The importance of specialists in a world of growing complexity
Read our interview with SuperVenture speaker Vanela Bushi, co-founder and GP, H Tree Capital.
What emerging trends should investors pay attention to?
We are seeing unprecedented innovation and advancement in computational methods such as machine learning, and this is impacting entire industries in ways that we have not seen before. Human health is a good example where advances at the interface of computation and biological sciences are creating tremendous opportunities that we, at H Tree, find really exciting. This is having a knock-on effect across the value chain: from prevention through to drug discovery, manufacturing and commercialization. We are also extremely interested in adjacent sectors that ultimately have an impact on human health, and where we’re seeing disruptive innovation driven by advances across software and scientific innovation. For instance, other industries such as agriculture, the chemicals, and so on are also being impacted by these megatrends.
As they say, necessity is the mother of invention, and these trends are coming together at a very opportune time when healthcare systems are under immense pressure from a cost and demand perspective, and as we’re realizing that a lot of what we’ve done in the past is now impacting planetary health and as a result our health and wellbeing.
We operate in an increasingly complex world that requires specialist knowledge to navigate. I believe the market in Europe now is sufficiently mature and deep to accommodate more specialists.
Investing at the early stages of a company is an opportunity to partner with fantastic founders at the beginning of their journeys, and to be part of their growth.
It’s a privilege that can only be earned through mutual respect and real contribution and value added to their journey.
Capital alone doesn’t achieve that. We see a lot of early-stage investors at risk of being wiped out or unable to do their pro-rata in subsequent rounds unless the founders value the relationship and decide to make room in the cap table. It’s challenging to create those types of relationships and contribute meaningfully to these companies in a generalist setting, no matter how smart or well networked you are.
You end up losing deals and not being able to defend your position as these companies scale. So, I strongly believe there is a lot of value to be uncovered through a specialist approach.
I also think that VCs with a thoughtful approach towards combining different skillsets to help parse through the complexity of the world will be in a better position to identify untapped sources of value. We do this in a unique way at H Tree Capital where we have consciously brought together different skillsets across the computational/software disciplines with deep life sciences expertise.
In addition to that, I see a generational shift in the founder ecosystem in Europe, reflected in how they express priorities and which opportunities they pursue. I see bolder ambitions and appetite to reach for moonshot opportunities, and genuine desire and aspirations to make our world a better place. I also see founders being a lot more adept at defining new frontiers by merging different worlds – specifically the tech and bio world. As a VC investor, that is great to see, as this is what creates opportunity. We’ve however not seen this reflected in the investor ecosystem in Europe – there’s still a bit of a dichotomy between tech and the pure healthcare/life science investors and a lot of great founders and companies fall through the cracks as a result. That’s where we’re different at H Tree Capital. We have tailored our approach so it reflects what’s happening organically on the ground.
These are all things that will radically change this ecosystem.
We are seeing a lot of exciting opportunities at the intersection of tech and bio and the explosion in data that we’re witnessing as a result. These are innovations that will completely transform how we prevent, detect and treat disease and this is a space that has already garnered a lot of interest from investors. However, there is a lot of untapped opportunity further up the value chain around commercial services, manufacturing and supply chain that can be unlocked through advances in software and computation. The whole ecosystem is really being disrupted and re-imagined which is great. For us it is key to not fall into the trap of following hype. It’s about gaining high conviction on the fundamentals of these businesses and this is where an operational background can be very helpful.
Well, this is an interesting one as although it is my first fund, it is actually fund IV for my co-founder and business partner, Rob Kniaz who co-founded Hoxton Ventures about 10 years ago. I am really fortunate, and I am learning a lot from him around best practices and so on. Fundamentally, the main factors to consider remain the same whether it’s fund I or X. Fund size and how you run the portfolio for the strategy is very important. A smaller fund can’t take risk on follow-on as much, so one has to consider the capital requirements and types of co-investors in a round that can support the company long enough until the next value inflection point.
Then, it’s about the 3 Ts: team, track record and tenacity.
I would say stay close to fundamentals and invest in opportunities you fully understand, double down on existing portfolio companies. Those would be my two top tips.
