Looking forward 10 years: Private sector funding. Professor Joanne M. Hackett, Director of Commercial Development 15 June 2016

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1 Looking forward 10 years: Private sector funding Professor Joanne M. Hackett, Director of Commercial Development 15 June 2016

2 Disclaimer This material is indicative in nature and has been prepared for information purposes only. It should not be construed as an offer or solicitation to buy or sell any security or any interest in securities or enter into any transaction. The information is not intended for persons who are private customers within the meaning of the rules of the FCA or for persons who are restricted in accordance with US or Japanese securities laws. Information contained herein is privileged, confidential and intended for use only by the addressees, and reproduction or communication to another party of any part of this information is expressly forbidden, unless it is with the prior approval of UCLPartners. Information contained herein and the data underlying it have been obtained from sources believed by us to be reliable, but no assurance can be given that the information, data or any computations based thereon are accurate, complete or that it will not be subject to future change. Recipients are responsible for making their own independent decisions in the exercise of their own due diligence as to the completeness, fairness and accuracy of any information or opinions provided herein and must rely on their own judgment and investigations in relation thereto. Changes to assumptions may have a material impact on returns. Past performance is not indicative of future returns. There are significant risks associated with private equity investments as described above including, but not limited to, price risk, liquidity risk, redemption risk, and credit risk. Investors should consult their own financial, legal, accounting, and tax advisors about the risks associated with these investments. UCLPartners makes no representation as to the existence of a secondary market for investments in the funds.

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4 Venture capitalists what to look for Healthcare only investors with a genuine passion for highest clinical practice, innovative models and trends in the market Committed to small end of the PE market growing disruptive businesses to market leaders Deep experience investing across a number of healthcare sub-sectors leveraging sector specialism to recognise early market trends and make informed decisions Active on the ground management style working closely with management teams providing operational support and strategic guidance to drive growth Exceptional network with in-depth understanding of international best practice in Healthcare Proven track record of building successful healthcare businesses 4

5 Areas of focus Healthcare services Primary and acute care models, mental health, homecare, chronic disease management, cosmetic and aesthetics Digital health Health IT, smart phone and software solutions for better patients recording and monitoring, telehealth Social care Complex care, elderly and specialist care, supported living, children s care services Medical products & services Medical equipment, medical devices, specialty pharma, CROs, diagnostics 5

6 Investment criteria Strategy Companies with strong potential for growth into market leaders Innovative models focused on high quality Geography UK and the rest of Europe Sub-sectors Healthcare services, social care, medical products & services Investment size Target 10-20m to be invested over the life of the investment Initial investment can be 1-5m or less Stage Revenue generating companies Style Active investor with Board representation 6

7 Who to work with Committed to add value Proven track record of building successful companies Long term commitment follow on investments Strategic input to drive company development Build strong relationships with investee companies Open and straightforward Supportive and understanding Provide an exceptional network World class advisors and access to key decision makers Help build management team International network and strong connections to North America and Far East Act as lead investor Manage due diligence efficiently and effectively Representation at the Board of Directors 7

8 The fund raising process

9 Sources of private finance Crowdfunding Impact bonds Banks Debt funds HNWs Angels FOs Hedge funds PE Growth Funds VC 9

10 Other types of financing Social impact bonds Results orientated finance Government support Good for novel ways of improving outcomes for government Crowdfunding Good for small amounts Worry that investors do not understand risks 10

11 The pros and cons of private fundraising Pros Investors can add value Understand what you are doing and the company growth process Introductions Strategy Trouble shooting Flexibility Lifetime and medium term Cons Usually want equity Want control Single minded focus on growth 11

12 Who to approach for further information and advice Accounting firms Nomads and stockbrokers Sole operators 12

13 The process Build a plan Financial model Decide amount required, valuation expectations, what sort of investor you are seeking Hire placement agent, if required Finish preparation stage, hire lawyers, prepare due diligence materials Approach investors Ask for term sheet(s) Decide on which investor to accept Due diligence phase Negotiate terms; price, amount, governance, exit issues Legal documentation Closing 13

14 Deal sourcing When should the investor get to know a potential investment?? Yesterday! Early investor/entrepreneurs interactions help both sides Preparation for the meeting forces company to think about long term issues Strategy Business plan Risks etc Company gets free consultancy on the materials they have prepared Company gets on the investor s radar Investor is more likely to invest in a company that it has seen over a period and has demonstrated that it can achieve its objectives Investor learns about a niche or sub-sector But management need to be sufficiently advanced to prepare well and you need to do what you say you are going to 14

15 What investors look for in pitches and businesses Company is open about the issues The product/service does not cure/apply to everything under the sun!! Don t oversell the early data, business, revenues Honest about the competitive edge Highlight the risks at the outset Be clear about the opportunity Highlight the possibilities.but be realistic It s a discussion not a sell The team is passionate and committed 15

16 Top tips for pitching to potential investors Do not try to say too much. Max 20 slides, better less for the first meeting. First meeting objective is to get a second meeting and get the potential investor doing due diligence Bring everything back to returns and have a rigorous financial model and a summary of its results Ask for a sensible amount of investment, given your plan Consider the exit for the investor Research and think about your investor so you know what their interests are Be upbeat Know the detail of your business, sector, strategy 16

17 Make sure there are sufficient resources included 17

18 Post investment what happens next? 18

19 Post investment what happens next? 100-day action plan to rapidly move forward Risks are identified early Key metrics are agreed and monitored on an ongoing basis Set in collaboration with the management team at the beginning of the investment Service quality assessment Key financials (revenues, margins, EBITDA, cash) compared with budget Operational KPI s Status of businesses development activities Review of performance and correction plan Open direct communication CEO allows you to speak to team members CEO does not only give good news Admits when going to miss goals early enough to take corrective action A Board that is effective Aligned objectives and investment thesis Knowledgeable and engaged 19

20 What is the ideal investment? December 2009, Rembrandt sells for $36M at Christies, London Can you get the return? September 2007, Self portrait of Van Gogh was found at Geneva flea market purchased for a few Euros Can you find one of these? 20

21 Key considerations Understand your objectives before looking at a potential deal social and financial return objectives Never enough of due diligence that can be done Management is key, assess expertise and bandwidth Think about valuations of companies, market opportunity and creating value Always plan the Exit ahead! 21

22 Timing is everything Innovative Captured the mood of the time The returns are phenomenal for those who invested at the right time As always, timing is the issue 22

23 Thank you Joanne M. Hackett Director of Commercial Development Direct : +44(0)