The 5 Why Series: Why #3

Our Digital Marketplace

Our mission at Bioverge is to democratize early stage investing in the $3.2 trillion healthcare market, while offering founders access to capital and an ecosystem of resources to help them push the boundaries of human healthcare.

Our goal is to build awareness of innovative investment opportunities and provide investors the tools and resources necessary to make informed investment decisions. To accomplish this goal, we’ve set out to build a high quality, curated healthcare-dedicated digital marketplace.

As with any marketplace, we must balance the supply side of the equation with the demand side in order to create an equilibrium that satisfies all parties involved (who often times have competing interests). There’s been plenty of great pieces written about marketplaces by a16z ( and ) so in this blog we’ll focus on the specific attributes of the digital marketplace we’re building at Bioverge.

The Demand Side — Our Investors

Investors comprise the demand side of our marketplace, and as such, we must bring them efficiencies they wouldn’t otherwise have when investing in alternative assets (more about the benefits of alternative assets ).

Without rehashing our which we’ve previously covered, we did want to do a deeper dive in a few areas:

Access & Fees

It’s notoriously challenging for individual investors to access high quality deal flow for private investments. Historically, you either had to be a venture capitalist, high net worth individual, or have a personal relationship with a founder or CEO. On top of the relationship barriers to entry, direct investments were challenging because check sizes typically had to be large to get a seat at the proverbial table.

If you had enough cash on-hand, you may have been able to invest in a venture capital fund, but that required even larger check sizes and investors lost control of how their money was invested (i.e. the fund was a block box and you hoped for the best!). In addition, the typical 2% management fee structure incentivized fund managers to raise larger and larger funds instead of focusing solely on returns (and that’s on top of the 20% carried interest).

We’ve designed our marketplace to solve these obstacles by providing accredited investors with access to a curated set of high quality deal flow, allowing for deal-by-deal discretion. We’ve also significantly lowered the minimum capital requirements to make an investment (from what used to be >$25,000 to $2,500).

Our marketplace utilizes technology and software to automate the transaction process thus making it more efficient, leading to lower transactions fees for investors. For example, we do not charge a management fee on direct investments and only profit when our investor earn a profit. This serves to aligns our incentives 100% with our demand side customers while also ensuring our marketplace is truly curated.

Finally, our digital marketplace offers accredited investors access to invest alongside some of Silicon Valley’s top venture firms and premier accelerators. In our first four deals, we’ve provided our investors access to invest alongside some of Silicon Valley’s premier VC firms, including:

Access to Invest Alongside Top-Tier VCs and Accelerators

Diligence & Transparency

In addition to investors lacking access to a reliable source of quality deal flow, many investors lack the time, knowledge, and/or desire to do a deep dive on diligence. Although investors are ultimately responsible for conducting their own diligence (which we maintain is 100% essential), we provide the tools and resources to help them streamline the process and make informed investment decisions.

We’re building a set of tools for investors to leverage that de-mystify the process of investing in complex science and healthcare products. We term our diligence process, Dynamic Diligence, since we leverage subject matter expert input and iterate our models throughout the process (more on this in a future blog).

“Spending time on due diligence is significantly related to better outcomes…investors who spent less than the median 20 hours of due diligence and investors who spent more, shows an overall multiple difference of 5.9x for those with high due diligence compared to only 1.1x for those with low due diligence.”

Source: Kauffman, The Foundation of Entrepreneurship. “.”

The Supply Side — Founders & Entrepreneurs

Founders and the companies they are building represent the supply side of our equation. Just as with the investors on the demand side, our digital marketplace must offer them efficiencies they wouldn’t otherwise get.

For founders, fundraising often requires significant amounts of time and is a major distraction from what they should be doing…actually running their business!

Again, without rehashing our which we’ve previously covered, we want to do a deeper dive in a few areas:

Streamlined Capital at a Lower Cost

Our marketplace aims to act as a force multiplier, helping founders efficiently leverage the funds they’ve raised offline. In our experience, founders are most successful when they have secured a portion of funds offline and are trying to fill out their round (and it works even better when there is a strong lead in place).

This, however, is just the beginning and as our marketplace gains scale we fully anticipate raising a larger percentage of the round online (as well as larger rounds). Our ultimate goal is to help founders cross the unfortunately named valley of death, which suffers from a critical lack of early stage seed and bridging capital.

The valley of death is not merely a funding gap, equally important is providing access to the right skills, support and infrastructure.

Our tools include access to advisement, services, business development & partnership opportunities, as well as networking introductions (more on this topic in a future blog).

From a cost of capital perspective, the only fees we currently charge are based on carry, so our incentives are 100% aligned with companies (as well as with investors). Even if we were to choose a transaction fee model in the future, we’re able to leverage the efficiencies inherent in a digital market to provide our services at a lower cost (more on this topic later).

Relevant Investors

Perhaps the single most critical aspect of our digital marketplace is connecting founders with the right set of relevant investors. This point cannot be over-emphasized, our marketplace aims to connect healthcare startups with the people who like to invest in healthcare startups!

Founders don’t have to wade through tech investors, or consumer investors, or real estate investors, etc. to find the relevant investors for their unique offering.

Digital Marketplace-based Investing

Image credit: .

Finally, we believe in a true marketplace-based investing approach which means individual investors can invest alongside institutional and strategic investors. Perhaps there’s a crowd, but perhaps not. It’s about connecting founders with the right investor or set of investors.

Our Team

Our unique backgrounds and experiences within the healthcare world have empowered us with a distinct perspective on the industry, one that has both isolated a market need and helped formulate a product vision, as well as gone on to give us an advantage in executing on that vision.

Neil started his first business at age ten (a neighborhood-franchised lemonade stand) and by high school was an active investor and derivatives trader. He studied molecular biology and worked in a lab at the University of Colorado, Boulder before pursing his Master’s in Biotechnology from Johns Hopkins. Neil spent seven years in healthcare investment banking at Deutsche Bank, Thomas Weisel Partners, and Burrill & Company where he helped companies raise >$1 billion. Most recently, Neil was the Head of Business Development at the California Institute for Regenerative Medicine (CIRM), which manages $3 billion and invests in novel regenerative medicine technologies. Neil’s personal investing and I-banking experiences combined with his time at CIRM created the perfect storm and the concept of Bioverge was born.

Rick joined Bioverge from Stanford’s Office of Technology Licensing, where he managed a portfolio of 300+ early stage biotech and med-tech university inventions. Rick also worked with the University’s CFO, managing two expansive venture capital portfolios, investing in university technology licensees as well as university-affiliated companies. Rick’s roles within early stage tech transfer and venture capital have enabled him to hone skills critical to the evaluation of novel technology, assessment of market and industry trends, and the creation of effective go-to-market strategies.

In both the worlds of innovation and investing, seeing things differently is an advantage. Unique backgrounds often lead to unique industry perspectives and investment strategies that can lead to enhanced returns.

We hope you’re join us on our journey as we build Bioverge into the premier digital marketplace for investing in healthcare startups transforming tomorrow.

-The Bioverge Team

Disclaimer: Bioverge is not a registered investment advisor and nothing contained in this blog is meant to be a recommendation on how to allocate your assets or is intended as investment advice. Returns presented here are not necessarily representative of the companies listed on Bioverge and do not reflect projected returns. This blog is meant for informational purposes only.

Connecting the world to startups dedicated to transforming healthcare