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What role can an investor have that’s not the lead?

How we met: founder x funder

Wellumio CEO Dr Shieak Tzeng and Movac partner David Beard talk about how they work successfully together.


Fiona Rotherham

Wellumio co-founders L–R: Dion Thomas, Shieak Tzeng, Sergei Obruchkov and Paul Teal.

When medtech startup Wellumio was seeking to raise money in its first seed round, it did its own due diligence on potential investors.

As it turned out, the university spin-out raised $2.7 million in August in a round led by deeptech investors Outset Ventures, and supported by Nuance Connected Capital, New Zealand Growth Capital Partners, Curekids Ventures and Movac

The company is creating a portable MRI machine that will allow medical practitioners to diagnose and treat strokes. There is a golden hour after a stroke in which a patient’s chances of survival are enhanced and the risk of permanent injury greatly reduced if they get treatment. 

Wellumio’s co-founders – Dr Shieak Tzeng, Dr Sergei Obruchkov, Dr Dion Thomas and Dr Paul Teal – estimate the global market for their category of pre-hospital imaging devices at US$7.1 billion – an attractive total addressable market (TAM) for investors. The co-founders had already gained two grants worth a total $2 million through the government’s Endeavour Fund. 

Tzeng, the CEO, says he was introduced to Outset Ventures through Wellumio’s patent attorney, and that flowed into conversations around investment. He says it was important to the co-founders that Outset shared their philosophy of supporting founder-led companies.

“We grew out of a university project and knew very early on we wanted to lead the company and not pass the IP on to a commercialisation team and we stay in the university while the commercialisation got done by other people. It’s going to be difficult and challenging, but what makes it easier is when investors also believe in your capacity to grow and evolve as people.”

Tzeng says the startup was having simultaneous conversations with other investors because it knew one single investor was not going to be able to cover the round. Quidnet Ventures founder Dr Mark Bregman gave Tzeng lots of advice in the early stages but wasn’t able to invest due to the timing of closing on its own fund. 

Shieak says while investors were undertaking due diligence on Wellumio, he was talking to companies already backed by those investors to gain feedback on their behaviour. 

“That was my priority. How do they behave in the face of uncertainty? How do they behave in the face of difficulties? Do they suddenly change or become a different person?”

Angus Blair from Outset Ventures was chosen as the investment director from among the investors, and sits on the startup’s board. But what role can other investors play?

Caffeine talked to Tzeng and Movac partner David Beard about how their investor/founder relationship works.

How did you meet?

DB: We got a nudge through the normal channels – VCs saying they were looking for other investors. There is a lot more collaboration these days, particularly around a deeptech company, which shouldn’t have one or two investors. It needs three to four in my view, as it will need multiple rounds of funds raised and there is a new environment where overseas investors are being more cautious. That means Kiwi deeptech companies have to have local funders that can get them to meaningful milestones before they can potentially get overseas investment. 

We always meet the team before investing; whether [we’re] a co-investor or lead investor, the process is the same. At that meeting we’re really looking at whether the startup fits the fund’s key thematics and whether we think the team members have the execution capabilities we’re looking for. The thematic on this one is we are interested in healthcare because of the ageing population and what role deep tech can play in that. The question is: how do we automate the healthcare industry, which has been chronically old-fashioned to date compared to other industries in adopting new technology? It’s an industry ripe for innovation and AI.

ST: Movac was the last investor to come on. When meeting them we felt very intimidated because we’d heard stories that David asks tough questions, and they’re obviously a big and successful fund so we had to be switched on. Their due diligence process was very thorough and they went really deep into the technology. David brought in a couple of members of its investment committee and they were asking us questions that no other investor had asked before about the technology and they got it. Sometimes you talk to investors and you’re like maybe I didn’t articulate it in the right way and they didn’t get it, but sometimes the investor just gets it – they get the value proposition. 

What relationship do you have with Wellumio if you’re not the lead investor?

DB: The lead investor is, to some extent, acting as the eyes and ears for all investors but others can attend board meetings. With Wellumio I have taken a strategic advisory role. A lot of my skills are in strategy, negotiation, and tactics that don’t necessarily come up in board meetings. But you want to have a contribution in the early days in particular as the company progresses and you can add value. When you’re the board director you also deal with strategy, but you’re also loaded up with governance and day-to-day stuff.

