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Strategically integrated investors help de-risk innovations in the Venture Development Lifecycle

Entrepreneurs shouldn’t be left to integrate various investors on their own; instead, investors should form strategic partnerships with other investors where they formally form a vertically integrated supply chain.

This post is sponsored by the MidAmerica Healthcare Venture Forum.

The path from an idea to product/market fit, profitability, and long-term success for any startup is what I refer to as the “Venture Development Lifecycle” (VDLC). The VDLC has risks throughout the process but some of the highest risks come when a venture is moving from one capital raise phase (e.g. seed or angel) to another (e.g. VC, growth equity, or PE). Experienced investors already know that de-risking startups as they move from seed to angel to VC to later stage capital is necessary. Unfortunately, investors don’t always work together in a strategically integrated approach throughout the VDLC, putting earlier stage capital at more risk than is necessary.

Traditionally it’s the entrepreneur that has had the job of understanding each investors’ risk tolerance and de-risking approach. However, many entrepreneurs don’t know really how to evaluate their product/market fit risk, capital risk, execution risk, and the myriad other problems they’re likely to face. Entrepreneurs shouldn’t be left to integrate the various investors on their own; instead, investors should form strategic partnerships with other investors where they formally form a vertically integrated supply chain throughout the VDLC.

This idea of a vertically integrated group of investors is nothing new. In fact, on March 10th at MedCity News’s MidAmerica Healthcare Venture Forum in Chicago, the organizers plan to cover this topic in a great panel called “Angel and Venture Partnerships Done Right”. The speakers include:

Don, Jan, and Chris will talk about trends, deals and best practices when angels and VCs can work together. I’m hoping they will discuss how angels and earlier stage capital can better collaborate with payer investors and VCs through more diverse and sophisticated syndications. When early and late stage capital get more involved in advisory roles with their investments throughout the VDLC, de-risking innovations becomes easier and more successful innovations will get to market faster.

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Shahid Shah is an enterprise software analyst with 15 years of experience in healthcare IT. He writes regularly at The Healthcare IT Guy.

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