VC and growth equity investors on how to get their attention: Be different, be smart

Anna Haghgooie of Sandbox Industries speaks at the Nashville Health Care Council’s “Council Panel: Financing the Deal” on May 22, 2018. Courtesy/Donn Jones Photography

What’s the best way for health care companies to get venture and growth equity attention?

Be different from all the rest. And, definitely, have a good management team.

Private equity investors are looking to put capital to work in companies that can set themselves apart by demonstrating that their model is trying to solve a real problem, said the speakers at the Nashville Health Care Council’s ‘Financing the Deal’ panel.

Anna Haghgooie, managing director at Sandbox Industries, likes to see companies targeting an area of health care where there’s a tremendous amount of money spent, variability in approach and “not great outcomes.”

The Medicare Advantage market is attractive to start-ups because the number of people on Medicare is booming and there’s room to help providers and insurers transition to a value based system, the speakers said.

Matt Carroll, general partner at WestView Capital Partners, said to constantly be asking “how are you different”

The switch to a value-based system is uncovering areas, whether it’s revenue cycle management or clinical areas, that are inefficient and spotty in outcomes — opening the door to new models, and thus cash.

Contessa Health, for instance, had to build the infrastructure around it but found a way to cut costs and increase patient satisfaction, said the woman. And, in successful cases, it’s eliminating the need for post-acute care, Haghgooie said.

Companies need to put the “customer before capital, then capital will fly there to fund your business,” said Paul Wallace, managing director of Heritage Group.

Yet when buyers — both strategics and investors —  are digging into the make-up and model of a company, the quality of the human capital is paramount, the speakers said.

Carroll said the best assets are strong management teams — and that his shop is looking for dynamic, sharp teams that gel together and can grow the company.

“You can get (a higher) multiple based on who’s around the table with you,” said Haghgooie.