineke Cazander also participated in this interview.
Can you talk a bit about the history and focus of Healthy.Capital?
We launched Healthy.Capital in 2018 with a focus on digital health. Thom Nefkens and Johan van Mil managed to enthuse a number of Peak Capital investors. Together they put in six million that the RFO Seed scheme supplemented to 10 million for investments in digital health. In total, we invested in eight companies in three years. The second fund started four years later, in 2022, with a size of 20 million. Our goal is to make a positive contribution to solving the major problems facing health care. These are the rising cost of healthcare, the shortage of skilled healthcare professionals, the long waiting lists, the increase in chronic diseases and the aging population. We invest in innovative, digital companies that address these problems.
Our selection criteria are:
- The start-up is focused on digital therapies, digital health products and services or SaaS and health technology marketplaces
- Company is in pre-seed or seed stage (just before or after market introduction)
- The start-up is led by a talented and ambitious team
- There is a strong problem-solving fit
- The company has a scalable model with healthy profit margins
- Start-up offers prospect of attractive exit
We focus on both the pre-seed and seed phases of the venture. In the pre-seed phase, the problem-solution fit is the most important question. Including a clear definition of the target audience willing to pay for the solution provided. The seed phase is all about the presence of an attractive product-market fit.
We offer smart capital. We offer not only capital but also knowledge of and experience in this niche market. In this we are still learning, we are a learning VC.
The success of a start-up is largely pure luck (or bad luck)
What determines the success of a start-up?
The success of a start-up is largely pure luck. The founders are in the right place at the right time with their plan. Things are falling into place. The other way around is also true. We came across a start-up where everything was right: the problem-solution fit and the right team were in place. But then came corona and that meant the end of this fine company. That’s just pure bad luck. So is there nothing that makes a start-up – apart from luck – a success? Sure did. In the pre-seed phase, the team is the most important factor. Ideally, the founding team consists of two to three people. Are the founders complementary to each other (one is sales driven, one tech savvy and a strategist). And the founders preferably have several years of entrepreneurial experience.
What does your method of selection look like?
It is not easy to single out the right start-ups in the pre-seed phase. Our process for arriving at an investment consists of five steps:
- Analysis phase: quick scan pitch deck (team, problem & solution, value creation, scalability, traction, competition and financials) and digital introductions
- Strategy & team phase: analysis problem & solution offered, value proposition, customers and customer segments, analysis team composition and strategy
- Terms phase: in-depth financial analysis and terms: valuation, cap table, liquidation preference, qualified majority, drag & tag along, vesting
- Deal structure phase: drafting term sheet, book review, drafting contract, Investment Committee approval
- Partner phase: closing, support and reporting along the way, subsequent rounds & exit
Especially in the pre-seed phase (before market launch), we look in particular at the problem and the solution offered. What problem does the company solve and is it big enough? What value does the solution offered provide to the customer? Who wants to pay for it?
An example of a strong problem-solving fit? We are very excited about Roott, a new marketplace for mental health issues.
The problem: consumers do not know how to find the right coach, psychologist or psychiatrist to solve their mental problems.
Solution offered: creating a digital marketplace where supply and demand come together.
Roott delivers the following value creation:
- There is a huge fragmentation in supply (they are mostly independent professionals). The marketplace allows consumers to seek targeted help
- The platform addresses the often long waiting lists by better matching supply and demand
- The marketplace generates dealflow (customer acquisition) for the specialists
- Specialists are willing to pay for access to the platform (monthly fee)
Since we are also excited about the team, we are happy to invest in this young company.
Digital health is still a young market. America is five years ahead of the Netherlands.
What is your added value as a specialist fund?
Anyway, generic funds are getting tougher. We really only see specialty funds emerging, focused on a specific sector or solution. Digital health is a young market. America is five years ahead of the Netherlands. There are no major funds focused on this branch yet (in the later growth stage, Series-A and beyond). We are forced to focus on digital health start-ups that are in the early stages of their existence. The biggest problem is getting funding for these businesses. Ideally, we would like to see five more Healthy.Capitals stand up. Then we realize more impact and attention to this discipline.
The advantage of our specialty is that the dealflow (start-ups to invest in) comes better to us. We are also better able to validate a product. And we know the necessary steps a start-up needs to take specifically in this sector. Consider arranging reimbursement from insurers, which can be a long and complex process. We have the right contacts in this area. Then the medical specialists have to start prescribing or applying the start-up’s product. We call this the clinical implementation phase. We have had the opportunity to go through these processes several times now. We have built a network and can support start-ups well in this.Finally, as a specialized fund, we are better able to discover and select the most promising start-ups. The luck factor will play a role in whether they actually grow into a successful business.
Success factors of start-ups that emerge
- Purpose driven
- Market potential
- Team composition
- Ambition & dedication
- Domain knowledge & track record
- Distinctive product
- Market demand & timing
- Competitive Advantage
- Exit possibility