Last week I wrote about how federated groups of investors help de-risk innovations in the Venture Development Lifecycle (VDLC). Yesterday I elaborated on how entrepreneurs can understand risk through various funding cycles. One of the most important investors we didn’t talk about in the VDLC was the strategic investor (what I like to call the mission-driven investor) . Mission-driven strategics view risk differently and entrepreneurs should create investor journey maps to take them into account.
What is a strategic investor? Almost all successful firms have some overarching strategy when it comes to their products, services, and customers. When an investment helps promote a firm’s strategy in some way, it’s often labeled a “strategic investment”. For example, when a health system embarking on an ACO strategy invests in a patient engagement startup that can further the ACO mission, it could be called a strategic investment. Such mission-driven investments are often made by sophisticated enterprises that know their gaps can’t easily be filled on their own. So, they seek innovators and partners along with associations and multiple channels to help fill them. What gaps are mission-driven strategic investors looking to fill? Think about some of today’s macro trends:
- Fee for service business models are slowly giving way to pay for performance
- Major healthcare workflows are moving from paper native to digital native
- Telemedicine allows diagnostics and care to be performed at great distances and outside of traditional centers of care
- Digital biology unleashed by the genomics revolution is enabling personalized medicine and patient-specific treatment regimens
- Digital chemistry and microfluidics allow biological specimen diagnostics on mobile devices, often obviating complex lab tests and the time it took to conduct diagnoses
- Entrepreneurs must understand and respond to the changing role of finance in a global economy.There is a greater emphasis on international finance than ever before. Many investors are discussing the benefits of trading on OTC markets.
Who’s going to be able to fill the hundreds of gaps that are created by the macro trends? What about the thousands of gaps created by the micro trends within each macro trend? Health systems and drug companies can’t do it alone and payers as well as device manufacturers can’t do it by themselves either. Much innovation, especially in healthcare, often requires entrepreneurs to work with complex organizations so that their ideas can be tested in situ within institutions. Building and testing innovations where they will be used rather than coming from the outside reduces their overall acceptance risk. Why is mission-driven strategic investing so important in healthcare? In some industries major innovations can come from outside but in a complex regulated industry like healthcare, where patient safety and clinical workflows are ingrained, mission-driven organizations must partner with innovators. Proper strategic investments help de-risk and position innovations so that they meet institutional mission goals. The institutions can’t create the innovations by themselves but they can provide mission-driven capital and resources so that innovators can succeed long term. Strategic investments / shutterstock
