Start-ups – are you solving a meaningful problem?

Forward Partners’ Luke Smith shares his views on early stage investment.

With the inaugural Biohacking Congress arriving in London tomorrow, we had just enough time to catch up with one of the judges at the event’s start-up competition. Seed and Series A level start-ups from MedTech, digital health, biotech and healthcare will pitch to a panel of experts as part of the Startup World Cup, a global competition with a grand prize of $1 million.

One of those experts is Luke Smith an investor at Forward Partners, where he focuses on sourcing and executing new early stage investments for the £60 million fund. We spoke to Smith to find out what excites him about the biohacking investment opportunity.

“If you look at digital health [for example], it’s often a challenge for companies to get uptake because their products naturally sell into organisations within the healthcare space and it’s very hard to get the kind of penetration you want,” he says. “I think biohacking is interesting because it naturally lends itself to direct-to-consumer sales, and therefore means that you’ve got scope for much more rapid uptake. And I think particularly as the awareness of some of the benefits you can drive grows, that means you can show real improvements for people, so there’s scope to build very viable businesses.”

As an early stage investor, Smith isn’t yet seeing biohacking or Longevity as distinct investment categories.

“They [biohacking or Longevity investment categories] feel like something we’re talking about and paying attention to, but we’re not seeing enough yet for them to feel like sectors that stand on their own and that we would express as an area where we’re specifically looking,” he says. “We’re aware of demographic shifts that mean that aging is a very interesting area, but it doesn’t feel like we’re yet seeing a body of companies that share enough similarities for us to think of them as a cluster.”

Although this certainly isn’t dissuading Forward Partners from investing in companies with a biohacking or Longevity focus. He points to a portfolio company called Big Health, the digital health company behind personalised digital sleep improvement product Sleepio.

“They provide an app to help people with insomnia and provide cognitive behavioural therapy digitally to help people get better sleep,” he says. “They started out selling to consumers, but over time, they’ve actually shifted to a B2B business model, where they sell to employers and insurers – effectively helping those people to make sure that workforce get quality sleep and therefore are more productive and healthier.”

Smith is also excited by other developments in the Longevity and biohacking spaces.
“I’m interested in things like the microbiome, although uBiome and their tribulations potentially make the space look less interesting, but I think there’s a lot of potential there to drive improvements,” he says. “And then into consumer genetics and companies that are helping people to understand their genetic data better and therefore, live better lives.

Companies like Sano Genetics, who we spoke to recently, and are connecting people with clinical trials based on their own on their own DNA profile. I think there’s a lot of progress to be made there in the next few years.”

So what will Smith be looking for in the companies pitching to him at Biohacking Congress this week?

“The first thing is, are they solving a really meaningful problem for the user?” he says. “Is this a nice to have, or is this something that people care about deeply and are willing to make lifestyle changes or adopt a new product or pay handsomely for?”

“The second point – is there capacity to grow to massive scale?” he adds. “Is the problem you’re solving sufficiently broad that it’s possible to deliver venture-scale returns? And then the other important one – is this the right founder and founding team to be doing this? Do I believe that they have the skills and the network and the experience required to build a company that can get huge and deliver venture-scale returns?”

Forward Partners typically invests at the pre-seed and seed stages.

“We go really early,” says Smith. “So half of what we do is pre-seed, where we’ll invest as early as a solo founder with an idea – typically before they’ve started building anything. We will put in £300K to £500K, total investment, which we might stage over the course of, say 12 months. Alongside the investment we provide workspace and we also have a studio team who can support them.”

Forward’s studio team supports portfolio companies in areas including development, design, product, talent, PR and comms, and growth.

“The idea is we can almost act like their team for the first few months, and then help them hiring the right team once they’re in a position to do that,” says Smith. “And then at seed stage, we’re typically investing £500K to £2 million in a company that has some initial traction in rounds up to £4 million.”

Image courtesy of Forward Partners