Zoom’s impact on investing in intercontinental startups
When it comes to investments, including healthcare and biotech, companies in the Bay Area, Boston and New York tend to get the lion’s share of venture capital. But in recent years, more attention has been paid to investing in companies beyond these regions. The Covid-19 pandemic has also played a significant role as people have been forced to limit their movements and use Zoom to connect their In a panel discussion at INVEST Digital Health, healthcare and life sciences investors discussed investment strategies and why they place their funding bets in states like Texas, Indiana, Utah and Arkansas.
The panel, Investing Between Coasts, moderated by Dr. Hubert Zajicek, CEO, Partner and Co-Founder of Health Wildcatters, offered a window into how investors find companies that fit their investment thesis, even in states that are not considered start-up hubs. The panel was sponsored by Lyda Hill Philanthropies.
“We were the most active investor in Arkansas last year,” said Ayush Jain, senior partner at Revolution’s Rise of the Rest Seed Fund. The fund, which was started by Steve Case of AOL fame, has invested in more than 200 companies in 40 states since 2017.
The Zoom video platform has had an indelible impact on democratizing investing across the country, according to Ayse McCracken, founder and board chair of Ignite Healthcare in Houston and president of eNNOVATE Health Ventures. Ignite focuses on female-led digital health and medical device startups, while eNNOVATE invests in a wide range of startups across the African continent.
McCracken said it was one of the unintended consequences of the pandemic.
“[Zoom] allowed us to connect with entrepreneurs across the country and around the world and match them with mentors across the United States. All of a sudden, we were working with a broader ecosystem from coast to coast, and we were working with startups coming from all over the country. We have eight of the 22 companies [in our latest cohort] that come from the Texas market – San Antonio, Austin, Dallas and Houston, which is great. We would love to see Texas continue to grow. Denver is another place where we see a number of entrepreneurs coming from, as well as Minneapolis.
Max Rosett, director of Research Bridge Partners, credited Zoom with helping connect and stay connected with portfolio companies in areas that would otherwise have been expensive to travel to from its offices in Salt Lake City.
“It’s going to sound incredibly mundane and yet it’s incredibly real. Now that it’s normal to have board meetings on Zoom, life is a lot easier,” Rosett said.
Research Bridge Partners, which focuses on life sciences companies, is trying to undo what it calls on its website the “geographic misalignment” of venture capital in the Bay Area and Boston. He also draws attention to the tendencies of large venture capitalists to create lab-to-market systems to advance ideas to financial liquidity that make it more difficult for senior researchers from the mid-continent to gain access, as these companies favor the institutional brand and the geographical proximity of their offices.
Although everyone is happy that the worst of the pandemic seems to be over, Zajicek said that over the past two years the accelerator has received a record number of applications from around the world, which has boosted the development of a hybrid program combining in-person-based interactions and Zoom with startups in its cohorts. It has added an international flavor to its portfolio of startups. Add to that the accelerator’s advantageous base in Dallas, near an airport with the most direct flights in the country.
“It flattened the world in a big way,” Zajicek said.
Health Wildcatters recently moved its offices to Pegasus Park, a 13-story building that provides plenty of space for healthcare and life sciences startups to work and connect with investors and collaboration partners.
Jain agreed that Zoom can provide a useful complement to in-person meetings and has made it easier to build relationships with startups. He highlighted the importance of regional startup incubator and accelerator spaces, which frequently host demo days and other events to bring investors and startups together. They can also prove useful for out-of-town investors looking to connect with the regional startup ecosystem.
“If there’s a city you gravitate to, whether it’s because of a particular industrial strength or a personal connection, those are factors to leverage when you build relationships in those cities and find deal flow,” Jain said. “It’s something we rely on a lot. We are not principal investors. So we rely on finding opportunities to invest in startups, mostly through local regional investors, accelerators, incubators, places like Pegasus Park, where there are a ton of companies. There are institutions in other cities like this. I think it’s important to find them, to deepen them and to build relationships.