DHACA interviews : Dominick Kennerson

In this series, DHACA is sitting down with Key Opinion Leaders involved in financing HealthTech globally, asking questions to help founders navigate growth stages.

Dominick Kennerson is a thought leader in VC and HealthTech. Serving as Senior Vice President Health Tech at HSBC Innovation Banking UK, he has also held positions in Bayer G4A among other roles directly or indirectly driving health innovation globally.

To hear more about HSBC Innovation Banking’s role in helping high-growth innovative businesses navigate their growth journeys, hear Dominick explain more on the Health Beyond Tomorrow Podcast.

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At the beginning of the year, you spoke about key trends in the MedTech space being AI, Big Data and Analytics, eight months on, has this trend delivered investible opportunities/companies?

We are two-thirds through the year now, and this has mostly come true to the point where people are almost asking if we're in an AI bubble. There has been a lot of chatter also in the investor community about, almost jokingly, about how if you don't have AI in your slides, then you're maybe not investible.

I was reading last week about AI-driven workforce applications in the NHS and how the majority of NHS staff would actually appreciate some AI layer to make their work easier. So the need is still there. The desire is still there. I think it still has to be practical to be effective. And for larger markets or for different markets, that has to translate into value in different ways. For example, in the UK, it's often about saving time as a priority, minimising human resource impact. Whereas in the US, it's maybe how does it make money? Versus, in the UK, how does it save money.?

Many of our DHACA members will be looking to, or actively trying to expand into new markets. What should innovators consider in the process?

Healthcare is a population-driven market. To achieve scale in Europe, considering population density and demographics, you essentially need at least three to four European countries to even have the same population level market as in the US.

There was also report that came out last year suggesting there should be a European-level DIGA to make reimbursement for digital health a bit more turnkey, practical and predictable. We have that model now in France and Germany, and there is somewhat of a model in Belgium. What we know historically is that when you have Germany and France on the same page in Europe, you can typically get things done in the European Union. We saw this happen with the Health Technology Assessment which Germany led on over a decade ago.

That predictability in reimbursement is important because that's what investors want to see. That's what banks want to see. That's how you really meet your value-milestones as a business as well. If the business is in a situation where you're expecting €500 reimbursement, and all of a sudden, overnight, you're stuck with €250, then that completely changes your business plan and your business model.

Are any companies doing particularly well at international expansion?

There's a trend where you see companies that have talent in the UK, but address other markets. So for example, AI developers that are using that talent to build in the US. There are others who have a Nordic HQ, but are building business in the US. Other companies are in stealth mode, trying to tackle the US market. I spoke to a founder yesterday, and his emphatic message to me was, 'you have to go to the US because you have to go big or go home!'.

Do you have a feel for the risk appetite of investors in the current climate? Are there hygiene factors that have changed or evolved in recent years?

Part of the challenge is the challenge of valuation. Where we are right now as a market, there have been significant fundraising announcements in HealthTech. For example, in recent weeks we’ve seen an announcement from Hexarad, which is brilliant. We've also seen companies such as, CareSyntax, Doccla, and Psyomics all announce significant fundraising rounds. These are high-quality companies. I think it's happening, though a lot of companies have been quiet about their fundraising.

In terms of hygiene factors, I believe the majority of EU founders have never heard of the AI Act. The consensus is that people do not know the impact of the AI Act, as the AI office has not yet been set up. But the initial version of the Act did indicate that everything in healthcare would be high risk, with the expectation of significant penalties if standards are not met. The UK may not follow the EU direction, but innovators need to be aware.

For most UK-based MedTech companies, the NHS has a unique role. You have spoken about companies benefitting from having three distinct revenue sources, have you seen particularly good examples of companies working with the NHS and building sustainable resilient businesses through alternative streams?

DrDoctor, last month announced an acquisition, giving them a new service level. Phlo has also done well with three distinct verticals.

Do you see a greater role for consumer healthcare in the UK?

In the UK, consumer models have a critical role in keeping people outside of the public NHS system.

In the example of UK-based consumer companies Numan and Manual, there are clear comparison companies in the US, which are publicly traded. This means you can find publicly available quarterly information and can potentially map best practice to your business, with a clear story to tell investors. ?Having a strong comparative company with good financials is powerful.

An article in City AM that showed companies that tried to go public from UK to US, of the 23 that tried, only 4 are trading positively. You need to build relationships with the US way before you try, otherwise you don’t go big, you go home.

How important is it to you how many clinically qualified senior-level executives there are in the company and their respective roles?

Clinically qualified senior-level executives need to be acting in well-defined roles, in other words, the company has to be set up properly. Smart people in a business need to all be on the same page.

You have written about the Series A chasm, and have touched on the value of transatlantic, cross-fund relationships. How can innovators ensure their company benefits from this?

You need to be self-aware enough to know when you need help. Innovators can get so focused on one thing, longer term becomes less of a priority. Founders need to be able to walk and chew gum at the same time.?

The role of the founder also changes as you grow your business. Series A done? Immediately start working on your series B. There is real value in having a very strong operational person in your business, one of you needs to be building the business network for investing.

What’s more, investors want to see this in founders. Livongo is a great example, when you look at the data – every April like clockwork, they took on capital. They set a clock to their equity, pattern recognition is such an advantage in your business.

Best networking opportunities for Founders : HSBC innovation banking is a wealth of knowledge; we have seen the best and worst of this sector. The right banking partner is underestimated.

Best book / podcast / case study for Founders : Shot of Digital Health Therapy (Eugene Borukhovich and Jim Joyce), this episode is with Rachel Trobman and talks about the dark side of her business.

Biggest waste of time for Founders : Getting stuck in your own mental loops of things to deploy and execute. You need to make time for your own health and wellness.