How can you source deals in the healthcare industry?

The healthcare industry is one of the most dynamic and innovative sectors for venture capital (VC) investment. However, sourcing deals in this field can be challenging due to the complexity, regulation, and competition involved. In this article, you will learn some practical tips and strategies to find and evaluate promising healthcare startups for your VC portfolio.

1 Identify your focus areas

The first step to source deals in the healthcare industry is to define your focus areas and criteria. Healthcare is a broad and diverse sector that includes various subsectors, such as biotechnology, medical devices, digital health, and telemedicine. Each subsector has its own characteristics, trends, and challenges that require different expertise, resources, and networks. Therefore, you should narrow down your scope and target the subsectors that match your investment thesis, stage preference, and value proposition.

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Julien de Salaberry

Founder | CEO | Influencer | Venture Partner | Board Advisor | Speaker | Author | Photographer | Veteran
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Indeed the starting point to deal flow is to be very clear on what your focus is (e.g. disease area, geography, maturity, technology, etc.) and make the ecosystem as a whole aware of your focus thru both your online and activities that engage you with the ecosystem e.g. events. However, these activities are reactive and a great deal flow will require a pro-active focus. In other words, to achieve great deal flow, you will need to develop a reliable, efficient, and effective data-driven initial due diligence process that will enable you to quickly screen your deal flow into a great deal flow of assets you really should be focused on.

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2 Build your network and reputation

The second step to source deals in the healthcare industry is to build your network and reputation in the ecosystem. Networking is essential for any VC deal sourcing, but especially for healthcare, where trust and credibility are vital. You should establish relationships with key stakeholders, such as entrepreneurs, founders, advisors, mentors, accelerators, incubators, universities, research institutions, industry associations, and other investors. You should also showcase your expertise, insights, and value-add by creating content, hosting events, speaking at conferences, and joining communities.

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Dr. James Somauroo

CEO at SomX | Healthcare Communications
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Ultimately, in healthtech, great deal flow will come from having brand in our space. Healthtech isn't a huge world, so VCs that are visible, accessible and who genuinely add value to the community through events, sponsorships and high-quality content will be seen regularly and positively. Having a reputation of genuinely supporting founders also goes a long way. Good founders talk to each other, and the best founders, who have their choice of investors, will speak to your portfolio companies to find out if you're truly value-add. Reputation and brand are so important and, in my view, the best way to build them are to be intentional about your value-add activity, create content and give to the community 👍🏼

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3 Leverage data and platforms

The third step to source deals in the healthcare industry is to leverage data and platforms to discover and track potential opportunities. Data can help you identify market trends, gaps, and opportunities, as well as evaluate the performance, traction, and potential of startups. Platforms can help you access and filter relevant information, such as pitch decks, funding rounds, product reviews, customer feedback, and media coverage. Some examples of data and platforms that can help you source deals in the healthcare industry are Crunchbase, PitchBook, CB Insights, AngelList, Product Hunt, and MedCity News.

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4 Engage with prospects and referrals

The fourth step to source deals in the healthcare industry is to engage with prospects and referrals in a timely and personalized manner. Prospects are startups that you find through your own research or outreach, while referrals are startups that are introduced to you by your network or contacts. You should follow up with both types of leads as soon as possible and show genuine interest and curiosity in their vision, problem, solution, and traction. You should also tailor your communication and pitch to their specific needs, goals, and challenges.

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5 Conduct due diligence and validation

The fifth step to source deals in the healthcare industry is to conduct due diligence and validation to assess the viability and potential of the startups. Due diligence is the process of verifying the facts, figures, and claims of the startups, such as their financials, legal status, intellectual property, team, market, and competitors. Validation is the process of testing the assumptions, hypotheses, and risks of the startups, such as their product-market fit, customer satisfaction, unit economics, scalability, and defensibility.

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6 Make your decision and offer

The final step to source deals in the healthcare industry is to make your decision and offer to the startups that you want to invest in. Your decision should be based on your analysis, criteria, and intuition, as well as the feedback and input of your partners, advisors, and mentors. Your offer should be clear, fair, and attractive, and include the terms and conditions of your investment, such as the valuation, equity, board seats, milestones, and rights. You should also be prepared to negotiate and close the deal as quickly and smoothly as possible.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How can you source deals in the healthcare industry?

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1 Identify your focus areas

2 Build your network and reputation

3 Leverage data and platforms

4 Engage with prospects and referrals

5 Conduct due diligence and validation

6 Make your decision and offer

7 Here’s what else to consider

Venture Capital

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How can you source deals in the healthcare industry?

1

2

3

4

5

6

7

1 Identify your focus areas

2 Build your network and reputation

3 Leverage data and platforms

4 Engage with prospects and referrals

5 Conduct due diligence and validation

6 Make your decision and offer

7 Here’s what else to consider

Venture Capital

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