Angel investors put their money into all kinds of early stage companies with the goal of helping entrepreneurs and getting great financial returns. There are misconceptions out there that angels shy away from health care investments, but nothing could be farther from the truth.
Health care investments can carry the traditional market and execution risks that any company has, but they can also have extraordinary regulatory risk if FDA approval for a product is required. The FDA process can take years and millions of dollars to complete.
Most health care investments that Rockies Venture Club Angels look at don’t have FDA risk, or if they do, the process is minimal and takes only two years or less from the date of the investment. All FDA approvals are not the same and as a group we’re learning about the kind of FDA processes that we can accept as a part of an angel risk profile and those that are better left to large Venture Capital funds who have both the money to get through the process and the time to wait it out.
Angels typically like investments that can exit within five years or less. There are a lot of Health Care companies that fit this profile. One trend we’ve seen is that companies can exit earlier now since they are no longer required to build a sales channel as part of their proof of concept. Once they can show that their innovation works and that people will buy it or that FDA Phase 1 trials are successful, they are ready for exit.
Smart founders will have a target list of acquisition targets identified before they even raise their first angel round. By the time their concept is validated, they should already have relationships established with the major acquirers in their industry and be ready to negotiate a deal.
To see four examples of companies that can have profitable exits with 10x investor return in five or fewer years, check out the pitch presenters at this year’s “Investing in Health Care” event put on by Rockies Venture Club.
- RXAssurance, Bob Goodman, provides a platform for patients and providers to keep each other informed about whether medications are being taken and that they are effectively treating the patient.
- Six One Solutions, Ginny Orndorf, an innovative targeted method for blocking breast cancer.
- LeoTech, Steve Adams, a wearable system to detect and report hydration in patients, athletes or others for whom hydration is important (ie. Everyone)
- ExchangeMeds, Anand Shukla, rovides better ways for pharmacies to manage their inventories by sharing with others across a network.
To learn more about these companies and trends in investing in health care, you may want to consider attending the RVC “Investing in Health Care” event, Monday September 9 5:00-7:30 in Golden. For more information, or to register for the event, please Click Here.