6. Investor perspectives in Nordic Health Tech

Besides analysing the type of investors investing in Nordic Health Tech, their preferred investment patterns and their barriers to invest, a core component of this report is to better understand their perception on some key topics related to investing in Nordic Health Tech companies.

In particular this section focuses on 5 key areas: 1) Main investment risks related to investing in Nordic Health Tech 2) The perceived need of previous knowledge and expertise in health to be able to invest in Health Tech 3) The main strength of the Nordic Health Tech ecosystem, the level of innovation and entrepreneurship and the public and private engagement in it 4) The level of funding available for Nordic Health Tech companies 5) The main trends affecting the sector.

Perceptions are in essence opinions and therefore we do not consider these findings to be conclusive on the general performance of Nordic Health Tech. However, investor perceptions allow us to capture the general feeling on how Nordic Health Tech is performing and the areas investors believe could be improved.

We asked investors what were in their views the main risk associated with investing in Health Tech companies in the Nordic region. Unanimously, for both generalist and specialist investors, as well as active investors and not active investors, the answer was the same: Long sales cycles is the main investment risk for this type of companies. This is, the fact that these companies take a longer time to market and to start generating revenues, and that mostly rely on B2B and B2G business models.

Other important risks indicated by both generalist and specialist investors is that Nordic Health Tech investments might lack follow-on capital. In other words, for these types of companies there might not be enough investors and capital at later stages of the company growth that can ensure the company to successfully reach the market and start generating revenue. In section 6.4 we expand on the investor perception of available funding for Nordic Health Tech companies.

Furthermore, the fact that the Healthcare sector in the Nordics is predominantly public, is also indicated as a risk factor for active investors in the field. Sectors that are heavily regulated and with a large state presence, like for example education, are in general less attractive for private investors. 

Finally, it is worth noting that perceived risk in Health Tech varies based on the investor you ask. Generalist investors would also mention that there is a lack of specialised co-investors to invest with. Specialists mention that the Nordic region has small and fragmented markets not optimal for ambitious Health tech companies, who should rather focus on larger markets like the US market. And non-Health Tech investors consider the market regulations, the need for clinical validations and the lack of current quality deal flow as the main risk associated with investing in this sector.

We also asked investors what were in their views the main and most common weaknesses for Nordic Health Tech founders. Here the answers were not so unanimous. However, all investors, generalist, specialist and non-health tech investors, agreed that one of the main weaknesses for these founders was their lack of access to capital. Furthermore, other main weaknesses highlighted by these investors were the founders’ insufficient customer understanding, related to lack of experience in working and selling to health corporations and public entities, as well as end patients and individuals.

Other perceived founder weaknesses are that they lack commercial and communication skills to be able to draft a compelling investment opportunity to investors. That they lack a growth mindset and are mostly targeting small markets, probably focusing in one or few of the Nordic countries. That they are unable to build teams, either because there is not such available talent in the region or that these companies are not competitive enough to attract top talent.

There are many things that can be done to address or reduce the perceived risks in investing in Nordic Health Tech that could ultimately attract more investments in the field. We will use section 7 to make some recommendations on this topic.

Another area where we wanted to get investor's perspective, was on the importance or unimportance of having prior health knowledge and expertise in order to invest in Health Tech. The obvious answer for this question is that: it depends. Different levels of knowledge and expertise is recommended from investors in the field depending on the Health sub-sector you want to invest in.

Overall, all investors agree that if you want to invest in BioTech and Life Science it is very important to have prior knowledge or expertise in the field. And this is specially important for specialist investors, with 85% answering so. Furthermore, all investors agree that it is somewhat important to have some knowledge and expertise in Health if you want to be investing in Digital Health and Consumer Health, emphasized again by specialist investors that answered 85% so for each category. Finally, for Med Tech, the opinion is more divided. More than half of the specialists believe it is very important (62%), while generalist and non-Health investors are split between very important and somewhat important. This report suggests listening to the experts, the specialist investors, where there seems to be a more unified consensus on the health expertise recommended for each health sub-category. 

For this report, we also thought it could be interesting to know what is investors general perception on the Nordic Health Tech Ecosystem. What are the most promising sub-sectors in Nordic Health for them, what are the main strengths they see in this ecosystem, and their overall perception on the Nordic Health Tech ecosystem, its level of innovation and entrepreneurship and the public and private engagement in the space.

Most promising sub-sectors. Overall, investors consider that the two most promising sub sectors in the Nordic Health ecosystem are Digital Health and BioTech, with the majority of investors answering so. Here all investors agree, however they do differ in which specific sector is more promising. Specialists consider BioTech and Life Science to be the most promising sector in Nordic Health Tech, while generalist and non-Health investors, rank digital health as the most promising.

