Relevance Ventures CEO on Investing

mental health company Ginger. So back with us to talk about VC investments and things like health and wellness and those beyond those traditional areas often sought out by Silicon Valley and Silicon Alley is Camer Newton, founding partner and CEO at Relevance Ventures. Back with us on the phone from Nashville, Tennessee to Cameron, how are you. I'm doing great, Carol, thanks for having me back on Well, it's nice to have you back before we get into some of your

thoughts about what's going on in VC and investing. Um, how's Nashville. Nashville is great. You know, we've had a couple of days a really good weather here after having you know, the of some flooding and so forth, which was unfortunate, but we've come out of that, and uh, you know, it's a great place to be. I often get to ask why I chose to locate in Nashville, and you know, it's really easy answer. It's it's a business friendly area, business friendly state, no state income tax.

And probably one little known fact about Nashville to most in the country is, uh, within a six hundred mile radius is you know, over fifty of the U S population. So from a geographic perspective, it's a it's an ideal location. It's a windward It's one place I have not been in the country, and I'm dying to go um for so many different reasons. You know, it's interesting you brought up no state income tax, and tax policy definitely shapes

what companies do, what individuals do. What do you think about some of the initiatives that the Body administration are talking about, especially when it comes to corporate income tax. Well, I I tend to stay out of, you know, the discussion about the taxes at the federal level. I think when you get granular on it, though it certainly affects

emerging ecosystems in the venture space. I would consider Tennessee and Nashville to be, uh, you know, very business friendly with a public policy geared towards the business friendly environment. And that's encouraging businesses to move to Tennessee. That's encouraging entrepreneurs to leave other areas that perhaps of public policy

arrangements or tax arrangements that are not as compelling. Uh. And I think that that's lending to this kind of rise of the rest that you're seeing throughout the country where you're having entrepreneurship and the entrepreneurial spirit just rage in areas that you know are not historically areas where you would see companies being started at, including the Southeast and Midwest. Well, okay, so interesting, and I do wonder as you see, you know, some of these new companies

that are ultimately being started. I mean, I know you guys are looking for things that are different when it comes to investing, uh in the VC world. Um, what in particular, I know we've talked with you about health and wellness. What more are you seeing on that front? Well, I think you mentioned earlier in your comments about the Ginger round, so we're very bolish on the mental health space. We have two investments in that space, one on the

health system side and one on the outpatient side. When we just did in January actually in New York a company called Talkaiatry, which is really bringing you know, mental health services to the masses. Uh. You know, it's an industry that has historically been kind of anchored by a cash pay system and somewhat of a taboo. People didn't want their insurance companies to know they were going to seek,

you know, someone to talk to. And I think that is falling away, and I think insurance companies now are engaging, and I think it's a prime time for that space. I think you're just going to continue to see massive growth. Yeah, when you look at your health and wellness. We've talked about some of its sun Basket. Um, you mentioned Crew, Diet, I d the Good Patch. Um. What is it that guide you in terms of, you know, where you want to commit money. What is it that you're looking for. Yeah,

that's a that's a good question. So you know, Carol, we're a Native American owned adventure and so that's who we are, doesn't necessarily definance that's who we are are investing. Ethos is really anchored around this philosophy of harmony, which is certainly derived from our heritage, and harmony at his basic level really is increasing the connection with oneself to community, family, in nature, while providing a balance that's kind of mind,

body and spirit. And so how do you take that and overlay it in the health and wellness space and look for companies that kind of meet or fulfill those criteria. So for us, it's really seeking out companies that reduce the the reliance on the traditional health care system, which and our view really is is geared towards treating symptoms. It doesn't really get to the root calls a lot of times of people's deficiencies or illnesses. And so as we look across the space, we look for companies that

are doing just that. There's really kind of falls in that preventative care space. So self fulfillment, self help, uh, food is medicine. Food, lifestyle is medicine. All of those things kind of go in and uh into what we look for in that particular space. Hey, Kerin, I'm curious to um. You know, health wellness is certainly an area. Fintech is another area that you guys are in. What's your typical hold time for a company, and I'm just curious about exit strategies right now or if you're looking

to do it in this market environment. Yeah. Well, for us, you know, we are Series A and Series B investors, so we're not the first check in the first check you've seed in precede rounds are typically eight till twelve your holds. Uh, you know that that's on average what we experienced for us. We're we're really investing in companies with an eye to to look to liquidation somewhere between three and five years. Uh. Sometimes it runs longer, sometimes

it doesn't. I think what has emerged in the market, Uh, is just this massive amount of money in the in the later stage of DC or private equity world, which is has been butterst by you know, your corporate VC arms and also your sovereign wealth funds and so. Uh, you know, there is an attractive option for early investors actually sell secondary shares into larger, you know, later stage BC rounds. I think you know everyone's watching this back market to right, everyone's kind of watching the I P

O market. Uh. It feels uh, you know that things are a little tighter, but you know, deals are still getting done for good companies, and I think at the end of the day, that's really the important point, right. Um. You know, these Denovo companies with five years of projections and everything happening in year five, uh, you know, probably are not going to be getting access to the market as easy as they did, you know, three or four

months ago. But I do think for good companies that have real revenue, real cash flow and good positions in their respective markets, that market will remain open. So you're looking to do exits this year, next few months, I'm looking to do exits every year. If you're not going to give me anything more, are you. Well, if I could wave wave my magic wand and uh without getting

in trouble, I I would certainly share. But but yes, I think that there's going to be an attractive market for for exits this year, and you know, even it'll be a little bit tighter. I think in the public market's an I P O and spack market especially, and not so much on the spack side, but probably on the pipe, you know, the pipe side of the equation,

it's going to get a little tighter, more competitive. Why why do you say that on the pipe side, Well, you know, look, you've both read the stats about how many spacks have been formed, how many billions of dollars in the facts. Well, because of the mechanics of a spack, you really need a quality pipe to come in beside your spack investment. And so, uh, you know, it's one thing to go raise money as a blank check company.

