December 17, 2021
Meet Annie Thériault, Managing Partner at Cross-Border Impact Ventures
VatorNews highlights Managing Partner Annie Theriault in their series on new VCs investing in early stage startups.
Annie Theriault

Venture capital used to be a cottage industry, with very few investing in tomorrow’s products and services. Oh, how times have changed! While there are more startups than ever, there’s also more money chasing them. In this series, we look at the new (or relatively new) VCs in the early stages: seed and Series A.

But just who are these funds and venture capitalists that run them? What kinds of investments do they like making, and how do they see themselves in the VC landscape?

We’re highlighting key members of the community to find out.

Annie Thériault is Managing Partner at Cross-Border Impact Ventures.

Thériault has been immersed in impact investing, venture capital, royalty financing, and capital markets throughout her career. As a venture capital investor and venture advisor, she worked with high impact companies to mobilize more than $100 million in non-dilutive capital. She was previously a director on the boards of several North American venture-backed companies, is an advisor to crowdfunding fintech company FrontFundr, and, prior to the launch of CBIV, was Chief Investment Officer at Grand Challenges Canada.

Thériault obtained her PhD in Management from the Rotman School of Management at the University of Toronto, is a CFA Charterholder, and holds the ICD.D designation. She also has a master’s degree in Business Economics from Wilfrid Laurier University and a Bachelor of Science with First Class Honours in Chemistry from Mount Allison University.

VatorNews: What is your investment philosophy or methodology?

Annie Thériault: The idea for the firm started in around 2018. My background is traditionally very typical capital markets bringing trading sales, hedge fund type of work. I’ve spent about a decade in venture capital, lending to companies and other related activities. I had done some impactful investing, if we can call it that, where a lot of the deals that I had covered were in the cleantech/climate change space, but not really with an approach that was rigorous in terms of tracking, measuring, or targeting impact, per se. And, at that point, my daughters were quite young and I was at a point in my career was thinking it would be nice to align my values and what I really cared about with what I was doing; I knew I wanted to return to venture capital and came came across Grand Challenges Canada, which is a wonderful organization that provides funding to help innovators, whether it’s a social innovation or a tech innovation, that has the potential to save and improve lives in emerging markets. I  had the bug at that time and suggested to them that I join them. They had a posting for a role to manage the Every Woman Every Child Innovation Marketplace and the concept was I would join them and we’d worked together on launching an Impact Fund, which I would ultimately spin off of Grand Challenges Canada. And this is what we did, we did exactly that.

The roots of the firm are grounded in this concept of funding technologies that can materially improve health outcomes in emerging markets. And as we dug into it, what we very quickly realized sounds, and this very obvious now when we say it, but at the time we thought maybe it would be different, you really need global health tech companies in order to have a venture return profile. And we also came across a lot of amazing examples of dual market strategies that could generate the  financial returns that investors in the sector want to have but, at the same time, also create a lot of impact in emerging markets. Whether it’s companies like Zipline, Babylon Health and others, these are companies that, from day one, have been designed both for return and impact, where the impact has often aligned with the technology development roadmap of the company. The core and the crux of the investment thesis of the fund is to find these amazing companies where we can both have financial success and a lot of impact in an approach that is very rigorous in terms of how we target, measure, report on, and achieve impact.

VN: Obviously, there are a few healthtech funds out there, but it doesn’t seem like there’s a lot that take that global view that you do. Is that what’s different about your fund?

AT: There are a few things that are different about us compared to other funds. First, I would say the global view, as you point out; I wouldn’t say we’re the first or the only ones but it’s certainly only a handful of funds. Some funds do it a bit accidentally or it happens once in a while but as far as funds where that’s core to their thesis, it’s a growing number, but it’s still a fairly small number.

