Flavia Popescu-Richardson talks longevity investment and how venture debt financing can benefit early stage companies.
The longevity sector is expanding with early-stage companies and, although venture capital is still typically the main source of funding for such businesses, there is a growing trend towards venture debt as a supplementary form of growth finance.
Longevity.Technology: For companies seeking a way to access funding quickly, without having to give up equity, venture debt can be an attractive option; helping start-ups extend capital between VC rounds. We caught up recently with Flavia Popescu-Richardson, a VP at Silicon Valley Bank, to learn more about venture debt, and how longevity companies can benefit.
Popescu-Richardson is part of SVB’s Early Stage Practice team, where she has a particular focus on life sciences and healthcare companies. At a high level, she says that SVB has observed a growing trend in longevity investment.
“For me, sitting in the early stage part of the journey, looking at companies between seed to Series A and B, it’s definitely top of my agenda,” she says.
“In the next year or two, I want to create the good foundation and practice so that we can build a strong presence and strong links within the various different ecosystems to help support those companies, understand the investor appetite and navigate the ecosystem to find the right sources of capital.”
One of those potential sources of capital, of course, is venture debt. This form of financing, notes Popescu-Richardson, is not designed to replace equity investing, and indeed is directly tied to it.
“The venture debt industry as a whole operates in a very unique way and the vast majority of the time it has a reliance on the equity investor,” she explains. “There usually has to be a VC investor in order for venture debt to even be a possibility for a company.”
One of the main reasons for raising venture debt is to “extend the runway” of a company.
“Consider an average company raising a 5 or 10 million Series A round – they are probably on a very aggressive growth path to reach the type of milestones that a Series B investor, usually a fund, would expect,” says Popescu-Richardson. “Having another 20-30% of venture debt that they can drawdown in the next six to 12 months provides something like an insurance policy by having this capital available if they need it.”
“The ability to introduce another one to two million, or a little bit more, into that marketing budget … can have a huge effect.”
But beyond purely an “insurance policy”, venture debt also gives companies an ability to accelerate growth.
“The ability to introduce another one to two million, or a little bit more, into that marketing budget, and grow your user base from 10,000 to 15,000 can have a huge effect,” says Popescu-Richardson. “The earlier you introduce growth in the company and are able to scale operation, the quicker you get the company ready for the next round, enabling you to have a smooth transition from Series A to Series B to Series C, and ultimately to a successful exit.”
Founders of companies at key inflection points, such as Series B, will often find themselves in a minority position, so growing through venture debt rather than equity can be a more attractive option. Popescu-Richardson feels that for most companies, venture debt becomes an option after raising Series A funding.
“They’re in a position where they can attract a serious institutional investor or VC fund, and they’re able to understand the pathway to the next stage of growth, to the next investor,” she says. “For many companies, when they reach that point where performance starts to become, to some extent, predictable, so the cost of acquisition becomes predictable, it’s much better to have a finance tool to enable growth, rather than dilute 20 – 30% at each round, and erode the interest of the founders.”
Views on longevity opportunities
“We see these emerging investment trends, looking at companies addressing agetech and longevity from various different perspectives,” says Popescu-Richardson. Agetech, she says, hasn’t historically been a “go-to” field for investors.
“From my perspective, this ecosystem is solidifying and emerging, and is gaining a lot of attention.”
“It has never really received the attention of biopharma, or digital healthcare, or some of the other mainstream types of technologies. So I think this is a very good moment in time to start introducing and start promoting the solutions that are absolutely vital for our future and vital for communities all around the world.”
Another area of the sector that particularly fascinates Popescu-Richardson is companies focused on what she refers to as “control and empowerment” – technologies that help us track and improve our health via a wide range of biomarkers.
“The type of technologies that look at nutrition, sleep, stress level – all the bioindicators that we can monitor,” she says. “So you can have a sense of the habits and activities that you can engage in to help improve your general health and general wellbeing … and that can have a substantial effect on how you’re going to be in your later years.”
The COVID-19 pandemic has also driven increased investment in companies seeking to change how healthcare is delivered, notes Popescu-Richardson.
“A shift has happened to help manage the patient journey and pathway, both generally and also very specifically,” she says. “And 2020 has been such an important inflection point… towards seeing more and more technologies gaining momentum within the investment community, and seeing those very good use cases and growth potential.”