More relevant are the different answers to this question depending on which Nordic country the investor is located. Norwegian investors point out BioTech and Life Science to be the most promising sector for them (70%). Not surprising, as in June 2023 the Norwegian government announced that the life science industry would become the fourth export industry under the national export program, fostering new exports outside the oil and gas industry.

https://www.regjeringen.no/no/aktuelt/helsenaring-valgt-som-neste-nasjonale-eksportfremmesatsing/id2982759/

For Swedish investors it is by far MedTech (82%), an industry with a long presence and a growing influence in the country and with very active medium and large industry players. In Denmark there is unanimity that Digital Health is the most promising Health sector (100%). Denmark has been since 2018 working on a Digital Health strategy

https://sundhedsdatastyrelsen.dk/da/english/digital_health_solutions/digital_health_strategy

and it is on track to become the leading European hub for testbeds in digital health.

https://investindk.com/set-up-a-business/life-sciences/digital-health

In Iceland, BioTech gets the highest rate (57%), followed closely by Digital Health (50%), as the Icelandic Government increases the support schemes and initiatives for young Icelandic companies in the field.

https://investindk.com/set-up-a-business/life-sciences/digital-health

While in Finland the consensus is that BioTech, Digital Health and Consumer Health are equally promising (67%). Finland has a historic and well position MedTech industry and the survey suggests the Fins are now betting on more areas and technologies within Health, specially in areas such as applied IoT and AI in Health.

https://healthtech.teknologiateollisuus.fi/en

Main strengths of the Nordic Health Tech ecosystem. We have many reasons to believe the Nordics enjoy a strong and robust Nordic Health Tech ecosystem. Investors of all types agree that the Nordic Health Tech ecosystem benefits from high-quality education and research institutions and high levels of specialised talent. Furthermore, even though investors think the dominance of the public sector in health could be an investment risk and a burden for Health Tech companies trying to improve Healthcare, they also believe this is a positive factor that makes the Nordic Health Tech Ecosystem stronger compared to other ecosystems. Strong and supportive governmental initiatives focused on improving entrepreneurs’ conditions, fostering research and innovation and providing initial capital, are always welcomed and recognised by investors. This could also be linked to the perception that the Nordic ecosystem counts with a strong governmental support for companies and other stakeholders in the space making it a positive environment for company creation and development.

It is worth noting that specialists also highlight two other main strengths of the Nordic Health Tech Ecosystem: the high level of IP produced and the strong quality of deal flow. Something that this report finds very revealing. If specialist investors investing in Nordic Health Tech are excited about the quality of the science and the companies they are investing in, we believe the rest of the investors have many reasons to explore the field and get excited as well.

Table: Perceived main strengths of the Nordic Health Tech Ecosystem by type of investor

Level of entrepreneurship and innovation. Innovation and entrepreneurship are two key factors for any ecosystem to thrive and evolve, and from this survey we can conclude that investors believe that in the Nordic Health Tech ecosystem these two factors are not performing equally well. Overall, generalists and specialists both agree that the level of innovation in the Nordic Health Tech ecosystem is above average compared to other sectors and geographies, specifically specialist, where 83% of them answered so. However, investors are not so excited about the level of entrepreneurship in Nordic Health Tech. Most investors believe entrepreneurship in this sector is average. Findings that could suggest that, if innovation in the space is superior, probably more efforts can be made in the region to support more of this innovation to become commercial products and to encourage the creation of new health tech companies. 

Engagement of corporations and the public sector. Furthermore, a healthy ecosystem needs the engagement of the different stakeholders, the entrepreneurs and investors on the one hand, but also the public sector and large corporations on the other. Overall investors perceive the engagement of corporations and the public sector into Nordic Health as average, compared to other sectors and geographies. Considering the public nature of Healthcare in the Nordics, the findings point out that more can be done to engage further the public sector into the health tech ecosystem and to foster the collaboration between health providers and health startups innovating in the space. More worrying is the fact that the majority of specialist investors believe that the corporate engagement in Nordic Health Tech is below average. Health corporations act as customers to many health startups, and more collaboration and test pilots is key for companies to validate their products, begin commercialisation and capture interest from investors. However, more importantly, health corporates are the most likely acquirers for health startups and the most viable exit route for investors to liquidate their investments in health tech (85% of investors indicating so). For more investments to occur in Nordic Health Tech, many investors would like to see a more dynamic and developed exit landscape for these types of companies. In section 7 we expand further on the importance of better public and corporate engagement into Nordic Health Tech as well as our thoughts and recommendations on how to improve it.

One of the most important goals of this report is to capture investors' perception on the level of funding available to Nordic Health Tech companies and to try to identify if there are significant funding gaps stopping good companies from getting the funding they need. 

