Recently, World Financial Symposiums (WFS) hosted a Growth & Exit Strategies virtual conference focused on women leaders in tech. The conference was highlighted by three panels comprised of women executives representing investors, buyers, and sellers of tech companies, respectively. The panelists shared insights and tips on a variety of topics such as which sectors investors are excited about, what buyers want to see in companies for purchase, and how to prepare for an exit.

This first part of a multi-part series of articles about the conference focuses on the Investors panel. Here are some highlights of that panel discussion.

Investors panel

Kristin Fox, Founder and Principal of investor advisory FoxInspires, LLC, led a panel of three women executives representing investment companies from various geographies and different investment focuses. The panelists were:

• Diane Fraiman, Partner and Managing Director at Voyager Capital, a firm that invests in early-stage B2B software companies in the U.S. Pacific Northwest.

• Anna Ljungdahl, Senior Investment Director at Industrifonden, a Stockholm Sweden-based evergreen fund that invests in growth companies in the life sciences, deep technology, and transformative technology sectors.

• Ute Mercker, Investment Director at IBB Ventures, a venture capital firm based in Berlin, Germany

The panelists were asked a variety of questions that ranged from what sectors and company characteristics they currently target for investment, to the impact AI has had on their investment strategies. Here are some of their answers.

Where they invest

The panelists cited a number of sectors that they currently target. Diane Fraiman noted that she and her team look at places where markets and technology are finally intersecting. One of those intersections that excites them is AgTech. Fraiman pointed out that farmers who were not ready to buy into technology in the past are now interested in tech solutions that will help them solve problems. She added that her company expects to see a lot going forward in markets like AgTech as a result of new technologies such as Generative AI that have the potential to improve operational efficiency.

HealthTech is another area cited by the panelists as a hot investment target. Ute Mercker pointed out that companies involved in biotech, medtech, and health diagnostics are always on IBB Ventures' radar. In fact, IBB's portfolio includes a company that provides online therapy courses designed to treat people suffering from psychological stress and mental health issues such as depression; another company that leverages AI to assist pathologists working in cancer research and clinical trials; as well as a company that provides a chatbot that makes doctor appointments for patients.

While the life sciences have also been a target for Industrifonden's investments, Anna Ljungdahl said that the firm has lately turned its attention to fintech companies. For instance, last year it invested in a company that provides a payment infrastructure for B2B transactions. Another sector that she sees emerging as a target for investors is climate tech, that is, technologies that address climate-related issues such as global warming. Ljungdahl envisions a lot of startups materializing in that area with relatively high valuations.

Characteristics they look for

For Fraiman, the answer to what investors look for in a company is simple: companies that have very disruptive technologies, address really large markets, and have great teams. But she admitted that finding all of those characteristics in a company is often difficult ‒especially finding one with a great team. Fraiman's experience has been that it's fairly easy through due diligence to determine if a technology is disruptive and whether the market for it is large. But the magic, she said, is finding those teams that can execute on a great opportunity. She pointed out that the best products don't always win in the market, and, in fact, quite often it's not the best, most innovative product that wins. What wins is largely based on execution ‒ whether that execution addresses the product-market fit, the go-to-market strategy, or just watching the market and listening to customers.

Being adaptable is another important characteristic that the panelists cited. Ljungdahl said the companies that stand out to her are those that over the years of the development of the technology or its commercialization had the ability to adapt to changing markets and be able to adjust their growth path.

That flexibility is something that Mercker especially values in company founders. She said that her company is very founder driven, and before they make an investment they need to determine whether they can work with the founder. She pointed out that founders are a key element in making a company successful, and their ability to pivot to changing conditions and accept advice when needed has a direct impact on a company's success.

All three panelists noted that they take seats on the boards of the companies they invest in, and play an active role in helping guide the direction of those companies. Being able to have frank discussions with the founders and having them listen and change course when needed is of paramount importance to them. Fraiman put it this way: "There's got to be trust, it's a long relationship."

Advice for those seeking early round investment

During the course of the discussion the panelists offered an important piece of advice for founders and CEOs looking for early stage investment. They stressed that it is not a good idea to try for a high valuation early on because even if a company does everything right, it may still miss its targeted milestones in the first 18-to-24 months. In Fraiman's words, "stuff happens," meaning you have to anticipate that something will not go well. All of the panelists cited examples where they had to drop out of a deal because the company they invested in missed a target. Valuations will catch up downstream, the panelists said, if a company starts to execute. The company then has negotiating leverage in the follow on rounds. The panelists agreed that it doesn't make sense for a founder or CEO to fight over valuations in the early rounds.

The impact of AI on investment

The impact of AI is growing at a fast pace in many segments of life, and Fox asked the panelists what impact it has had on their investment strategies. Fraiman pointed out that AI is not really new. Her company has been investing in AI as well as its technology counterpart, machine learning (ML), for years. She said that AI is behind almost every one of the investments she makes. Fraiman went on to say that it is going to be exciting to see the impact AI will have over the next 18-to-24 months in all markets. She expects to see some amazing things especially in the health care and supply chain segments. However, she feels that it will be a while before AI really moves markets.

Although the big impacts of AI on markets may be in the future, both Fraiman and Merker pointed to companies in their portfolios that already have cutting-edge AI applications. Fraiman extolled a Seattle Washington-based company called Syndio. Run by a female CEO, the company provides software that helps companies measure, achieve, and sustain workplace equity by identifying inequities in compensation, representation, and promotions. The software uses AI for its analytics. Fraiman said that the company had an exit ARR of $2 million at the time of investment, and three years later they grew to $35 million in exit ARR. They are by far, she said, the strongest and biggest player in this market right now.

Mercker cited Aignostics GmbH, a German company that was spun off from Charité Berlin, the largest university hospital in Europe. The company provides AI solutions for medical pathology. For example, using these solutions, pathologists can do a better job of interpreting breast cancer scans, and doctors can provide more effective treatments. The AI-based tools can also make a difference in pharmaceutical research and clinical trials. Mercker said that having access to this kind of technology can be a huge game changer for emerging countries that lack sufficient numbers of health care professionals.

WFS Growth & Exit Strategies Conferences

WFS Growth and Exit Strategies Conferences give you the opportunity to learn about a variety of topics and trends in Tech M&A. Get insights from private equity, VC, angels, strategic and financial buyers, M&A advisors, and CEOs who’ve had a successful exit. Attendees attest to the value of these conferences. Here are some recent comments:

• I loved the live panels - was refreshing to hear “real life” examples and situations described honestly as well as opinions from the panelists (all women in this case) who work day-to-day in the industry.

• I was very impressed, many useful topics were covered.

• The investor panel was just awesome!

• Excellent buyers & sellers panel.

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