The other differentiator is really an emphasis on women’s, children’s, and adolescent health. Most funds are focused more in a more traditional way on health, and they may do a deal or two that are women’s health or children’s health, but it’s not really a core focus of the firm. Finally, the third differentiators are gender lens investment practice. So, when we do look at broader platforms, we always bring in experts in women’s health and in children’s health to ensure that if it’s a technology that’s supposed to be applicable to the whole population, that it is actually applicable to the whole population and in a rigorous way, meaning we don’t think it’s enough that a diagnostic platform can diagnose everyone if the algorithms hasn’t been trained on a population of women and children and other metrics of diversity. There’s differences between the genders, there’s differences between the races, and it’s important when you develop supposedly global technologies that you start with the strong rooting and the data that’s truly reflective of your whole population.

VN: Since you focus on women’s health and children’s health, are there specific verticals that you invest in? Like, pediatrics, would be a vertical you invest in, I would assume.

AT: We think of it quite broadly and so there’s some topics that we’re interested in that are what people would typically think of; if you think of bikini health, as we call it in my world, the sexual reproductive health for women. If you think of children, prematurity is often a big area of concern, because it’s high mortality in emerging markets and it’s just really crazily expensive, particularly in the US. And it sucks resources: even if it’s a government funded health system, treating a premature child with the kinds of technologies we have today sucks a lot of resources out of the system and so we need improvement.

In addition to that, we’re also focused on subject areas where women or children would have worse health outcomes relative to men. So, if you think of cardiovascular health, the majority of technologies and treatments are developed on male cells, male rat models, middle aged white males. And so, if we could expand that and address those versions of heart attacks that are more popular in women versus men, we could really move the needle. When we think of bringing these kinds of technologies to emerging markets, it’s particularly exciting because many of these regions will have access to these tools for the first time; what if we give them a much better, more accurate tool? If you give a better tool, that’s obviously going to be cheaper and so you’re not creating really high cost structures that we have in other places. So, we like that.

Finally, the third piece is really thinking about strengthening health systems. In certain regions of the world you may have HIV and be very willing and wanting to take your regular treatment, but if you show up at the pharmacy and the drugs aren’t there, that’s quite unfortunate. And so supply chain is an area where we’re spending a lot of time because I guess in our high income markets it’s much more a case of optimization, saving on waste and high cost, reducing our carbon footprint, but in emerging markets it can be life saving. And so, that’s another topic of interest.

VN: I always ask about the macro trends that you’re seeing, but the obvious one for healthcare investors right now is COVID and what’s happened over the last two years or so. How has that changed your investing philosophy?

AT: It’s created such an acceleration because, in our shoes, what we think about is what are the most scalable solutions because it not only has to be scalable in the way that normal healthtech investors think, like in North America and Europe, it has to be really cost effective and usable at scale to reach emerging markets. So, for an investor like us, what it’s done is, for many of the technologies that were seen as leading edge perhaps, telemedicine, anything remote care, anything point of care on the cell phone, algorithm based, we’ve just seen a huge acceleration in the pace of growth of these technologies. So, I would say it hasn’t really changed for us, it’s just made our investment thesis a little bit easier to achieve. If you think of anything that’s remote care related in high income markets, for the longest time insurance providers weren’t paying for it, and that’s whether you’re in a system like Canada or the US, it was really tricky to get these kinds of solutions implemented at scale. And COVID has really unlocked that; we’ve all realized that many of the doctor’s visits we used to get to in person, like getting the results of a test, for example, can be comfortably from home, five minutes for us, for the doctor a lot less movement, it’s just a cost saving for everybody. But when you flip the equation and think of an emerging markets concept, we can now offer care to a lot of people that never had access before.

Often when I’m asked to talk about what we do, there’s this perception of huge differences between the markets but, if you think of being someone who lives in a remote community in Alaska, and you needed to fly to get a test done in Seattle, well, you might have had to typically stay a bit longer to get your result, but now you could do your second visit from your home. And so, there’s all kinds of situations like that that are equally applicable for the residents of Alaska, and I’m from a small province in Canada, so my family faces that all the time; that’s not all that different from being someone in a remote community in Africa. There’s a lot more that unites us than divides us in health than we realize; there’s contextualization and we need the technology to be a little bit better, generally, to function in more challenging settings, like smarter and more AI, but there’s a lot of similarities.

