As part of the startup Interview series, we are going to interview Mr. DC Palter from Pitching Angels, an experienced startup leader, mentor, and investor with a focus on marketing strategy. DC has a huge experience in the VC world, being Tech Coast Angels Executive Committee Member, an active member of Chemical Angel Network of investors, as well as co-founder of several companies.
DC, thanks for taking the time to catch up with us. Can you tell in brief about your background, Tech Coast Angels network and of course, about Pitching Angels.
TCA is an angel group focused on startups in Southern California. I’ve been a member for about 10 years, investing individually in around 30 startups, plus many more as part of TCA funds. We invest primarily as individual angel investors but share due diligence together to take advantage of the diverse experience of hundreds of members. For example, my background is in energy and computer networking, but there are many doctors, pharmaceutical researchers, medtech entrepreneurs and other people from the health and life sciences world in the group. I don’t have the background to assess a startup in HealthTech on my own, but if the experts in the group say it looks like great, I’ll join in and invest alongisde.
I’ve also been mentoring many early stage startups through a number of accelerators. I get asked the same questions so many times that I decided to write the answers down in an organized and make them available to everyone. I post my articles with advice for early stage statups on PitchingAngels.com.
What do you think about the modern HealthTech industry? Is it still a prospective one, and shall it be more tech-powered in the future, considering AI implementation trend?
It’s a huge, huge space that covers so many different areas that it’s hard to generalize. I’m certainly glad to see so much innovation in a space that so badly needs it. And I love the fact that these are real solutions that will cure diseases, enhance medical processes, or improve the quality of life.
Some of these solutions are about finding the right set of chemicals, or inventing new ones. Other solutions are about building medical devices or test tools. Some are about better, faster diagnostics, while others are providing better information to consumers.
As far as we know, you have mentored a few hundred early stage startups from all industries. What kind of common recommendations could you provide for the early stage startups now?
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My biggest recommendation in working often with technical founders is that the best founding teams combine technical expertise with business experience. Building a successful business is about more than inventing a great technology.
Is it a good idea to start from the accelerator program if you want to make your own startup, or it could be a waste of time for certain founders?
It depends on the founders, the stage of the business, and the program. Some programs are incredibly useful, others can be a waste of time.
Y-Combinator, in my opinion, is great at teaching how to build a consumer-focused unicorn, and gives completely wrong advice for specialized B2B startups. However, if you’re accepted into the program, VCs fight with each other throw money at you, and it opens so many other doors I tell all founders to apply to YC.
I suggest finding accelerators that specialize in the field, have mentors who know the industry, and are connected to VCs who focus in the space. Then talk to companies in the previous cohort and ask specifically what they got out of the program. Consider the time commitment and the equity stake and make a clear-headed analysis of the value before joining.
How should founders (and startups themselves) prepare for fundraising? What are the dos and don’ts when approaching VCs for investment?
The most common mistake I see from early stage startups is misunderstanding of the point of the pitch and the pitch deck. It’s not to show that the company has a great product or even a great business plan, but that the business will be a great investment.
More generally, the further the company is along with customer traction, the easier it is to raise money. Many founders think as soon as they have a great idea, they can go to investors and get $2 million to build the product. It doesn’t work like that. You need to bootstrap with personal funds to build a prototype. Then you can talk to industry insiders to put together a little more funding to get to MVP that you can use to sign up initial customers. Paying customers are the validation needed by investors to see that there’s a real need.
Could you tell us your impression of the current VC landscape in the HealthTech Industry? How have you seen it change in the last 5 years?
I can’t speak to HealthTech in particular, but in general there’s a lot more investment money now and that changes the dynamics of investment. It used to be VCs would wait at least until Series A to invest, with seed funding provided by angels. Now VCs are investing in earlier rounds to get their foot in the door. Valuations are going up, check sizes are getting larger, and more deals are getting done faster.
What practical actions do you think need to be carried out to shift the funding landscape in the next 5-10 years, and by who?
In the end, a startup is only a good investment if it is acquired or does an IPO within 5-7 years. And that exit has always been the bottleneck. Regulations put in place after the dot-com bubble mean that realistically, only giants can list on the stock market. That not only limits the number of startups that can do an IPO, but limits the possibilities for acquisition. SPACs, which are a loophole around some of those regulations, are starting to change the game, but they come with a lot of downsides. The real solution is to change the securities regulations to promote a vibrant market for public trading of companies of all sizes.