ST: With Dave what you get is his experience. Since the investment, we’ve kept in touch with him on a monthly basis. It’s great talking to him because he always puts things in that broader perspective, which is important when you’re making decisions. So what is the decision we make here? What impact might that have in three to five years down the track? Because he’s got that experience, we tend to focus on those sorts of discussions with him. 

Movac partner David Beard

How important is the human connection?

DB: It’s massive. What is ‘connection’? It actually means that you are synchronised in your thinking. When you ask a question they understand why you’re asking it and have already thought about it previously in some shape or form and are able to come up with an answer that is reflective of some thinking. The team at Wellumio had that in spades; there was nothing at the pitch that they couldn’t answer. The questions and answers we do in DD are about having those nuanced conversations that show how open they are, how they might take feedback. It is a critical element to make sure founders have an open mind. 

ST: Just about every company we spoke to that had Movac investment had only great things to say about Dave. Our experience since the capital raise just confirms everything that the people we’d spoken to had said: he’s reliable, dependable, gives advice but doesn’t try to run your business, empowers the founders. Those are all things that are really important to us.

Do you have to like them as well?

DB: It matters to me. If there is no chemistry in the relationship it is only going to get worse. The journey with them will be around five to seven years at least and, frankly, I’m too old to work with people I don’t enjoy working with for that long. I enjoy working with people who are open and understanding and collaborate with you. In my experience that has been the most enjoyable way. I’ve worked with founders such as Fady Mishriki from PowerbyProxi and Will Barker from Mint Innovation. They were fantastic individuals to work with. 

ST: It’s like a marriage; whilst you can get out of it, it’s difficult. That’s why the trust is so important and the mutual respect, because you’re in it for the long haul. You have to be prepared to work through issues – not that we’ve had any, touch wood!

What are your three tips to maintain a healthy investor/founder relationship?

DB:  1. Honesty: You have to have honesty to build an ongoing relationship that lasts the distance. I think there is a misconception among founders that they have to be solitarily perfect from day one and have all the answers without input from anyone else and their job is to execute the strategy. The founders I have seen that have been particularly successful have all been open to new ideas and inputs.

2. Value add: They have to see the value add in the role you are playing – that you are bringing different skills and experiences and have that bird’s-eye view, because you’re not working in the business, you’re working on the business. 

3. Frequent communication: You need frequency in your communications with founders – at least every month to two months – otherwise it gets hard to connect with one another and you spend half the time reconnecting in each meeting. They should be able to call you up when they need backup and for that to be valued. 

ST: 1. Regular contact: We have reports that we write and deliver but everyone appreciates the human touch. It’s not like we’re having long conversations with Dave; sometimes it is just 30 minutes, but it’s regular contact. It’s about making them feel part of the company, which of course they are as stakeholders, and that everyone feels this is something we’re doing together.

2. Trust: They have to trust that I have what it takes to run the business and I have to trust that the advice they’re giving me is good advice. How do you build that trust? It’s listening to what other people say and then reflecting on our own direct experience and is this what we expected.

3. Believability and feedback: If someone is saying something to us, do they have the experience and the credentials to believe what they say? Also how do you feel when they give feedback? Great investors are the ones that can give you feedback; even if it is something you might not want to hear, they deliver it in a way that doesn’t crush your motivation, but makes you feel like you’re ahead because you’ve just gained some pearls of wisdom. When we went through our eight-month long capital raising process we spoke to some investors that were clearly lacking in those skills. That speaks volumes for the investors we do have, that they know their stuff and how to give feedback in a way that inspires and supports the team. Part of our due diligence process was asking ‘what kind of energy are these investors bringing to these conversations and how do you feel after you talk to them?’

As told to Fiona Rotherham


Fiona Rotherham

Fiona Rotherham has worked at numerous business publications as editor, co-editor and senior journalist. Her passion for startups was sparked while working at former entrepreneur magazine Unlimited of which she was also editor.

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