VN: What is the size of your current fund and how many investments do you typically make in a year?

AT: We’ve just had our first close at $30 million and we’re targeting $200 million. In terms of range, we’re aiming to invest in 12 to 17 companies at our target; we’re a very typical investment firm, so we’ll look to do three to four investments per year until we’ve validated the fund and moved to a new vehicle.

VN: What stage/series do you invest in?

AT: We’re at the commercial stage. So, we look for companies that have $1 to 10 million in revenue if it’s a non-regulatory type technology, and if there’s a regulatory process, we look for them to have one commercial product, meaning that they have regulatory approval from either the FDA or the CE mark, for at least one product where they may have a suite of products that are still undergoing that process.

VN: Sometimes I talk to investors who are investing very early, even pre-product, but it sounds like you’re investing a little further down the road.

AT: We used to call it Series B; a few years back that’s how you would have thought of it but the market has shifted quite a bit. And because we invest in global companies, sometimes you’ve had a lot of grants and so they look and feel like what I used to think of a Series B three or four years ago, but they may just be raising their seed round, or whatever you want to call it, or the first institutional round. So, I’m finding that the naming of the rounds is just not what it used to be, so we try to avoid that nomenclature as much as we can, but that’s how we design the fund with that historical stage in mind. We’ll see how the naming changes in the next few years, but in our mind, it’s clearly at that early growth, commercialization stage that we get interested.

VN: It sounds like you look for specific numbers, like they have to have a minimum amount of revenue or a minimum number of users, to want to invest.

AT: It’s less about a specific number we look for. For us, we start from the impact in terms of the deal, so that all goes together. But what we need to know is that the company will be able, if things go well, to reach a certain number of users over the next few years in emerging economies. That’s really the starting point once we’ve gotten excited about the economics, and so whether it has $3 million of revenue, or $10 or $1, it’s a little less important for our fund. Similarly, when we look at a device or a diagnostic, it’s really about having one product that can be sold immediately so that we can reach users more or less immediately, which is relative, but so we’re not waiting another five years, potentially, to reach users. That’s really how we think through it. So, it’s less about a specific number, although we do have our internal thinking about it, it’s really much more about can some components of this technology be scaled? Because sometimes it’s a slightly different use case in emerging markets, at the same time as we meet our return target.

VN: It seems like the market is the most important thing to you, then you also mentioned having a product earlier; the thing a lot of investors say is most important them is the team. So, what do you look for in those entrepreneurs and founders? What do you want to see from them?

AT: There’s the same typical stuff that any other VC looks for: can you feel that the team is qualified to do what they say they’re going to be doing for us? Do they have grit, resiliency? Do you want to work with these individuals for the next four or five years? But, in addition to that, what’s unique about us is we really look for that global mindset. When you enter a relationship with an impact fund, there has to be an alignment and the motivation. And that doesn’t mean you’re not excited about making a pile of money, you should be excited about that; at our core, we’re a VC shop, so you don’t get any forgiveness or return from us or no sympathy just because you tell a good impact story. But we want to see that from the gut and that shows up in a lot of different ways; we have a lot of founders that we speak with that are from an emerging economy themselves and often what we’ve observed is they started the company thinking about home and where they wanted to be and then, along the way, they met the traditional investment crowd and got told, ‘Well, you’ve got go to the US otherwise I won’t invest in you,’ and to let go of that dream of improving lives at home. There’s this thought that they’ll do that when they retire. Then, when we talk to them, you can see if that’s really real or not, because what happens often is on the first call they’re just wondering what the heck we’re talking about and then, on the second or third call, they’re like, ‘Yeah, well, I reached out to my network and I actually  this is entirely doable. With some grant capital that we now could qualify for, we could advance our tech even faster than we thought because the tech needs to be a little better to be functional in India or in Kenya, or pick another place.’ So, that’s quite important to see that ingenuity, that creativity, that ability to think about different business models and use cases that are going to work in different places around the world.

