Investments continue to flow into healthcare at a record pace, with the third quarter of 2020 seeing $21.8 billion across 1,539 deals, according to a report from CB Insights. And a now a new venture firm is entering the space; however, they are not offering startups more money, but their time.
Purohit Ventures, a sister company of 30-year-old healthcare firm Purohit Navigation, launched in the beginning of December 2020 with a time-as-currency investment model. In other words, they will offer their services and work—instead of funds—for a piece of the company. The company is led by an all-female executive team, including Anshal Purohit, Founder/CEO; Ahnal Purohit, Co-Founder/General Partner; Jen Clark, Partner, Chief Portfolio Strategist; and Kim Hogen, Partner, Chief Financial Officer.
PM360 spoke with Anshal Purohit and Jen Clark about the founding of this new firm, their unique investment model, how they will incorporate Purohit Navigation’s history of behavioral-based research, and the significance of an all-female leadership group in venture capital.
PM360: Why did you decide to launch this new venture firm?
Anshal Purohit: We’ve been in the healthcare space for upwards of 30 years as Purohit Navigation and over those years we have learned that we love working with early-stage companies. A lot of those companies are Series A or even Series B, they’re cash-light, and they need a lot of support, and most of their funding is allocated to clinical programming. We decided to come up with this model for an investment strategy that would yield a win-win, where we could leverage all of the experience that we have in the industry and come to the table with skin in the game.
How will this new firm impact your agency Purohit Navigation? Is there any carryover? Will any of your responsibilities change?
Anshal: I think, if anything, it will enhance our work at Purohit Navigation since this space is where all the innovation is. We all benefit from having exposure to what’s next in healthcare. This is going to enable us to work with companies that are earlier stage, doing innovative things, but just don’t necessarily have the cash or the appetite to work with a full commercialization firm. Because we’ve been strategically focused and research-focused on the Purohit Navigation side for quite some time, we already know how to support these companies.
One of the foundations for Purohit Navigation has been its background in behavioral-based research. Will you apply that same approach towards how you identify the right startups to work with?
Anshal: Absolutely, our focus on the Purohit Navigation side has always been grounded in behavioral science. Even 20 years ago, we used it to look at what makes a commercially relevant product. It’s not just defining its market potential or looking at where it could potentially fit, but how it will fit and what behaviors need to change in market to make it successful. We’re applying that same thinking to our portfolio strategy on the Purohit Ventures side—really thinking about these new technologies, platforms, diagnostics, drugs, etc., and how they’re going to enter the market and what it’s going to take to make them successful, because that’s ultimately what will govern a successful exit. It’s the ability to show commercial relevance, and then being able to help tell that story.
What else besides that are you looking for in a company to invest in?
Anshal: Seed through Series B is our sweet spot. We want to curate a portfolio across healthcare, so we are looking at platform technologies, diagnostics, as well as drugs. We’re always going to try to balance those things out. The other pieces are intangible. We need to have a good feeling about the team we’re going to be working with and the ownership we’re going to have for the equity we’re taking.
Speaking of equity, you are using a time-based investment model in which you get a piece of the company rather than contributing funds. Can you explain how exactly that model works and what you provide to these companies?
Anshal: We are using a time is currency model, where we take on the work and in exchange, we take a piece of equity in the company. The scope of our engagement differs based on the company we’re targeting as well as what their exit strategy is. If they’re looking to commercialize versus IPO versus exit to an acquisition, their needs will be different. So what we offer will vary based on what companies need, but our services include everything from early-stage indication and analyses, helping companies with their clinical trial strategy, thinking about public-private partnership (PPP) development, and more. For example, we’re helping companies with looking at molecular targets and where they should focus their clinical development efforts as well as helping them tell their story for their raise strategy. It’s not a recommendation and then a list of things that they need to go off and do. We take on the work and just execute straight through.
What are some of the companies you have already worked with in your portfolio and what are some of the things you’ve done for them so far?
Jen Clark: We supported a diagnostics company early on when they were considering IPO’ing and helped them build their corporate brand as well as rebranding some of the products within their portfolio. We also worked with another diagnostics company ahead of acquisition. We helped them with clinical pipeline planning, corporate imaging and communications as well as branding out their portfolio of diagnostic tests to make sure that it felt cohesive and ownable and transitioned well as they moved into that acquisition.
What are your future plans for the firm in 2021? How will you go about finding more companies to add to the portfolio?
Anshal: We’re just out there looking around for what is interesting. We’re fortunate to have had a pretty strong launch among a small subset of targets that we identified, and we’ve been talking to a lot of those folks already. We also have a good number of investor decks in front of us and are just starting to think about building out the 2021 investment portfolio and diversifying it. It takes a lot of diligence on our side and pressure testing our investment algorithm to make sure we’re filtering through to the opportunities that we see as the best fit for what we’re looking to do.
Finally, can you talk about the significance of having a venture firm with an all-female leadership team? That’s pretty rare, and according to Axios, only 9.65% of decision-makers at U.S. venture capital firms are women.
Jen: I think there are obviously, in our mind, advantages to an all-female leadership team, but we think one of them is that females, in general, have been underrepresented in venture capital. There have actually been some recent publications, such as this article from the Financial Times, that have even shown a venture cap that involves women either in leadership roles or just on the roster can actually outperform some of the male firms—so we’re hoping to come in on those coattails and have the same success.
The other good part of it is we will probably approach the diligence process differently and also potentially look at different opportunities that may include other female-led biotechs and startups. Just having our eye on that as part of our portfolio thesis and making sure we’re finding the best companies—whether they’re male-led or female-led—and keeping all of that on the radar as we move forward is something we want to make sure is important to our firm.