There’s a disconnect between founders and investors, according to a new study from Taylor Wessing, an international law firm based in London.
A study of 250 digital health founders and leaders from the U.K, Germany and the U.S. found that nearly three in four say investors have “extraordinarily high” growth and return on investment expectations. The same number of founders were “concerned” about delivering for investors that had deployed significant amounts of early capital.
“There's clearly a disconnect between what investors and founders are looking for,” said Ross McNaughton, a partner in Taylor Wessing’s corporate technology and life sciences practices. “That, to me, suggests there's some form of disconnect between expectations of investors and expectations of founders.”
While the survey was completed over the summer, McNaughton said it was possible an evolving macroeconomy has altered the results. Around 40% of total respondents were from the United States, with 75% of total leaders surveyed at or beyond the Series B fundraising round.
Not everyone was convinced the conclusions were as definitive.
“I believe it’s generally true that expectations of early-stage digital health investors remain high,” said Bill Geary, co-founder and general partner at venture capital firm Flare Capital. “Those of late-stage investors have come down to more appropriately conform to the public market.”
Geary also cautioned it was difficult to interpret subjective judgments in numerical ways.
While this year’s total funding is markedly lower, according to data from Digital Health Business & Technology, the number of early stage-deals remains resilient. Nearly one in four deals went to an early-stage company. Despite the broader market turbulence, it appears 2022 will be the second highest year ever for funding.
Nearly three-quarters of respondents of the Taylor Wessing survey said that rising inflation, interest rates and geopolitical tension will reduce investors' risk appetite.