General perception on funding. Overall investors consider the level of funding for Nordic Health Tech companies to as average (62% answering so). In general investors believe that good Nordic Health Tech companies that deserve funding, that they are receiving the funding they need. However, perceptions drastically change based on who you ask, as well as the stage and sector.

Perception on funding by type of investor. Between investors investing in Nordic Health Tech and investors not investing in it, there is some sort of agreement that the level of funding is average compared to other sectors, however investors active in the field are a bit more pessimistic with 31% indicating the levels to be below average. Between generalist investors and specialists, however, the difference is more significant. A significant group of specialists believe the funding for the sectors is below average (43%), compared to a majority of generalist investors believing that the levels are average (68%).

Perception on funding by type of investor. Between investors investing in Nordic Health Tech and investors not investing in it, there is some sort of agreement that the level of funding is average compared to other sectors, however investors active in the field are a bit more pessimistic with 31% indicating the levels to be below average. Between generalist investors and specialists, however, the difference is more significant. A significant group of specialists believe the funding for the sectors is below average (43%), compared to a majority of generalist investors believing that the levels are average (68%).

Table: Investor perception of available funding by stage and investor location
(% indicate proportion of investors that answered below average, average or above average for each funding stage)

From the answers in the survey and interviews with local Nordic investors, we also found that perceptions drastically change based on which Nordic country is the investor from. Norwegian investors estimate that the biggest funding gaps for local health tech companies are in the early stages (pre-seed and seed) and in the growth stage. Swedish investors are the most pessimistic, estimating that outside of their IPO market, there is a lack of funding for health tech companies at every stage. Danish investors are very confident about the level of capital available for early stage, but they consider later stage capital for health to be insufficient. This is a similar case for Finnish investors, that while they are satisfied with the level of funding in the early stages and IPO stage, they perceive a big gap of funding at growth and early growth. Icelandic investors are by far the most optimistic, indicating that health tech companies have access to the right amount of capital at every stage of the funding ladder.

Perception on funding for each sector. Overall, investors part of this survey believe that most health sectors are receiving the right amount of funding, with the majority answering so. The exception is BioTech, where in general, the perception is that there is less funding that average for Nordic companies operating in this field. Interestingly, specialist investors have a different view on the available funding for each health sub-sector. Overall specialist investors agree there is enough funding going to Digital Health and that BioTech is receiving less funding on average. However, they also perceive that MedTech companies are receiving less level of funding than average, and more surprisingly, they also believe that Consumer Health is the most underfunded sub sector in Nordic health.

Table: Investor perception of available funding by sub-sector and type of investor
(% indicate proportion of investors that answered below average, average or above average for each Health Tech sub-sector)

Perception on funding for each country. The perceived level of funding going to each Nordic country is actually very different depending on the investor you ask. Overall, there is a general investor perception that Danish and Finnish Health tech companies have available the right amount of funding, with around 65% of all investors stating so. Investors, on the other hand, perceive that Norwegian and specially Icelandic health tech companies are receiving less funding, with 90% perceiving the funding for these companies to be average to below average. And finally, there is a general perception that Swedish health tech companies are receiving more funding than average, with almost 90% of investors believing so.

This report finds it very interesting that few Nordic investors agree with this overall investor perception when you ask them about the perceived level of funding for their local Health Tech ecosystem. Norwegians, Swedes and Fins are very pessimistic and perceive their companies to be receiving less funding than average. While Icelanders, contrary to what outside investors perceive, they believe their companies to actually be receiving the right amount of funding. Danish investors, on the other hand, not only agree with the general perception that Danish health companies are receiving the right amount of funding, they are also much more optimistic about the level of funding going to these, indicating that is above average.

Table: Investor perception of available funding by country and investor location
(% indicate proportion of investors that answered below average, average or above average for each Nordic country)

The Nordic countries have many things in common, however culturally they can be very different. As the findings suggests, investor perceptions on Nordic key challenges are very different based on investor nationality or location, and are a reflection of each Nordic culture and country ecosystem uniqueness. 

To conclude, we also asked investors to indicate the trends they believe will have the greatest impact on Nordic Health Tech over the next 5 to 10 years. Unanimously all investors, both active and outsiders, and both generalist and specialist indicated AI and the automation of healthcare as the biggest trend that will impact Nordic Health Tech. This underscores a shared belief in the transformative power of AI-driven healthcare solutions, such as AI-assisted diagnostics and predictive analytics, in revolutionizing patient care and clinical processes.

Other important trends that investors agree will impact the Nordic health sector are 1) Remote monitoring and telehealthcare 2) Rise of precision medicine and genomics 3) Digital Therapeutics and behavioral Health.

Table: Investor perception most impactful trends in Nordic Health Tech by type of investor