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5. Investor approaches in Nordic Health Tech

5.1 Investors with investments in Nordic Health Tech

The first step of our analysis is to better understand the investors already engaged in the Health Tech sector in the Nordics which in this report we defined as those with at least one previous investment in this space done in the last 3 years.  Time frame in this context is important, as we understand that an investor that did a deal in Health Tech more than 3 years ago cannot be considered an engaged or active investor in the space.
Based on the data gathered from these 80 investors, the aim of the section below is to understand further what a typical investor in Nordic Health Tech looks like. In particular, to understand further their level of knowledge and expertise in Health, their investment patterns, preferences and strategies when investing in Nordic Health Tech and their historical returns and their future investment expectations for the industry.

Three types of Health Tech Investors

From the survey analysis and the mapping of the investors investing in Nordic Health Tech, we have been able to identify three main types of Health Tech investors:
  1. Generalist investor, with one or more investments in a Nordic Health Tech company
  2. Thematic investor, with a focus on Health Tech
  3. Specialist investors in one or more sub-sectors within Health Tech
Types of investors in Nordic Health Tech (% survey responses)
Generalist investors are those private or institutional investors that either have a broad investment mandate, meaning that could invest in any relevant sector or theme, or that do not have a mandate at all.  In the survey, almost 70% of the investors investing in Nordic Health Tech fall into the category of generalist investors. Examples of these investors include for example Alliance Venture in Norway, Spintop Ventures in Sweden, and Frumtak Ventures in Iceland.
Thematic investors are those investors that have a more narrow scope or focus for their investments, and that tend to focus on a few sectors, themes, or technologies to invest in. As the Venture Ecosystem evolves and new players come in, private and institutional investors choose to narrow their focus, from generalist investors to thematic investors, to win a competitive advantage and to dedicate time and resources to the sectors more relevant to them. In the survey, almost 15% of the investors fell into the category of Thematic investors with a focus on Health.  Examples of these investors include for example People Ventures in Denmark, Innovestor in Finland or Farvatn Family Office in Norway.
Finally, Specialist investors are those investors with a higher expertise, knowledge, or specialization of one or few specific fields, and are in those areas where they focus the majority of their investments. In particular, Specialist Health investors are those investors, private and institutional, that solely invest in Health and its adjacent sub-sectors. Specialist Health investors can choose to invest broadly in Healthcare, investing in everything from Digital Health software to Med Tech hardware, or focus on one or more of the Health Tech sub-sectors, for example, investing only in Life Science. In the survey, a bit less than 20% of the investors fell into the category of Specialist Health investors. Examples of these investors include Hadean Ventures in Norway and Novo Nordisk in Denmark.
It is both surprising and encouraging to witness such a high turnout of generalist investors actively investing and involved in Nordic Health Tech. This observation underscores the fact that the health sector, often perceived as niche, actually possesses a broader appeal. Such active participation of generalist investors suggests that the Health Tech sector's potential is increasingly being recognized beyond specialized circles, hinting at its growing significance in the larger investment ecosystem.
The distinction between generalist investors, thematic with Health, and specialists in health, will be used in the report to assess better the different investor perspectives in Nordic Health, to understand better the different investment patterns between generalist and specialist investors investing in Health, and to identify concrete actions to support generalist investors increase their investments, knowledge, and exposure into Nordic Health Tech companies.
Even though specialist and thematic investors represent a small portion of the investors interviewed (over 30% of the survey respondents taken together), we consider that their perspectives provide great insights to a better understanding of investor practices in Nordic Health Tech and we estimate a data sample of 20–25 health tech focused investors to be sufficient and representative of the current Health tech investor landscape investing in Nordic Health Tech.

