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When it comes to connecting innovation and investment, aligning goals and culture is key

Two hands touch a golden coin, with a stack of coins sitting below.
Experts says a shared vision can make a big difference when it comes to the best pairings of innovators and investors, but it doesn't happen overnight.

Matt Buder Shapiro was “in it to win it” upon co-founding his Cleveland digital health platform MedPilot in 2014. In practice, this meant showing investors his company’s software which manages patient records, not to mention a personal understanding that he’d hear multiple “No’s” before getting his first “Yes.”

Before its acquisition by New Jersey-based group healthcare business Vytalize Health in February 2021, MedPilot raised upwards of $3.5 million over a five-year period. Like many startups, the company relied on personal donations and angel investors for initial investment, then cultivated additional funding apace with growing business momentum.

Buder Shapiro also made his fair share of mistakes, among them not connecting with the right partners in the early going, he said.

“We were extremely nascent as a business and not doing a good enough job of aligning with the people we were bringing in,” said Buder Shapiro, now chief marketing officer at Vytalize. “Like a lot of nascent entrepreneurs, I didn’t understand the importance of bringing in investors who were true partners. That will always come back to bite you.”

Buder Shapiro has learned from those errors since the purchase by Vytalize. The healthcare company, which focuses on quality of care, provider performance and the patient experience, has secured $153 million in funding since spring 2022.

Though Buder Shapiro continues to work on company branding, full credit goes to Chief Executive Officer Faris Ghawl and Chief Financial Officer Kevin Murphy for finding deep-pocketed investors who were also an ideal cultural fit, he said. This alliance includes investment group Enhanced Healthcare Partners in New York and David Wichmann, former CEO of health insurance giant UnitedHealth Group.

“It’s an incredible all-star lineup,” Buder Shapiro said. “Money is great when you’re fundraising, but for us, it’s been the quality of capital that matters in helping us navigate through this exciting journey.”

Building a relationship

Fund-seeking entrepreneurs are wise to focus on the now when cultivating investor relationships, noted Matt Zenker, director of deal flow and investments at UH Ventures.

The University Hospitals investment group receives 350-400 pitches annually from founders worldwide offering everything from digital healthcare solutions to medical devices – this pipeline is eventually narrowed to 5-10 investments of up to $1 million each.

“The key criteria is how well the team has thought through the value proposition of their product, and how well that resonates with leaders at UH,” said Zenker. “We think about fit before we run too far. So with any new company, we want to understand the pathway and the story of how we’ll eventually purchase the technology.”

UH Ventures invests in startups it has already tested in some capacity. In collaboration with venture development organization JumpStart, the group also provided funding to six additional U.S.-headquartered healthcare companies in the past year.

The best founding teams are responsive to the hospital system’s needs without sacrificing their vision for the company, said Zenker. Although UH may ask owners to refine their offerings, a balance must be struck between the hospital’s needs and a founder’s goals. Zenker said entrepreneurs can become “distracted” when asked to move too far from their original principles.

“Where we help is in understanding the founder perspective; we also understand the investor perspective and where they want to go,” Zenker said. “Sometimes there can be incentives that are not quite aligned, and we bridge that gap where we need to. If a company says they can’t deliver much more on this, we can help them deliver that message.”

Healthcare entrepreneur Buder Shapiro also emphasizes the importance of investor fit in a company’s early stages.

“Like any relationship, you have a good understanding early on whether you share an alignment,” said Buder Shapiro. “That doesn’t mean meeting someone and they’re depositing the check the same day. There’s a lot of work that goes into finding the right investors as the business matures.”

Telling your story

Receiving a few “No’s” from investors does not mean getting discouraged about your larger goals, Buder Shapiro said. Your first financiers may not even be around when your product enters the market.

“As you expand and ramp up the quality of the people you’re bringing in, you’ll be looking for different profiles of investors,” said Buder Shapiro. “The challenge is optimizing and updating the investors you’re looking to bring you to the next level. You’ll regret bringing in people that don’t share your vision – never sacrifice on that.”

Having a concise opening pitch is the most vital piece for a would-be startup, said Todd Schwarzinger, a partner with Cleveland Clinic Ventures, which finances global healthcare companies spun out from relationships with entrepreneurs and other investors. This is especially relevant in an environment where competition for funds has increased even as the donor pool has shrunk post-pandemic, Schwarzinger said.

“Have a very clear story – that’s the biggest piece,” said Schwarzinger. “Understand how you’re differentiating yourself and what the potential is for your platform. Lots of people are chasing fewer dollars today, so having a well-crafted story is critical.” =

Investors are attracted to companies that champion sound planning over flashy technology and unrealistic goals, said Zenker, the UH-based investment expert. Exciting innovations such as artificial intelligence and robotic surgery mean little without a strategy to get them to market.

“It goes back to being clear about the next steps in the journey,” Zenker said. “Find milestones that are achievable, and focus on building trust with prospective customers and investors. You need that big picture and to build hype, but I’d spend more time on the near-term.”

Corrected: February 12, 2024 at 5:58 PM EST
This story has been updated to correct the job titles for Buder Shapiro and David Wichmann.
Douglas J. Guth is a freelance journalist based in Cleveland Heights. His focus is on business, with bylines in publications including Crain's Cleveland Business and Middle Market Growth.