The fund focuses on the collision of healthcare and technologyRead more...
Principal Technologies invests in European healthcare technology companies
Venture capital used to be a cottage industry, with very few investing in tomorrow's products and services. Oh, how times have changed! While there are more startups than ever, there's also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.
But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?
We're highlighting key members of the community to find out.
Jerry Trent is CEO and President of Principal Technologies.
Trent is an internationally accomplished investment banker and portfolio manager currently headquartered in Vienna, Austria. He is the CEO and President of Principal Technologies, which is focused on building a diverse portfolio of healthcare technology investments. He is also the founder of Trent Investments, a multi-family office for direct investments.
He previously served as Head of Global Markets and Investment Banking for Sberbank, Head of M&A and a member of the Global Deals Origination Group for PwC, and has worked as a successful Wall Street investor and portfolio manager.
VatorNews: What is your investment philosophy or methodology?
Jerry Trent: We are focused on investing in proven healthcare technologies and related services that have significant upside potential, and that can provide us with an opportunistic entry point. To achieve this, we invest in proprietary funds that span the capital hierarchy including debt, equity, and convertible notes, and use principal investing as our investment style. Our goal is then to support the growth and success of these companies by leveraging our connections, expertise, and resources.
VN: What categories of companies or industries are of interest to you?
JT: We are focused on mid-market companies with unique healthcare technologies and assets that have IP capable of enhancing the quality and efficiency of medical treatments, improving cost efficiency, optimizing the patient pathway, and implementing point of care technologies. These technologies should have global distribution potential and have already achieved a significant level of regional success.
VN: What’s the big macro trend you’re betting on?
JT: Macro trends are difficult to predict, and we are therefore focused on a strategy that does not require a specific macro environment. We instead take a much more nuanced approach that focuses on situational and company-specific untapped potential that exists regardless of the current economic cycle.
Our focus is on the healthcare technology sector, which has a unique stability in that it is always relevant and continuously advancing, despite the latest popular fads. We believe that there is significant opportunity in this space.
VN: What is the size of your current fund and how many investments do you typically make in a year?
JT: We are backed by large-cap investors and ultra-high-net-worth individuals and plan on making multiple investments per year. We plan to grow this new fund so that it holds assets valued in the triple million range within the coming years.
VN: What stage/series do you invest in and how much is that in dollar amount for you?
JT: We are focused on investing in companies that are established, and that have achieved a strong track record of success in the market - but still have the potential to scale their technology or service much more broadly with the right strategic support and capital. For example, there are many successful European healthcare technology companies that have been very successful regionally, but haven't expanded beyond a relatively small geographic area, despite their potential for international success.
Occasionally we will consider investment in an earlier stage technology with exceptionally large potential. This would be determined by careful analysis with the support of our network of industry experts who are key opinion leaders in the field of medtech. In this scenario, we will also carefully vet the founding team as well to ensure that those individuals have a very strong track record in the field.
Dollar-wise, while it depends on the opportunity, we are currently looking at opportunities between $500,000 and $5 million per investment. From time to time we also invest jointly with co-investors.
VN: What kind of traction does a company need for you to invest?
JT: We seek companies that have demonstrated regional success, typically in Europe, and that have products that have the potential for international or global distribution to the U.S. or other major international markets.
VN: What other signals do you look for? Team, product, macro market?
JT: Within the healthcare technology space, there are several things that we look for when assessing potential portfolio companies. As mentioned, high growth potential is an absolute necessity, but we look for this potential in areas that can sometimes be missed. For example, a product that could add tremendous value to a large healthcare firm, but has to date been ignored based on its limited distribution.
Aside from this, it is also important that they have strong and stable cash flows and a durable competitive advantage. Long-term patents are also a high value asset that we prioritize, along with a highly qualified and experienced management team that has also demonstrated their own financial involvement. For each investment we always also seek feedback from key opinion leaders in our network.
VN: What do you think about valuations these days?
JT: I would say that at present, valuations are rather high for public single listed companies, especially in the U.S., and that they are much more moderate in Europe, and they are much more moderate for private companies in general as well.
VN: There are many venture funds out there today, how do you differentiate yourself to limited partners?
JT: I would not necessarily call us a venture fund. I would say that we are more accurately characterized as a private equity investor or hedge fund. We are an opportunistic investor following the principal investing strategy, acquiring significant stakes, mainly in growth companies. We then also support the growth of those portfolio companies with advice, industry connections, and potentially even distribution opportunities.
We invest in private companies, rather than publicly traded ones, and help them grow with a monetization strategy that includes a potential public listing of these companies at a later point in time.
We hedge our investments by: selecting targets that are quality businesses with large economic moats, hiring managers whose primary set goal and proven expertise is widening the economic moat, introducing highly incentivized and profit-oriented compensation, keeping capital allocation within our control, ensuring that we buy into quality businesses at prices that incorporate margins of safety compared to their intrinsic value, and securing a growth and distribution plan for the company before we invest.
We also have an impressive executive team that includes recognized leaders such as His Serene Highness Prince Alfred of Liechtenstein, who is serving as Chairman of the Board, and who has been involved in a broad range of healthcare initiatives internationally. Also part of the team is John McCoach, former President of the TSX Venture Exchange, Dr. Leopold Specht, Economic Council at Harvard Law School, among others.
We are also in the process of adding a highly seasoned and esteemed medical advisory team in-house to complement our executive team and support portfolio companies with their own IPO initiatives.
VN: Venture is a two-way street, where investors also have to pitch themselves. How do you differentiate your fund to entrepreneurs?
JT: In addition to providing our portfolio companies with growth capital, we plan to actively support each company with the expertise of our management team, board, and advisers. We will also provide access to a highly coveted medical technology network to significantly support international rollout of the technology.
To complement this, we are also strategically building a portfolio of companies that may have significant synergies among each other as well, so each new target will also potentially benefit from the other holdings.
VN: What are some of the investments you’ve made that you’re super excited about? Why did you want to invest in those companies?
JT: We are in the process of due diligence with a number of opportunities that we are excited about. We are focused on private companies on track to IPO that have large potential for international rollout but have not taken advantage of that potential yet. We plan to help these companies grow while also supporting their listing processes.
Our first investment was slightly different but highly strategic; we took a majority stake in E&E CRO Consulting, which is a specialized clinical research organization (CRO) that supports healthcare technology companies with the planning and execution of the clinical studies required to obtain international distribution permits. E&E provides us with unique insights into strategically evaluating the potential future success of healthcare technologies in the global market, while also providing continuous deal flow in addition to generating revenue for the company.
VN: What are some lessons you learned?
JT: One of the most important lessons that I have learned in this business is that despite all the noise and excitement there often is surrounding innovation, it always comes back to the basics. That is, the importance of having a clear and secured growth plan in place while closely watching costs.
VN: What excites you the most about your position as a VC?
JT: While I would not necessarily call us a VC, we are similar in the sense that we invest in companies that have large untapped growth potential. What excites me most about the work that we do is seeing these companies with significant potential bring their visions to fruition, creating a win-win-win situation for the founders, investors and of course, for the patients who are the ultimate beneficiaries of these life-saving, and quality of life-improving technologies.
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