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What do growth capital investors look for? In the following interview, our Co-Founder and Managing Partner Dr. Christoph Kausch gives insight into growth capital decisions.
What do growth capital investors look for? In the following interview, our Co-Founder and Managing Partner Dr. Christoph Kausch gives insight into growth capital decisions.
Is there such a thing as the most prevalent characteristic across MTIP’s portfolio companies that convinced you to invest in them?
So overall, all of our portfolio companies are obviously within the scope of digital health, healthcare, and IT. They all originated somewhere across Europe, including Israel. What we look for are companies that really solve an important issue in the healthcare market. There are different ways how to address it, whether it’s on a medical indication or on a healthcare service area, but all of our portfolio companies work to manage accessibility, affordability, and quality of healthcare. That’s an imperative for us that the companies fulfill it. Additionally, they need to have a large impact, meaning their contribution to the market needs to be sufficiently large for us to invest in. Then, another important investment criteria is that the companies have sufficient revenue levels. We check if there’s evidence for the market to need and buy the product on a recurring basis. Once the companies have reached this kind of maturity level, they are basically in scope for us and that’s also consistent across our portfolio.
In making growth capital decisions, different investors pay more attention on different things. For some, it’s the product. For others, it’s the metrics or the team. What’s yours?
I think it’s not a single thing. Overall, it must be the combination of all the different criteria so that at the end, you have a composition of elements that you trust and believe in. You have to be sure as you can be that it’s going to be a successful investment. The first crucial element starts on a personal level. Assembling the right team becomes critical to success. Working together, sharing knowledge and ideas, and understanding everyone’s strengths and weaknesses leads to innovation, greater efficiency, and produces the best results. Clearly, the market impact, the USP from the company’s product, and the need they’re going to solve are other key criteria. After that, it trickles down to the other elements, like scalability of the business model etc. That’s where I would start.
As you are one of the first Dark Green PE funds, how do you make sure that the company you want to invest in is fully compliant with SFDR Article 9?
Well, we start already assessing the fit to our article 9 fund in our “initial assessment”. During our due diligence, we then do analyze the level of ESG/ sustainability maturity in detail and derive recommendations, what we expect the company to put in place soon after we have invested in them. Given that it is still a rather new topic, we do not yet expect the companies to be already experts in this field, but we will ensure that this will be one of the priorities going forward.
Any advice you can give to founders as they try to scale up their companies?
As a founder, you will always have to find the right balance when it comes to focusing and prioritizing on where to expand to. You will not be able to tackle everything at once. If you’re for example coming out of Switzerland and want to penetrate the other European markets as well as the American market, you shouldn’t do everything in one go. So you need to pick the battles where you want to compete because everything is resource and time intensive.
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