Funding & Investment

Funding & Investment

From medicine to money: VC in medtech – Mercia Fund Management has the inside story



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The development of medtech comes at a price – so where does the money come from to fund tomorrow’s bright new idea? Simon Ball talks to an investor in the know

Mercia Fund Management

Venture capital (VC) fund management companies are a major source of finance for startups in medical technology. It’s easy to see why medtech would be attractive to their investment managers, since a stake in the right kind of startup can, in the long term, pay handsome dividends to their fund holders.

Mercia Fund Management is one of the UK’s leading sector specialists in new technology, working in partnership with pioneering UK businesses to offer both financial support and expertise to help accelerate their future growth. The company is led by Dr Mark Payton, who co-founded it as a VC fund manager in 2010, following a buyout of WM Enterprise. From its base in the Midlands, Mercia provides capital primarily to startup businesses that focus on innovative technologies. These companies are often in the very early stages of development and have, as yet, to earn any revenue.

Key expertise

The investment team all have experience in financing, building and managing companies within Mercia Fund Management’s four sectors of interest – Life Sciences and Biosciences, Digital and Digital Entertainment, Software and the Internet, and Electronics, Materials and Manufacturing/Engineering. After investment, they will continue to work with the executive management team of each of their selected companies to control risks, maximise value creation and deliver the profitable exits that investors require.

That’s not the only thing that makes Mercia Fund Management stand out against the greater pack of venture capital investment funds. Dr Ashish Patel, one of Mercia’s Investment Managers, explains what makes the company different and how he crossed over from medicine to money.

Dr Ashish Patel

Dr Ashish Patel

‘I come from a medical background, having qualified as a doctor in 2010, before going on to specialise in the areas of anaesthetics and intensive care. I was on my way to becoming a consultant when the CEO of a medical technology platform startup called Babylon asked a mutual friend if he knew a doctor who was interested in helping to revolutionise the way healthcare is delivered. In December 2013, I took on the role initially on top of my clinical work, before joining Babylon full time as Clinical Technology Director. As one of the original launch team, I matured this multi-award winning medical technology platform, taking it from a team of four to an international operation that secured Europe’s largest ever Series A digital health investment, one that was worth $25 million.

‘Then I joined Mercia Fund Management in 2016. Here I focus on investing in early-stage UK life sciences, healthcare and biotech firms. I think the thing that really makes Mercia Fund Management different from other venture capital investors is the longer-term interest that we take in the startups we invest in. Typically, for the exits of a new startup in life science to mature properly and maximise the profit potential takes up to eight years, whereas the usual VC investment cycle is just five years, which would probably still mean a profit for the investors, but not one as great as could be achieved over the longer term. It’s also less disruptive to the startup, especially when you consider that approval by the US Food and Drug Administration can take up to five years.’

There’s more to life than London

Another thing that marks out Mercia as different is the company’s focus on investment opportunities outside of London. The company works closely with 18 regional universities located in the Midlands, the North of England and Scotland, including the University of Birmingham, University of Liverpool and University of St Andrews.

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‘It’s not to say that we don’t think that there’s useful work going on in London. Of course, London is an international centre of excellence for new development in Life Sciences and other technologies and we have several portfolio companies based in and around London. However, ignoring other parts of the UK raises the potential to miss out on some very innovative and original investment opportunities where people, either in university departments or as individuals working on their own, may not have the business expertise or skills to obtain access to the funding they need to develop their new technology. Our investment also helps to sustain local jobs in these areas and help put some money back into the community, while at the same time offering good value for money for us in terms of lower cost bases.’

Focusing on the future

So what does he think the next big opportunities for investors in medical technology will be? ‘The identification and mapping of the structure of the next Ebola or Zika virus is a massive area of active work at the moment. These organisms can be unpredictable, but advances in population data can help to predict global pandemics, whilst developments in biotechnology will help to rapidly engineer new vaccines and treatments. This is going to be incredibly important as new global pandemics emerge in the future.

‘Also, with an ageing demographic in the UK, where people are now living longer and therefore suffering from an increasing number of long-term chronic diseases, non-invasive surgical techniques will become more important. From my own experience as an anaesthetist, I can tell you that there is a very big difference between operating on a healthy 20-year-old and operating on a person in their 80s suffering from high blood pressure, heart diseases or diabetes. Then there’s the effect it has on their relative time in recovery. Consequently, less invasive ways of fixing or stabilising conditions will be of enormous benefit not just to aiding patient recovery, but also to free up resources for other procedures within the increasingly cash-strapped NHS.

‘I think in the future virtual reality (VR) will offer a lot of potential in medicine and this is just one of the areas where Mercia’s specialist investment areas will cross over. Mike Hayes, our Head of Digital and Digital Entertainment, used to be SEGA’s CEO for Europe and America, one of the biggest video gaming companies in the world. We are already seeing VR applied in other industries, but I think there’s a long way to go before the tech is perfected for medical applications. However, the hardware is becoming more sophisticated and cheaper every day. It’s only a matter of time before it’s commoditised, allowing specialist content manufacturers to enable people to use the full potential of the technology.

‘However as a self-confessed PS4 geek myself, I can’t say I’m not excited by the idea of surgeons wearing virtual reality headsets to perform some kind of sophisticated surgical procedure using just robot instruments!’

About the author

Writer, photo journalist, researcher, and editorial and PR consultant, Simon covers a huge range of subjects including health and technology.

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