Why It’s the Right Time to Invest in Health and Wellness
By Marcus Evans, Marcus Evans Private Wealth Management Summit
“Health and wellness has become a social priority. With the cost of medical care and medication skyrocketing, we are seeing rapid growth and diversity in preventative wellness solutions that generate significant investor interest and returns. As Millennials and Gen Zs experience the healthcare struggles of their family members, they are driven to preventative solutions with the potential to help avoid the current healthcare system. As the next generation’s influence spreads to families and wealth decision makers, it’s a good time to focus on the future of healthcare. This sector fits perfectly with our Native heritage and holistic approach to life,” says Cameron Newton, Managing Partner, Relevance Ventures.
Relevance Ventures is a Native American-owned venture firm focused on comprehensive social, environmental, and individual wellness. The firm’s mission is to create an investment paradigm where lifelong relationships with entrepreneurs and investors are forged by a relentless pursuit of disruptive people, ideas, and technologies, anchored by a commitment to harmony, transparency, integrity, and the human condition. Relevance Ventures focuses on Series A and B, with some seed and late stage.
Relevance Ventures is attending the marcus evans Private Wealth Management Summit 2021.
What is unique about your approach and what types of companies you focus on.
Health and wellness is a hot topic. Pre-pandemic, people thought it meant diet or fitness, but now includes mental health, corporate, community and financial wellness. Financial literacy and access to technology is an issue in underserved populations. Wellness is an expansive term defining many elements of people’s lives.
We were early in this space, and the only Native American-owned venture capital firm. The way our ancestors approached life was from a concept of balance and wellness, for the environment, the land, climate and how they went about their everyday life.
We are wellness investors broadly defined, meaning we invest in solutions that improve the human condition and reduce dependence on hospitalization, ranging from telepsychiatry, dietary innovations, and even fintech opportunities that improve financial health or reduce social friction. Corporate budgets for wellness have dramatically increased. Companies are evaluating employee wellness, how people are recruited and kept engaged, because happy employees are more productive. Private wealth managers need a plan and a mindful partner to maximize value creation in this increasingly lucrative sector. It is so much more than diets or lifestyle; it is how we approach friendships, relationships, our community, financial literacy and retirement. What helps build a healthier person. This is a mega trend that everyone should understand.
What makes this the ideal time to invest in this sector?
Millennials and Gen Z don’t view mental health or psychiatry as taboo anymore. When more people start paying attention, money follows and valuations increase. We believe we are still early on in this movement, however the path this sector will take is already being formed. We saw it happen rapidly in telehealth, and believe it will happen in many other verticals. Health and wellness is where, at least part of, investors’ portfolios should be focused.
What are your investment criteria?
When we assess an opportunity, we look through the lens of harmony to see if the entrepreneur, board, investor base, and the market, all work together to increase the quality of an outcome.
Many investors look at the venture market and talk about disruption. In reality, market disruptors are often creating harmony and less friction in the markets. Fintech makes it easier for us to provide the population access to financial markets. We consider that a harmonious outcome.
How do you ensure the companies you invest in do not experience the early-stage business challenges that affect so many?
From the very first call we assess the potential for a long-term harmonious relationship with the entrepreneur and an ability to overcome challenges together. We pass if this cannot be achieved. We stay extremely active throughout the company lifecycle on all our investments.
Many private wealth managers like the idea of doing direct POs, we promote that with our LPs, but that can also be dangerous if they do not have an early-stage venture team supporting them. An experienced team navigating early stage product development, and related market challengers and challengers, helps to overcome risks but it can still end in a binary outcome. Even if a company has a million dollars in revenue and a good headway into the market, it still has a high chance of failure.
What are the risks relative to the potential rewards?
We operate in the Series A and Series B part of the market. Ten years ago, 80 percent of the Series A market was pre-revenue, today 80 percent is a million dollar plus in ARR post-revenue. This part of the market has been “de-risked”, and is the most attractive reward part of the venture market. With this market shift, seed rounds 1 and 2 are extremely risky. You get a lot of exposure to angel investing, crowdfunding and money from family. A lot of the risk has been pushed down into that early part of the market.
If you have the right manager, you will not have the failure rates that were common ten years ago. In our early fund, we had a 40 percent failure rate but now it is less than five percent. It is critical for private wealth managers to understand, especially if they had a bad experience with a venture ten years ago, that the market has changed. They need to take a fresh look at it. It is a core diversification tool for any portfolio.