A banking partner who truly understands your industry and unique business challenges can make all the difference to a company’s success. And that’s what Silicon Valley Bank aims to do – in their words, “help innovators, enterprises and investors move bold ideas forward, fast.”
A key player in that ambitious agenda is Kevin Longo, a 12-year veteran of the bank. Kevin began in the San Francisco office working with early-stage startup companies. His interest in healthcare led him to join that dedicated practice, eventually spearheading the medical device and digital health team in Palo Alto. He subsequently moved to Boston to run the region’s medtech and digital health team where he has expanded the sectors’ portfolio and developed a team with deep expertise in each subsector.
SVB has been a long-standing supporter of the Fogarty Institute, and we had the privilege of catching up with Kevin to get his insight on industry trends and tips on how companies can make the most of their banking relationships.
Q. SVB has a positive reputation among entrepreneurs and innovators. Why is that and how do you help early-stage medtech companies?
A. SVB believes in paying attention to these companies and helping them achieve success. With a specialty in healthcare, we have a solid understanding of the challenges entrepreneurs face, both at the early stages and later on.
While having a bank that can follow a company’s story all the way along is unique in itself, we also have an impressive track record and a long history of success. We enjoy a good market share — over 50 percent of venture-backed tech and life sciences companies nationally work with SVB. We have a strong network of folks working on the investor side and with new and serial entrepreneurs, which offers insight into the challenges that are ahead, as well as helping us identify key industry players and what it takes to be successful.
Q. What trends are you seeing in the medtech and digital health industries?
A. Medtech is still a challenging environment for entrepreneurs, but I am very hopeful about the industry. There are a number of positive signs related to financing over the last few years; we’re seeing higher dollar amounts being raised, with overall healthcare investing strong. While devices are a smaller piece of the pie than biotech, we have been seeing increases across the board in exits, upfront multiples and Series A financing.
Over the years, we have seen a shakeout in the number of players involved both on the VC and entrepreneur side, but we now have a high-quality community of repeat entrepreneurs, young and upcoming companies and solid VCs that have proven to be good partners. And now more investors are seeing decent returns which is contributing to interest.
While we are not seeing a lack of capital per se, it can be harder for entrepreneurs to find since the sources are so spread out – from strategics, Europe, China and family offices. SVB takes a deep dive into these trends in our annual Trends in Healthcare Investments & Exits report, which analyzes the fundraising, investment, M&A and IPO activity of private, venture-backed biopharma, medical device and diagnostic/tools companies.
Q. How do you select the companies you work with?
A. On the banking side, we work from seed stage all the way to multinational companies. Many of our largest healthcare clients started with SVB at the seed stage. On the debt side, what we look for is similar to what VCs look for in an investment. They have to have an experienced management team or have solid leadership that has done an impressive job of nailing down the vision of how their solution is going to provide real value to patients and the system. They should have made good progress on the product development front, have a clear plan for regulatory approvals and should be able to speak to the current and future reimbursement environment. Lastly, they should also be thinking about the “ease of use” for the device and how much training will be needed during the commercial rollout of their product.
In the earlier stages, they need to have good-quality investors and board members – professionals with related experience who can help them save time and money, thus avoiding headaches and the tendency to burn through cash unnecessarily. We also look at whether the market that they are targeting is crowded, and if so, if there is room for more innovation or another player.
Q. Leadership is important…what are the CEO/startups traits and characteristics that help make them successful?
A. Even at the early stages, we want to see that the CEO is really focused on the big picture and can look at the venture with a long-term perspective.
Resilience is important as there is always going to be a delay or a hang up, especially in the early stages. Successful CEOs can weather these bumps and set themselves up for success even in the face of challenges, while keeping the team motivated.
Obviously, all industries face this to some degree, but medtech is particularly challenging, and I am blow away by the grit that I see, especially with repeat entrepreneurs. In fact, the number one thing I always see in every successful medtech company is that the team is focused on the patient first, rather than valuation and how much revenue they are going to generate.