Joe Hage: Hi, it’s Joe. I’m here with Thomas Weldon. He is the Chairman and Managing Director of Accuitive Medical Ventures venture fund and we were talking in the hall at the Innovation in Medtech Conference in Dublin here in April 2016.
And Thomas was sharing with me how he goes about choosing the companies in which he invests. Would you repeat what you told me out in the hall?
Thomas Weldon: Yeah, sure. There are a couple of things. We look for very large market opportunities first. Typically something that would have at least $500 million in addressable market – not just the total market but actually the addressable market.
We have to have an exit for the math to work of at least $350 million and the average exit in medtech over the last 20 years has been $140 million.
And so, it has to be what I would consider to be a strategic asset, not a tactical asset. And so those are things were there are going to be multiple bidders at the end.
From my perspective, it’s really not that hard to actually find companies that meet that criteria – I mean, it’s not easy, but it’s not super hard.
The hard part is once you’re actually in and making sure that company has adequate financing, has the right people, follows a decent strategy, and you can actually spend the time – which is usually around five, to seven to eight years.
We’ve been in deals as long as ten years – to get it to the point where you can actually exit. That’s really the hard work about venture.
Joe Hage: You told me you rarely speak at events because, after which, you get mobbed, and everyone gives you their card, and they really want your money. And you also told me that really doesn’t work. And that, typically, you find your investments because you know of a strategic need and you go searching for them.
Thomas Weldon: Yeah, we look for technology and areas where we think if we had an asset and it was matured and it was the right asset, it would be more likely that we could sell it and get a higher price for it.
Yeah, so, chasing after venture capitalists at a conference isn’t a good way. I mean, at least you connect with a face but typically we are asked by other venture investors to join transactions because of some of our expertise and, frankly, the money.
And we actively look for technology in certain spaces that we think are hot.
But you have to understand that the math has to work. I mean, we take money from widows and orphans, pension funds, sovereign wealth funds… They want a premium because it’s an illiquid investment that usually ends up taking eight to ten years and they want a premium for the risk.
And so, if you can’t objectively look at a deal and say there’s a 5x return, then it’s just not gonna happen with venture.
I mean, honestly, it’s only suitable for maybe one percent of all investments anyway. It’s not how most people get businesses financed from venture capitalists.
Joe Hage: And so, when somebody does approach you with their business card, you must think, ‘You poor schmo. This is just not the way to do this.’
So for those who are watching this video who are thinking, ‘I’m one of those people who really needs money and I don’t know “a Thomas” and I don’t know what categories he’s looking for.’ What advice would you give them?
Thomas Weldon: Finding out somebody that is on one of the boards of my portfolio companies and convincing them an interesting idea and asking them for the introduction, that would at least get me to read the email and possibly an executive summary.
So a warm introduction. That’s absolutely the best way.
Joe Hage: That’s very helpful. Thomas Weldon, thank you very much for the time.
Thomas Weldon: Sure.