Investor background in Health

Lack of health education or expertise is believed to be one of the main barriers for investors to invest in Health Tech. Furthermore, there exists a general belief in the Nordic Health Tech ecosystem that there is a lack of specialized investors in health tech. In order to start addressing some of these assumptions, we wanted to understand first if investors investing in the field had any background related to health.
Overall, the results of the survey show that over 80% of the investors that are currently investing in health, 64 out of the 80 investors with at least one investment in Nordic Health Tech, have some sort of background in Health. Either by completing a degree in a Health-related domain or by having previously worked in the field.
Education background in Health. More concretely, the data shows that over half of the investors investing in Nordic Health tech have a formal education in health tech-related disciplines like Biology, Chemistry, Medicine, and Nutrition. Among those however, only a small fraction of the fraction has advanced degrees such as a Doctorate Degree or Post Doc (6% and 2% of the total, respectively).
Educational background in health does differ between generalist and specialist investors. Specialist investors are by nature more likely to have an educational background in health compared to generalist investors (60% of the specialists, compared to 50% of the generalists). Furthermore, specialist investors are also much more likely to have advanced degree levels in the field, such as Ph.D. and post-doc. (20% of specialists compared to 5% of generalists). Such a distinction implies that when it comes to accessing the top end of domain-specific knowledge, especially in nuanced scientific areas, specialist investors hold a distinct advantage over other health tech sector investors. This could also explain why specialist investors are more likely to invest in health tech companies with science-driven products or services (see section 5.1.3).
Professional Experience in Health. When it comes to prior professional work experience in health-related fields, overall, most investors investing in Nordic Health Tech have some sort of previous professional experience related to health (almost 70%). Among these investors, the most likely professional prior experiences are: 1) Working as a Health Tech investor (30% of respondents), 2) Working as a corporate manager in the field of Health (28% of respondents) 3) Working as a founder or employee in a Health startup (24% of respondents).
Professional experience does not differ that much between generalist and specialist investors. Specialist investors are equally likely to have prior professional experience in health, and this experience tends to also be related to working as health investors, as managers in a Health corporation, or as employees in Health startups.  The only main difference is that specialist investors investing in Nordic Health Tech are more likely to also have prior experience from working in academic settings in the field of health or from working as medical doctors or clinical professionals (30% of specialist investors indicated an academic or medical professional background, compared to 10% of the generalist investors)
The fact that investors in Nordic Health Tech come from various educational backgrounds and career experiences shows that there are many different paths a typical investor in Nordic Health Tech could take before entering the world of health tech investment. Interestingly, no matter their background, it appears that at least in the Nordic Venture Ecosystem, investors' real-world experience in the healthcare field often is more relevant than their formal education in health-related subjects. This could mean that more corporate or startup employees in the field of Health could aspire to become angels and Venture Capitalists in Nordic Health Tech. Or that many more generalist investors can become Health Tech investors with the right training, practice and support.
Furthermore, the survey findings might also indicate that the Nordics could benefit from a stronger connection between the Health Tech ecosystem and the academic institutions and professional healthcare organizations. As Health innovation evolves, specifically in the fields of life science and biotech, there will be an increased need of deeply specialised health tech investors.  And therefore, more scientific graduates, academics, and medical professionals could be incentivized to enter the investment landscape and become specialized health investors.

Investment activity and preferences

The next thing this report wants to understand is how active these investors are when investing in Nordic Health, where are they investing, and what are their preferences and main patterns when investing in Nordic Health Tech. 
Frequency of investments in Nordic Health Tech: All investors
Frequency of investments in Nordic Health Tech:
Generalist vs Specialists

Frequency of investments

Overall, more than half of the investors have completed 2–5 deals in Nordic Health Tech over the last 3 years, translating roughly into one investment a year.
Between generalists and specialists, the differences in activity are quite significant. Generalists tend to invest less often in Nordic Health Tech compared to specialist investors.  While over 80% of generalist investors have invested in more than one Nordic Health Tech company, less than 15% of them have invested in more than 5 in the last 3 years. A generalist investor would not typically invest in more than one Nordic Health Tech startup a year, and this seems to be a standard practice as generalist investors tend to manage portfolio risk by diversifying their investments across different sectors and trends. 
On the other hand, 100% of specialist investors have indicated to have invested in more than one Nordic Health Tech company in the last 3 years and more than 50% of them have invested in more than 5 companies in the same period, which is almost 2 per year. A specialist investor would typically invest in more than one Nordic Health Tech startup a year, however, it would not typically invest in more than 5 a year. Most funds invest in up to 30 companies during a period of 4 to 5 years, making the frequency of investments for specialist investors standard among the general venture practice.
Even though specialist represent less than 20% of the investors part of the survey, their higher transaction frequency underscores their leading position in the ecosystem, as not only industry experts but also as the driving forces that likely shape the investment trends and dynamics within the region. Understanding their investment strategies and preferences becomes therefore key to understanding investment practices and barriers in Nordic Health Tech.
Stage of investments: All investors

Stage of investments

Most investors interviewed in the survey indicated that their preferred stages to invest in Nordic Health Tech was a pre-seed and seed, with almost 70% of the respondents indicating so. This preference for early stage could be explained because of the high representation of angel and early stage VCs in our respondent set and an underrepresentation of later stage investors in the survey data.  In any case, these findings could also lead to a possible conclusion that will be later explored in the report and it is that there could be a potential funding gap in the later stages and growth capital for Nordic Health Tech. Point 6.4 looks further into this topic.