It's another thing to go to the market, to the you know, the real money managers of the world and say, here, evaluate these hundred SPACs, which one do you want to put your your money in? And and so it's just becoming a more competitive situation. Yeah. We we have actually

a great story in the Bloomberg. It's among our most read some three hundred acts debuted in the first quarter of this year, creating an oversupply with at least three d and two that hadn't bought anything yet, and we're trading for less than the cash raised in their public offering. They're also facing an eventual deadline to liquidate if they don't come up with a deal. I mean it is there feels like a lot of money sloshing around looking for something. You got it, there is no go ahead please?

Oh I was just gonna say on the spack side of the equation. I think there's there's sample people that would want to talk to you, and really any size company, which is probably not not the best scenario. But I think the ones that are real, the real companies with real size and real market positions, real revenue and real earnings, I think they'll they'll still continue to get it done. Is it driving up though some of the funding rounds because of this, because of all the money that's around, Well,

it's interesting, we um, we haven't really experienced that. So in our experience, there's really a bifurcation in the market. There's in the spack market, in the IPO market, and then there the kind of later stage p adventure funding rounds, and there's a there's a considerable gap I think still between the valuations there. I think that is starting to close. So I think over time you'll see that tall more in line and uh and that anomaly will will no

longer kind of exist. It's certainly not in the way it does now. You know when you talked about health and wellness, because I do feel like you know, Cameron, that there was and I know we've talked about this a little bit before. There really feels like there has been a gut change when it comes to health. It's not just about our physical well being, but it really

is about our mental well being. Um and I feel like it was such a taboo subject has been for years, but it's you know, even as we've evolved, it still felt like nobody talked about it. This year we kind of ripped the band aid off. What are you seeing in terms of the investments that you've made. We're just the metrics at some of these companies that you're investing

in where you're seeing it's really taking off. Yeah, I would say that particular space, especially on the telehealth so delivery psychiatric surface services via telehealth, it's just red hot. And so you know, you just see a lot of interest in the space. You know, we we invested in Talchiatry earlier this year, I believe in January. That's a New York based business. We've already onboarded thirty providers, which

was you know our target for the year. Uh And we've already onboarded that many providers and that has led to an immense amount of interests in the VC community

with that particular company. And we just printed the series day in January, and so, um, I think everyone is looking at this space trying to figure out how to play it, and I think, um, you can play it from the provider side, which you know is has a little bit more difficulty to scale because you're building a business on the back of physicians, or you can build it from a wellness coaching perspective, you know, delivering wellness coaching to corporate America or things of that nature with

tender scale easier. But at the end of the day, the real shortage in the mental health industry is on the provider side. They're just they're just on enough psychiatrists. And so we've taken the position that we want to bet on that. Uh, that arbitrage interesting you say red hot in this whole area. Um, is it red hot to the point that we're going to have a lot of companies and then ultimately there'll be some major players

or will it be kind of a fragmented market going forward? Well, I think it depends on how you define the space, because as I mentioned earlier, it can be very broad. What you consider me to be mental health focus. I think on the provider side, I mean, look, there's only so many psychiatrists in the U s. There's a shortage of psychiatrist, so there can't be too many companies because at the end of the day, there's just not enough

folks to work at them. So, uh, you know, telehealth is enabling h the service of a limited number of psychiatrists to be delivered to the masses, and so that's where we've kind of placed our bets is saying, well, look, you know, we know that there's a shortage here, and yes, there are some problems with scaling this quickly, but you know, if you get it right, when you get it right, it's a very very valuable business because you control the

most valuable asset, the physician. Yeah, no, it's a good point. Hey, listen, just got about forty five seconds here, um left when you look at this year, this upcoming year. I love talking to leaders investors just about what the visibility looks like, what it looks like from this vantage point. Again, just got about forty seconds. Well, I we continue to see great deal flow right, and I've been very encouraged about what we're seeing in the Southeastern United States in the Midwest.

Were continue to see things on both coasts very mature companies, you know, north of a million dollars of a r R, which is unique, and we're continuing to see that as a general kind of thesis. Ten years ago, maybe fifteen percent of the companies that access the Series A had revenue now, so it's uh, yeah, it's just a it's a great environment. So I think we're a positioned very well and we're pretty excited about what what this year holds.

All Right, We'll looking forward to talking to you. Excuse me, I got choked up there. Looking forward to checking in with you again to find out how those investments are playing out. Camra Newton, he's founder and chief executive officer at Relevance Ventures, joining us on the phone from Nashville, Tennessee.