Valuable Take-Aways From IN3 West

By William McKeever

IN3 West held an investor conference in Las Vegas with the title of “Investment in Innovation.” IN3 Conferences take place around the country and are developed by Elsevier Business Intelligence, which publishes the highly regarded industry report In Vivo.

There were forty companies giving presentations as well as comments and panels by venture capital firms. The venture capital firms discussed the current environment. The general conclusion was that the current environment is one of the most challenging in decades both for the VC industry and companies trying to tap into VC capital for growth. There was a panel comprised on VC executives that discussed the industry. One overall theme is that the VC firms have been hit with not only redemptions but also challenges in raising new capital. As investment firms look at asset classes, venture capital is at the bottom of the list in terms of current attractiveness. Returns in the VC world have been lackluster and with the IPO market still in the doldrums, there is a concern about the ability of VC firms to monetize their investments. The VC firms are also seeing a declines in valuation. As one person said, “the flat round is the new up round”. Many expect that most rounds in 2010 will be below the last financing round in 2009 as valuations have been hurt by the severe recession.

The VC  firms told the presenting private companies what were the key criteria that they are looking for today for investment purposes. There were four take-aways. 1) VC firms are looking for companies that have a clear pathway for reimbursement. While a company is waiting for approval, the VCs were expecting that the companies start establishing reimbursement simultaneously. A big turn-off is that companies have to wait another 1-2 years before having a reimbursement pathway. 2) Firms are looking for companies with unique technology and approaches. The days of the “me-too’ products/services are long gone. VCs want to see exciting new developments that will open up new markets. 3) The VCs want to see a comprehensive plan for how the capital in the current round will be used and what will be the future capital requirements.  4) With so many choices for VCs, they can be more selective in terms of investments. The VCs want to see what the company milestones have been and how successful the management has been in achieving those milestones. They want direct evidence of how the company has been able to meet its milestones over a few years, what are the future milestones, and how the management team will get there.

On an upbeat note, the companies that presented were generally impressive, and had build strong foundations for the future. One take-away from all the companies presenting is that the healthcare industry continues to demonstrate its ability to innovate, and that there are no shortage of exciting advances for several years to come.  Many companies showed that healthcare technology continues to advance, which creates opportunity for company growth. The conference had a wide range of presenting companies from pure start-ups to established entities with positive EBITDA.

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