Ben Carter, Deepbridge Capital | Episode Six - Talking Frankly with Founders & Investors

Introduction

In this episode of "Talking Frankly with Founders and Investors," host Frankie Smith speaks with Ben Carter, an investment manager at Deepbridge Capital, focusing on early-stage investments within the life sciences sector. Together, they delve into the motivations behind investing in startups, the critical factors for evaluating potential investments, and the importance of fostering strong relationships between investors and founders.

Ben shares his excitement about investing in early-stage companies, citing the unique opportunity to write the first check into new startups and influence their growth trajectory. He highlights that early-stage investing offers exceptional potential for returns as the valuation at entry is often set at a favorable point for subsequent growth.

Investment Evaluation Criteria

Carter outlines several key factors that Deepbridge Capital considers when evaluating potential investments:

1. Strong Leadership Team: The foundation of any successful startup is its leadership team; Carter emphasizes the importance of expertise and experience within the founding team, particularly in the life sciences sector.

2. Substantial Market Size: The startup must be operating within a significant and addressable market. Carter looks for disruptive technologies or science that can fundamentally change the landscape.

3. Product-Market Fit: As the business matures, aspects such as traction and established revenue streams become increasingly important indicators of potential success.

4. Rigorous Due Diligence Process: Deepbridge undertakes thorough due diligence, which can take anywhere from three to six months, ensuring that they invest in innovation and hold the highest chance for returns.

Exiting Investments

When it comes to the exit strategy, Carter explains that the life sciences sector often involves longer timeframes for investor returns. The nature of life sciences investments means that returns can vary dramatically across sub-sectors—some may take eight to twelve years to see exits, while others could achieve profitability in four to six years.

Ben discusses the growing opportunities within digital health, driven by increased investor interest post-COVID. He elaborates on the UK’s strong ecosystem of universities, wherein Deepbridge maintains relationships to tap into promising startup ventures. He highlights their recent successes, particularly a spin-out from the University of Strathclyde focused on antimicrobial resistance, which has garnered multiple awards and significant funding interest.

Learning from Failures

Carter candidly discusses the inevitable failures faced by investors. He notes that the life sciences sector can provide clear lessons through its failures, highlighting the importance of learning from these experiences to better support existing portfolio companies.

He emphasizes that founders should seek more than just financial backing from investors; they need active partners who bring expertise and guidance to the table. Founders should carefully choose investors who align with their specific needs and who understand the complexities of their sector.

Advice for Founders and Investors

In closing, Ben offers advice for founders looking to raise capital:

• Expect Longer Timelines: Raising funds often takes longer than anticipated; patience is necessary.
• Seek Warm Introductions: Creative strategies in securing investor attention are crucial.
• Choose the Right Investor: Engage with investors who have a genuine interest and understanding of your business sector.

The conversation underscores the critical dynamics at play in venture capital and the vital importance of forging strong, strategic partnerships in driving success in the startup ecosystem.

Keywords

• Ben Carter
• Deepbridge Capital
• Early-stage investment
• Life sciences
• Strong leadership
• Market size
• Product-market fit
• Exits
• Digital health
• Learning from failures
• Investor partnerships

FAQ

Q: What excites Ben Carter about investing in early-stage companies?
A: He finds excitement in the opportunity to write the first check into new startups and influence their growth trajectory.

Q: What are the key factors that Deepbridge Capital looks for in potential investments?
A: Deepbridge prioritizes strong leadership, substantial market size, product-market fit, and conducts rigorous due diligence.

Q: How long does the due diligence process take when evaluating investments?
A: The due diligence process can take between three to six months.

Q: What advice does Ben offer to founders seeking investment?
A: He advises founders to expect longer fundraising timelines, seek warm introductions to investors, and choose the right investors who bring more than just money.

Q: How does Deepbridge manage exits in long-term investments?
A: Deepbridge blends its investments across various subsectors of life sciences to balance exit timeframes, often seeing exits between four to twelve years depending on the sub-sector.