Geographical investment distributions

Diving into the geographic distribution of investments, perhaps one of the most significant discoveries of this report is the evidence that there's a clear trend among Nordic health investors: they predominantly back Health Tech firms within their own nation. This is, the report answers found out that more than 90% of Nordic investors are currently investing in their local Health Tech startups, however less than 25% of Nordic investors are investing in Health Tech companies from neighbour countries. For example, the survey showed that 95% of Norwegian investors are investing Norwegian Health Tech startups, while only 5% are investing in Swedish Health Tech startups, for example.
Where are investors investing
Where are investors located
Table: Where are investors investing based on investor location (in percentages % of investors respondents)
Some countries are more likely to invest in other Nordic countries than others, as is the case for Finland with a significant proportion of investments in Norway and Sweden. However, these numbers are relatively small to draw any important conclusion. Most importantly, such a domestic focus might be limiting the scope and diversity of opportunities. Encouraging cross-border investments could not only increase the volume of investments in Nordic Health Tech but it could also foster a more interconnected Health Tech ecosystem and a more integrated Nordic capital market.
Sector investment distributions: all investors

Sector investment distributions

When it comes to sector investment distributions, Digital Health stands out as the sector with most investors investing in it, with almost 80% of investors respondents indicating to have done at least one investment in the sector. On the other side, Consumer Health is the Nordic health sector with the least number of investors investing in it, with over 35% respondents indicating so. Interestingly, almost 60% of the investor respondents have at least one investment in MedTech, revealing a strong interest in MedTech from the investors interviewed. Finally, less than half of investors surveyed have at least one investment in BioTech or Life Science. Later in the report we will explore investor perspectives of each of the health tech sub-sectors.
This report has also found some interesting findings on how Health sector investments are distributed based on the type of investor investing:

Differences by type of investor focus

Specialist investors are more likely to have done prior investments in Digital Health (91%), Med Tech (82%) and BioTech (64%). And are less likely to invest in Consumer Health (18%). Generalist investors and thematic investors are also more likely to invest in Digital Health companies over other types of health sub-sectors, and they have similar approaches towards Med Tech (where over half of them are investing) and Consumer Health (where over 40% are investing).
Sector investments by type of investor
From these findings we can conclude that the main difference between generalist investors and specialist investors is that generalist tend to invest less often and more broadly in Nordic Health Tech, while specialist investors tend to invest more often and more concentrated into Nordic Health Tech, this is, focused into few Health Tech sub-sectors. Furthermore, the main difference between Generalist investors and Thematic investors is that Thematic investors are significantly less likely to invest in BioTech and Life Science. Thematic investors are also less likely to have any educational background in health related fields (almost 60% of the respondents did not have any education in health), and this could be a possible explanation of the finding.

Differences by investor location

From the survey, we found out that Norwegian investors are more likely to invest in digital health (74%), followed by Med Tech (50%), and less likely to invest in Life Science and Biotech (37%). Swedish investors are more likely to invest in Med Tech (63%) and digital health (50%) and are less likely to invest in BioTech and Consumer Health (20–30%). Danish investors are the most likely to invest in Digital Health (100%), followed by Med Tech (50%). Finnish investors are very likely (83%) to be investing in Digital Health, BioTech, and consumer, and a bit less likely to invest in Med Tech (67%). Icelandic investors are equally likely to invest in Digital and Biotech and Med Tech (60–70%), however not very likely to invest in Consumer Health (23%).
Sector investments by investor location
From this overview, there are some elements we can conclude: Finnish and Icelandic investors seem to be investing more broadly in Health, with investors betting equally in most sub sectors. Norwegian and Swedish investors are mostly focusing on Digital Health and MedTech. While Danish investors are predominantly investing in Digital Health.
It is surprising to see from the results of the survey how few investors from Scandinavia, this is Norway, Denmark and Sweden, indicated to be currently investing in BioTech. (And even more surprising for the case of Denmark, with one of the largest BioTech industries in Europe). There is one factor to take into consideration. The survey shows how many investors are investing in each sector, and not necessarily the volume of investments. Taking into account that almost 70% of survey respondents are generalist investors, we can conclude that the BioTech space, at least for Scandinavia, could be concentrated into a few players, responsible for most of the investments in the industry. 

