When an embattled venture capital investor’s plans have been derailed by budgetary constraints, the stage is set for another backer to step in with the capital to galvanise their portfolio businesses.
A recent example of this is the predicament facing commercialisation firm NetScientific, which has allowed investment firm EMV Capital to pick up two University of California healthcare spinouts, cancer diagnostics provider Vortex Biosciences and chronic disease management company Wanda, for a fraction of their most-recently published market valuations.
Having come across the spinouts through its contacts, EMV Capital sensed the opportunity was ripe to invest in medtech and connected health, and committed the resources necessary to aid Wanda and Vortex’s turnaround.
Ilian Iliev, who has a PhD from University of Cambridge focused on venture capital business models in emerging economies, is EMV Capital’s managing director. He said: “We had been looking at entry points for EMV Capital in the medtech, connected health and automation in medical space. I myself personally have done primary research in this space looking at patented trends in connected healthcare and medtech automation, and so we had a quick entry point with these two companies.
“Specifically, Vortex and Wanda have seen significant investment in the past from NetScientific. Both are university spinouts on the west coast from a very reputable university. As for the original founders of the businesses, each of them is a thought-leader in their space.”
Medtech is far from the only segment EMV Capital targets. It invests in a range of other hardware and software technologies, also straddling the high-tech industrial, energy and mobility domains.
However, Vortex and Wanda have already brought their initial products to market, giving EMV Capital greater scope to lend its technical and strategic assistance. That could mean help consolidating their go-to-market strategies, Iliev said, or preparing the ground for expansion into European markets.
Iliev continued: “What we find is depending on the sector focused on, sometimes the correct entry point into a university spinout is a little further down the line, once the growth hypothesis has settled in the business and where we are able to help those companies more meaningfully.”
EMV Capital often aims for its investees to promptly expand overseas, providing support to this end through its contacts, many of which have been built up co-investing with corporate partners. Financially, the firm concentrates on backing investees with what Iliev describes as “smart money”.
“I think what is quite unique to us is we are able to provide different structures of finance that match the company’s level of development in their specific circumstances,” he said. “What we think is missing in the university tech transfer space is this sort of flexible, smart capital that can be adapted.
“In the case of Wanda and Vortex, again we found an innovative structure that both enables NetScientific to exit the businesses and provided the management teams in both companies with incentives to stay on and to continue growing the business. This sort of flexibility, I think, is absolutely crucial for university spinouts as they go through different stages.”
Both technologies lay at the crux of digitisation in their respective segments, Iliev argued. Wanda markets an artificial intelligence-powered predictive digital health platform that helps prevent medical complications away from the hospital, while Vortex’s diagnostics platform identifies tumour cells circulating in the blood samples of cancer patients.
EMV Capital also drew confidence from the expertise of the founding teams. Iliev said: “I think for us coming out of the UK, there is always a healthy dose of scepticism around the kind of exuberant optimism that sometimes North American startups show.
“In this case, what I found is that the teams had been through quite a lot. They had solved a number of crises and overcome many difficulties. That attracted us because it meant these were tried and tested teams that get involved with the business and had proven they can solve problems while continuing to progress towards the overall vision of the business.”
EMV Capital is comfortable working alongside universities and academic entrepreneurs, Iliev said, citing its recent participation in a £3m ($3.8m) series A transaction for Imperial College London-founded underfloor insulation robotics spinout Q-Bot. Elsewhere, it expects to soon announce funding for Sofant Technologies, a spinout from University of Edinburgh which is developing microelectromechanical systems-based 5G and satellite communications equipment.
On Sofant, Iliev said: “We have been active in the industrial internet-of-things space for a while and we are aware of the gigantic wave that is about to hit as automation starts taking hold in the industrial space.
“The data requirements for these technologies will grow exponentially, both in areas with mobile coverage and in areas without, for instance in the seas or remote agricultural locations, as such that there will be no single solution.
“Sofant sits right at the intersect of this space. It is led by a very good and experienced CEO with experience in the semiconductor field, and from our perspective we are once again able to bring our experience in helping to build semiconductor businesses helping them put in place a growth strategy.”