Catalyst Venture Partners

We have done over 50 deals of varying sizes. The key is to remember that you are selling a product (your company) the VC is selling money. They work hard to find good deals you are working hard to find the money. Both want to do deals. So some advice:

1. Fund raising is a strategic not tactical decision like all strategies it needs to planned and enough time allocated. We believe that it takes about a year from start to finish.

2. Take advice – its a minefield and you need all the help you can get. It also says that you are serious about doing a deal. VC’s also recognise that if they behave less than transparently word will get about what is a very small community.

3. Research your target market. Look at deals done not what they say. Make sure they have money to invest at the right deal size.

4. Create a competitive market always have at least three live options on the go at once. Never assume anything will actually happen.

5. Create an atmosphere of trust. If trust is not reciprocated then walk away. This is a marriage with little chance of a divorce

6. Listen to your advisers on deal terms. They should have done all the research on comparables etc.

These are my top tips – I’d be interested to hear yours, either from an investors’ point of view or from the other side of the table.

The argument for telemedicine is very compelling, particularly in the arena of geriatric medicine and post operative care. Most people are they grow older would like to be in their own home and evidence suggests that patience recover more quickly at home after an operation.

The technologies to allow this to happen are growing rapidly but how do you make money? Selling technology to the NHS is a very long haul. There are pressures in the NHS to increase efficiency and reduce costs which should create compelling pressures however we suspect only short term benefits are likely to be recognised. Long term gains will require substantial investment. Investment that is unlikely to be forthcoming. Our in-house analysis shows that it is likely to be the service providers.

These are companies that offer services to care homes, retirement villages, and individuals on a private basis and can pick and choose their technologies and offerings. These companies benefit from long term service contracts and a captive market. A stunning example is Cirrus Ltd. These are telecoms and systems integrators that have moved to become service providers and are taking advantage of this growing market. We expect to see this sector become a rapidly growing market.

What am I worth? Valuing early stage technology companies is an art not a science and depends on the purpose of the valuation. The bigger you are the easier it is and any decent accountant can come up with a plausible range.  When you are small different rules apply. I once sold a software company in the US with a $1m turnover for $49 million – how did that happen? Well the purchaser thought it could plug the product into its range and generate an extra $250m revenues a year. It estimated that it would take two years to develop a  competitive product so total  foregone  revenues would be circa $500m. It paid 10% of that and got a bargain.    So what’s the answer? Well it all depends.  As I write this I realise that this is really far too complicated for a blog so I think a white paper is required. Watch this space.

I have Just came back from a two day biotech conference. I go to conferences to meet people, find opportunities, and keep up to date with the sector – probably in the that order. Inevitably I get my fair share of impromptu pitches and I am always amazed at the gap between the expectations of entrepreneurs and investors. Entrepreneurs typically play down risk, over value propositions, and under estimate the time it takes to do anything. Excessive bullishness does not instil confidence it breeds suspicion and a lack of credibility. Investors want to see realistic targets. I would much rather have the view that the entrepreneur was being excessively cautious rather than over optimistic. The mantra should be “under promise over deliver”.

I had a very interesting meeting today with our executive search company where we were discussing what do clients want? It seemed to boil down to three things: someone who understands their business; someone who can assess individuals so that they meet their needs; and someone who can provide people who meet the bill. In short it’s all about not wasting clients time. This leads me to the conclusion that specialisation is the key.