Sourcing and ealuating Nordic health tech

Investors invest in good companies and good investment opportunities. In the survey we also asked investors about their main sources of deal flow for Health Tech companies as well as the most important factors for them to evaluate an investment opportunity and decide to invest.
Sources of dealflow. For all investors, there are three main sources of dealflow to get into the right Nordic Health Tech companies: 1) Entrepreneurial networks, meaning founders referring each other (64%) 2) Other investors, meaning investors sharing opportunities (64%) 3) Inbound, meaning good companies reaching out directly to the investors (62%). For specialist investors however, the main source of Health Tech deal flow for them are Universities and Tech Transfer Offices (82%), followed by incubators and accelerators (73%), and other investors in the ecosystem (73%). It is less likely for them that good health tech companies reach out to them directly (50%).
Evaluating Nordic Health Tech. For all investors in the survey, the three most important factors when evaluating a Nordic Health Tech company are: 1) The team (87%), 2) A proven market need (43%), and 3) The strength of the IP or research (35%). Specialist investors also highlight these factors as the three most important when evaluating Nordic Health Tech, however, they slightly reduce the importance of the team (73%) and increase the importance of the market need (64%) and IP research (45%). Thematic investors, on the other hand, besides team (78%) and market need (44%), put more emphasis on the importance of product differentiation (56%) rather than the strength of the IP research (11%).
Importance of science-driven products. Finally, we asked investors how important was for them that the product or service was science-driven in order to invest in a Health Tech deal. Unanimously all types of investors consider it be very important and this consensus among investors increases as the level of specialisation of the investor increases in Health. In other words, the more focused and specialized the investor is in Health, the more important it is for them to invest in science-based products and services. A factor that almost becomes a must for specialist investors in health, with 82% indicating so.

Co-investing in Nordic healh tech

We also asked investors about the type of role they would typically take in a Nordic Health Tech deal (lead role v follow role) and who were their most likely co-investors. But before we jump into our findings, it is important to explain what a lead investor is and the role it plays in an investment deal. Lead investors are the investors in a funding round who tend to be the first investors to commit capital to the deal, take responsibility for the due diligence process, and lead the structuring of the terms and negotiations. The job of the lead investors is to prepare the deal and the investment terms in a way that allows other investors to better understand the investment opportunity and make an investment decision, without having to dedicate much time and resources to evaluating the deal.
Importance of science-based products by type of investor
Leading v following: The role of the lead investor is particularly important in Health Tech investment deals, as Health Tech startups often navigate complex regulatory landscapes and their products tend to be scientific based or subject to clinical evidence. A leading investor in this deal would need to properly understand the product value proposition as well as the main investment risks. That is probably why the majority of generalist investors investing in Nordic Health Tech prefer not to lead the investment round (50% indicating they were very unlikely), while specialist investors would in general prefer to lead a round in health tech (with 75% indicating they were likely or somewhat likely). In sum, Specialist investors are more likely to lead a Health Tech deal.  
Co-investors: most common types. Specialist investors are also more likely to invest with other professional investors in Health Tech deals, compared to the generalist. The survey shows that health specialists investing in Nordic Health Tech are much more likely to have VC and family office as the most common co-investor type (73%). While generalist investors in health co-invest more often with angels (70%).
Co-investors: health expertise. For the respondents in the survey, co-investing with health experts is a very important factor, especially for specialist investors. The majority of generalist investors (51%) and specialist investors (65%), believe it is very important to co-invest with investors with previous knowledge or expertise in Health Tech. While thematic investors are most likely to believe it is “somewhat” important (56%).
The way these investors prefer to co-invest could hint at the following patterns: Generalists would prefer to co-invest with health specialists, to bring into the deal complementary knowledge and expertise. These specialists tend to be mostly angels. Specialists would prefer to co-invest with other health specialists, as they are more likely to invest in scientific-based products and the need for health expertise becomes more important. And these co-investors tend to be professional investors like VCs and Family Offices. While thematic investors, depending on the type of health company they are investing in, and depending on their specialization, would choose different co-investors. For example, one Swedish investor interviewed who specializes in Medical hardware mentioned that when co-investing into MedTech deals he would prefer to co-invest with generalist investors, who bring software and general tech knowledge that he typically lacks. 

