After 13 years working with entrepreneurs, investors, universities and corporations in Silicon Valley, Marta-Gaia Zanchi, the founding director of Stanford Biodesign’s digital health program, moved to Barcelona to launch Nina Capital. Her goal was to invest in and serve the growing number of European, need-driven founders at the intersection of health and technology. Last month, she and her management team spent a day at Fogarty Innovation, where they met with some of our earliest stage companies before addressing a larger group of FI family and friends in a Lunch & Learn presentation. Here are some of the highlights:
Who is Nina Capital?
“Nina Capital exists to improve healthcare by supporting need-driven funders,” said Marta. While the company is a traditional venture capital firm that ultimately needs to deliver a return to investors, the team is passionate about achieving that goal by improving healthcare systems worldwide. The company invests at the pre-seed or seed stage and is often the first investor in, committing anywhere from $150k to just over $1 million. “We’re happy to lead rounds but are also friendly co-investors to other VC’s across Europe, in North America, and in Israel,” she continued, noting that wherever they are based, nearly all of those investors seem to like to come to Barcelona to visit. The Nina team itself is also global, holding passports from nine different countries and working with a larger group of advisors spread across the US and Europe.
The company is deeply committed to the Biodesign need-driven approach, in which any innovation starts with a deep understanding of an important unmet need, rather than an idea for a technology. “We focus our investments on funders who have a passion, commitment and strong understanding of the area of needs in which they are operating,” said Marta.
More specifically, Nina focuses on companies who leverage enabling technology to solve problems in three areas – clinical indications and clinician’s education; healthcare infrastructure; and clinical pathways and pathways of data. Currently, Nina’s investment portfolio includes 38 geographically diverse startups with a footprint on 17 different countries, across two funds.
Trends from Across the Pond
Seeing and evaluating up to 500 companies a quarter gives Nina a unique perspective into trends in health technology innovation. Marta and her team shared some of the most compelling with our audience.
Digital therapeutics and telemedicine are cooling. According to Marta, Europe was faster to test reimbursement models for digital therapeutics than the U.S. and the experience overall was less than satisfactory. These reimbursement challenges are now affecting the U.S., making it difficult for companies in this space to raise money. There is similar disillusionment with the purely virtual model of telemedicine – popularized out of necessity during the pandemic – in favor of a hybrid care model that incorporates the best elements of both in-person and virtual care. Marta pointed out that there are numerous innovation opportunities around this model, including solutions that help coordinate care that takes place both inside and outside the traditional healthcare system.
Devices remain strong. “Based on our observations, this is the one sector that has been able to keep pace with the level of investment activity in 2021,” said Marta. She noted, however, that acquisitions have slowed somewhat, especially those valued at over $100 million. “While the lack of big success stories to share with entrepreneurs might come back to hurt this sector, for now it is a good place to be,” she said.
Investment activity in diagnostic analytics has dropped significantly, despite that fact that companies in this area continue to proliferate. Most of these companies are focused on efficiency claims, meaning that they seek to increase the throughput of patients – and thus hospital revenues – by supporting physician clinical decision-making. She explained that what her firm finds more compelling are innovations that not only allow hospitals to do more with less time, but open new revenue opportunities that were not available before or at least have strong evidence of cost reduction for the budgets they are tapping into.
Value-based care has been more a promise than a reality. “This is one of the biggest lessons we have learned as we have matured in the last few years, especially in the U.S.,” said Marta. “The combination of competing payment models launched by CMS, some resistance in stakeholder adoption, and an increase in inequality in some patient populations has resulted in slower-than-expected shift towards value-based care.”
The value of mental health apps remains uncertain. According to Nina general partner Marc Subirats, mental health was very fertile ground during the pandemic, but three years later the proof of their value is still not compelling. “It turns out that one size does not fit all – so it is unclear which companies will be actual winners in this space,” he observed. “Companies focusing on reaching underserved populations, offering help with more serious mental health issues, and helping streamline a hybrid in-person and remote model seem most promising.”
