Tim Barry knows entrepreneurs can be skittish about asking for money to grow their businesses. He figures he was the same way. But after 20 years as an entrepreneur — and fresh off a $100 million capital raise — he knows they shouldn’t be.
“Investors want to invest money,” says the co-founder and CEO of VillageMD. “Frankly, they have to. They go out and find capital from a lot of different sources and if they don’t invest that money, they don’t have the opportunity to be an investor. It’s as simple as that.”
We caught up with Barry, whose company provides healthcare management services for primary care physicians, to learn more about his strategy when raising capital and the importance of establishing an ongoing dialogue with potential investors.
Sharpen your strategy
Barry moved past his apprehension about asking for money long ago. He embraced this most recent capital raise and the opportunity it provided “to just get sharper about where we focus our energy and why we focus our energy the way we do.”
It forced him to really zero in on the company’s core operating metrics.
“It's a way to stand in front of a lot of really smart, talented people who ask great questions about your business,” Barry says. “If you do it right, I think you can learn a ton about your own company and about ways to improve how you prioritize objectives and manage your business on a go-forward basis.
“No doubt, it’s a challenging time. But it's an incredibly beneficial process. It really does force you to think about who are the people that you want to work with in this next chapter of your business.”
Entrepreneurs are typically very passionate about what they’ve built and Barry encourages his peers to let that shine through in meetings with potential investors. At the same time, you need to demonstrate that you have a solid growth plan in place and articulate the value it can create.
“Whether you look at and track your unit economics tied to each individual widget that you sell or tied to each individual customer or it's tied to a certain number of accounts,” Barry says. “You should be able to say that for each time we sell, whatever our product or service is, here's what the revenue is and here's what the income looks like on our product. If you can't articulate that, the investor is going to lose a lot of interest.”
‘Prime the pump’
It's important to foster relationships with investors “far in front of when you want to go out and do the actual capital raise,” Barry says.
“Investment banks, private equity firms — all these folks are very happy to meet with companies that have interesting and unique models that are delivering value, regardless of the industry,” he says. “We can sometimes make a mistake by not investing the time with some of these firms as much as a year or at least several months in advance of when we begin the capital raise.
“You kind of prime the pump a little bit. That's something that's often overlooked. We go out and we only raise the capital when we really need the capital as opposed to fostering the relationships well in advance to help the capital raise process become as efficient as possible.”
When you do meet with investors, be confident in what you’ve built, Barry advises. VillageMD has 825 employees, partners with more than 2,500 primary care physicians and manages $3 billion of total medical spend in value-based contracts. The company intends to use some of the new capital raised to grow its Village Medical brand and scale its Village Medical at Home offering.
“Let people know how much money you're raising and don’t be apologetic about it,” Barry says. “Make sure you raise the amount that you really need. Don't tell people you need $2 million when you think you really need $6 million. Go in, be comfortable and be proud of your business.”
VillageMD’s goal is to continue growing at a rate of several hundred new physician relationships each year, strengthen health care and reduce the need for people to go to the hospital.
“The thing that people should understand is that the really good venture capitalists, the really good private equity folks, they value entrepreneurship tremendously,” Barry says. “They have so much respect for people who are out there running at the windmill every single day trying to create something new and exciting. They want to be a part of it. The really good ones approach it like a partnership. Those are the ones that you want to be trying to connect with.”