Investment performance, liquidity, and future investments

Investors invest ultimately with the expectation of receiving returns from their investments. That is why we thought it important to understand how Nordic Health Tech currently performs in terms of returns, what are investors’ expectations when it comes to future returns and liquidity events, and how they see their future investments in the field looking like.
Average Nordic Health Tech returns for the last 5 years. The majority of investors with at least one investment in Nordic Health Tech indicated a current performance above 1x (70%), and a third of them indicated a return above 3x (30%). Returns that are in line with general venture performance, where it is estimated that a third of the companies will not provide returns (<1x), a third will just return the capital invested (1–3x), and the remaining third will provide returns above 3x.
Average returns in Nordic Health Tech (last 5 years)
Expected liquidity. All investors estimate an investment horizon in Health Tech of either 3–6 years (50%), or 7–10 years (48%). Due to the nature of these investors, angels and Family Offices tend to have shorter investment horizons, expecting to exit these deals within 3–6 years. While VCs, considered to be more patient capital, tend to have longer investment horizons for these deals (5 to 10 years). Also, from this survey we can conclude that the most viable exit route for Nordic Health Tech companies is predominantly M&A, with 85% of the investors answering so. Only half of the investors in the survey believe IPOs to be a viable route for this type of company (52%).
Predictions on future returns: It is positive to see that most investors in the survey expect the returns of their investments into Nordic health tech to increase, 75% indicating so, while the remaining 25% believe the returns will stay the same. The main reasons why investors believe their returns will increase are that 1) They see the Nordic Health Tech market as a growing and more mature ecosystem 2) That is attracting more customers, more investors and more acquisitions into it, increasing the overall market activity 3) And that is providing more and better quality deal flow. The main reason why a quarter of the investors expect their returns on their investments not to change in the near future is because of the current poor market sentiment in the venture markets in general. 
Predictions on future investments: Half of investors currently investing in Nordic Health Tech expect to increase their allocations into the asset class. While the other 40% estimate they will continue the same level of allocations, and over 10% will decrease their future investments.  The main reasons why half of the investors will increase their investments in the asset class are because they see 1) An increased relevance of the sector 2) Increasing investment opportunities 3) That the Health Tech market is evolving and is more mature and 4) More and more relevant technological breakthroughs happening in the health tech field. The main reasons why the other half will continue the same level of allocations: 1) Capital is more expensive 2) Still complex regulations in the health sector 3) Companies take too long to market and to generate revenue 4) They still need to see more exits in the space and 5) That there still are lot of barriers for the health tech sector to grow.

5.2 Investors without previous investments in Nordic Health Tech

Now that we fairly understand who the investors are already engaged in the Health Tech sector in the Nordics and how they are investing, the next step is to try to understand why other investors are not investing in Nordic Health Tech yet, and what would trigger them to start investing.
From the survey, over 40 of the 120 investors that participated, indicated that they have not yet made an investment in a Nordic Health Tech company, of which over half were based in the Nordics and the rest were non-Nordic investors. Most interestingly, 90% of these investors indicated that even though they do not have investments in Nordic Health Tech companies, they do have an investment mandate or focus that would allow them to do so.
Main barriers to invest in Nordic Health Tech. For 57%, the main barrier to investing in Nordic Health Tech is finding good investment opportunities, indicating that they either do not have access to quality health tech dealflow, or that they haven't found the right company yet. Another 14% mentioned that the main barrier to investment in these types of companies is the length of development and approvals, how long it takes for these companies to market and to generate revenue, and therefore how capital intensive these companies tend to be. Other important barriers mentioned by these investors include: the lack of networks in the Nordics or other Nordic countries (10%), lack of enough health knowledge and expertise (5%), or the lack of attractive exit markets for these types of companies (and that Nordic Health Tech companies go public too early) (5%).
Reasons they would consider investing in Nordic Health Tech. Still, despite the challenges, 67% of these investors expressed they would be interested in investing in Nordic Health Tech in the near future. When we asked them why, these were some of the answers: 1) “The Nordics is the region in Europe with most emerging startups in BioTech”, 2) “The Nordic region provides good elements to produce good health tech companies: good policies and attitude towards health, good science, smart people, many grants and many state organizations investing in the space”, 3) “Health Tech is by far the most important sector for the future, there is a big potential”, 4)  “We are seeing more and more quality deal flow coming from the region and want to benefit from the opportunity.”
What would make them invest in Nordic Health Tech. Nearly all of them (96%) are waiting for the right investment opportunity. Many (54%) would start investing in the space if they could team up with experienced investors in the field, ideally also present in the region. These investors would also be more prone to invest if they would see more technological breakthroughs happening in the space (50%) and if the sector could produce more successful exits and case studies (31%). Finally, a third of the respondents would also start investing if they could increase their knowledge and expertise in the field.
Where are they most likely to do their first Nordic Health Tech investment. We also asked non-Nordic health tech investors what a first investment in Nordic health tech would look like. In terms of sector, most of them (60%) would start by investing in Digital Health. In terms of company location, a third of them (30%) see Finland as the most likely country they would start looking into to make their first investment in the industry. And in terms of business model, most of them would prefer to invest in Health tech companies with B2B (83%) or SaaS (66%) business models.