Decentralization of Clinical Trials
One area of particular interest to the Nina team is decentralized clinical trials – trials that recruit patients from outside the hospital environment and enable participation through a network of clinics and remote services rather than being anchored to a central physical hospital. Marta noted that the need for these kinds of trials became acute during the pandemic. “Virtually every medical device we invested in ran into challenges around patient interaction, from bringing patients inside the hospital to participate in clinical trials to monitoring patients at home,” she said. Another driver of decentralized clinical trials is the increase in innovations that serve a relatively narrow population, which makes finding patients eligible for those clinical trials more difficult.
Hospital at Home
An additional trend of interest to the Nina team involves caring for an aging population at home. Promising innovations in this area including those that ease medication management and streamline remote patient monitoring. Recognizing the needs of their growing elderly populations, France and Germany are leading the way in developing reimbursement codes that can be used by health insurers and providers to cover care delivered in the home. In the U.S., while there has been some experimentation with reimbursement for shifted in-home care models, many of these codes remain temporary and/or generic. Marta expressed concern for founders relying on these codes for reimbursement. “If you come to us for funding with that reimbursement model, we will be thinking about those issues,” she said.
“Venture capital is an industry that is now almost 70 years old,” observed Marta. There are a few interesting changes her team is observing as follows:
Family offices are increasingly getting involved in VC and are coming in at all stages of investment. While it is uncertain whether these entities will stay in medtech investing for the long term, she notes that they are worth considering as a source of funding that might have lower expectations around the return on investment. “So especially if you have a small market, one that you might be very passionate that has a good business proposition but isn’t quite enough for a VC – they might be a good fit as a funder,” she said.
Another trend is a higher bar for companies raising later rounds of funding. “If you are in pre-seed or seed mode, not much has changed and in fact, we noticed a growing price dispersion with some outliers raising very large seed rounds. But the Series A or B have been more impacted by the cooling of the VC landscape this year,” she said. “In general, the angel and seed environment is a space for exploration, and Series A is when you have evidence of product-market fit and you need capital to finance growing commercialization.” While the rubric still holds, Marta noted that proving product-market fit today requires companies to achieve higher revenue than in the past, and also be able to demonstrate that revenue streams are recurring. As a result, she suggests companies raising later rounds prepare for a longer timeframe to raise needed funds.
The Nina team also observed that overall, the U.S. is a more expensive place to innovate than Europe. Because of this, a U.S. pre-seed often has the economics of a European seed. “Europe has a tradition of very generous grant funding and the cost of living is significantly lower than some of the places that are most prolific for innovation in the US,” explained Marta. “For example, we have teams in Europe that have just raised their $2 million seed and have a team of 30+ including a group of experienced software developers that would be the envy of any startup in Silicon Valley. And their products are coming to the US. This is something you should pay attention to when you’re doing your competitive map. Don’t disregard Europe.”
Tips for Fundraisers
Finally, the Nina team shared a few words of advice for would-be fundraisers, including the following:
Do your homework. Her team sees many companies reaching out with opportunities unrelated to healthcare for which they are clearly not the right partner.
Understand VC fund size. “VC’s are typically trying to make investments whose proceeds will move the needle compared to the size of their fund in order to deliver compelling returns to their limited partners,” said Marta. “A general rule is—can this one investment potentially return the size of the fund?” She noted that not all VC’s offer transparency in terms of the size of their fund and how many assets they support, but suggested that those that do may be more attractive to begin with because they allow companies to calibrate their pitch.
Approach with milestones. “Make sure that you articulate the necessary milestones the capital you are requesting will fund and why that is the right essential minimum set of de-risking milestones,” said Marta. “And that comes with explaining your inflection point for the next round and why it is meaningful.”
We were thrilled to get to know the Nina Capital team. We look forward to a fruitful partnership and, if we’re lucky, a visit to Barcelona.