In this Q&A, you’ll hear from NEXT VENTŪRES partners Mel Strong, Julian Eison, and Jordan Pascasio. The team discusses this year’s heat check for investors, opportunities in whole-person health, and becoming an effective leader during a downturn.
What are your biggest learnings from 2022?
NEXT VENTŪRES: There was undoubtedly some pull-forward demand in both healthcare and consumer health and wellness that carried over from the pandemic, resulting in a ton of fragmentation and bloated valuations to start the year.
While current market conditions have caused a lot of anxiety, it has helped normalize expectations and provide a heat check on how we assess opportunities across our thesis.
For us, the focus remains on opportunities rooted in whole-person health and central to a patient or consumer’s journey to achieve better health outcomes.
How is the macroeconomic environment impacting dealmaking?
NV: Investors are taking a more prudent approach and shifting focus to margin profiles and proven clinical outcomes. And they are likely prioritizing their existing portfolio companies’ needs: extending cash runway, responding quickly to market changes, and rolling up their sleeves as advisors and board members.
The operational slowdown can be positive for founders — your new investors will really understand your business and have more conviction when they do invest, and your existing investors will be more supportive and engaged.
Perhaps the biggest enemy for founders and investors right now is time. A round that might have taken three months to close last year is taking six this year. The pace of dealmaking is slower, and we’ve had to think differently about how we manage our fund and portfolio as a result.
What surprised you most in 2022 — what trend or market did you change your mind about?
NV: We spent time researching several spaces in whole-person health that we ultimately passed on: creator monetization platforms and connected fitness technologies, to name a few.
We did our work on these verticals and met with a ton of fantastic founders, but due to market and consumer behavior changes, we decided to focus on companies solving broader access or transparency issues in healthcare.
What trends are you most excited about going into 2023?
NV: We continue to explore innovation within Medicaid care delivery (social and clinical) and with tech-enabled service providers that are experimenting with progressive, less-capital-intensive business models.
We’re also curious to observe how various upstream coaching services (e.g., nutrition, movement) continue to integrate into Medicare Advantage plans to offer more effective supplemental benefits to the older adult population.
What advice would you give founders facing uncertainty in the current economic climate?
NV: Great leaders emerge from difficult times.
This downturn has been slow to unravel, and most founders have already heard the advice on extending runway, managing burn, and focusing on business fundamentals. All of this is good advice and will be true in 2023.
But especially now (and without making the financial predictions best left to the experts) our advice to our founders is to make sure they have what they need to be effective leaders for their teams.
The leaders of companies that survived, and even thrived, during the 2008 recession did this by:
- Communicating a clear plan for their company to employees and stakeholders
- Perceiving the crisis as an opportunity and a chance to innovate and think differently
- Establishing a sense of trust and psychological safety for their organization
- Leveraging a strong values-based, mission-driven orientation to their work
Our hope is we can use our experience and our network now more than ever to help our great founders also be great leaders.