Jonathon George, a Senior Associate at Flare Capital Partners, breaks down their considerations when evaluating deals in the health tech industry. For founders seeking investment, Jonathon notes that Flare Capital Partners evaluates the founding team, market opportunity, and clinical model, and holds a full partnership meeting to assess the startup’s potential. By prioritizing the founder-fit early on, Flare aims to create a long-term partnership that benefits both the startup and the firm.
VIDEO TRANSCRIPT:
Jonathon George: When we approach companies, it can be as early as an idea, or as late as perhaps the company has generated $10 million plus in revenue, in which case, the company would be seeking additional capital to grow beyond their first market. So when we look at companies, we will focus a lot of our time on the team, first and foremost, the size of the market opportunity, and how they’re thinking about going to market operating within the healthcare ecosystem.
Then we also spend a large chunk of time on the business model, the business itself. Given our healthcare focus, we focus a lot on the clinical model, and how are they reinventing the clinical model aspects of the side of things. How we operate in terms of diligence and evaluating deals is in some ways backwards from other venture capital firms. First, we’ll meet with the founder and assess the fit. After that initial touch point, from there, we actually have the companies come and pitch our full partnership right at the beginning. Usually, that is the last step of the diligence process. We love to bring folks in and put you right in front of our full partnership so that our full team can get to know you. From there, we spend a full hour kind of digging through the business and then narrowing down after that, what are the four to five key questions we need to answer in order to get really excited about this investment.
After that first initial pitch with the full partnership, it’s off to the races in terms of diligence. So we’ll set up customer calls over the next couple of weeks. We’ll also interact with existing customers of the business, as well as potential customers understanding what their experiences are working with the startup. As those diligence calls progress, assuming calls continue to go well and validate those initial set of questions, we’ll also work with the company and the founder to really understand what are the expectations for the financing.
How much money are they planning to raise? How are they thinking about work construction milestones that would set them up for success in the long run? Assuming those calls continue to trend positively, we will hopefully start to see how we can really work together to build a large enduring business. We would put forward an offer, submit a term sheet, and hopefully get to close and the hard work is done there. But in reality, the hard work is just beginning right. The founders and team can get back to working and building the actual company itself.
I hope that’s helpful in terms of how we think about and evaluate companies at Flare Capital.
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