VN: You talked a little bit earlier about stages and how they’re getting all jumbled, and it seems like now everything has started getting bigger: the rounds are getting bigger, valuations are getting bigger, especially in healthcare, which has been skyrocketing, for obvious reasons. Is that what you’ve seen? And what does that mean for the companies?

AT: We’re definitely seeing that the rounds are bigger, the companies are a little more mature when they reach the next stage. The positive of that, I supposed, is that companies have more capital and, if you think of anything in healthcare, it just requires a lot of capital to achieve your milestones relative to, let’s say, a network play. And so, in a way, there’s a good side to this, but the shadow side to it, and there’s always a shadow side, is often the rounds are priced for perfection. As a founder, you want to keep your investors happy all along the line, and so that, to some degree, there’s a bit of risk of in the next two or three years, a bit of a hangover that could happen with these larger rounds and larger valuations. It remains to be seen; of course, if things go well, it’s not a problem because, generally, what we see is that the larger rounds are with very exciting technologies and companies with very big market opportunities ahead of them. You’ll see some technologies that take what was 17 tests and now they do it in one step because before you had to rule out every other problem and now, with the technology they’re developing, you could diagnose the actual condition you were trying to figure out. So, it’s a bit of mixed feelings. Tracking valuations always makes investors nervous; I don’t care who you are, if you’ve been in this business for a long time and you’ve been through the tech bubble and the credit crisis, you should have that natural hesitation when you see these valuations but, at the same time, the technologies are just incredibly transformative and exciting, and so it will be seen in the next few years.

VN: I’ve heard other investors say they’re worried about companies being able to live up to the expectations of the next round. The later stage funds are coming into the early stage, pumping money into these companies, and then they go to raise again and they haven’t met those expectations. And that’s potentially very damaging for them. It sounds like that’s not something you see yet, but there’s the potential for that to happen.

AT: It’s potentially down the road. Anecdotally, I have heard of funds that are very large and really raised money on a series B to C thesis that are now looking at things that we always would describe as a Series A, in any normal state of the world. And you have to wonder what happens to that. We’re taking the approach to being as disciplined as we can in terms of valuation, and trying to right size our deals so that we have a lot of dry powder for the next few rounds. For the founders that happens to, there will be a cold shower on that day, and hopefully none of them are in my portfolio, and that things go well.

VN: There are many venture funds out there today, how do you differentiate yourself to limited partners?

AT: That’s a big question. There’s a lot of different ways that we differentiate ourselves: because of our impact mandate, we have access to networks that are not typically available to emerging managers, which is how we’re seen as a newer firm. Oftentimes we’ll have calls with world class experts to better deals and these are typically folks that would charge thousands of dollars for an hour of their time because they’re well worth it, but when they hear about the mission of our fund and what we’re trying to accomplish, every other call within a few minutes it’s, Call me back, I love what you’re doing. This is cool.’ Either they come from an emerging economy themselves or they have friends, and often these world class experts are a bit later in their career, and they want to give back. And so, I would say that our key differentiator is that network access, and that’s incredibly global network access. Every world class expert we’ve spoken with that is from an emerging country themselves, generally wants to give back and so when they hear about us, they just want to jump in. We’re cautious to not take advantage of that, of course, but we think of that as alignment of interests and that’s how they see it as well. And it really will pay off for the fund.

VN: How do you differentiate your fund to entrepreneurs?

AT: It’s that same expertise, although that’s generally not visible to them on day one and we have to deliver on that promise before that becomes really valued.

There’s really two things: one is the ability to achieve something with the support of an investor that they didn’t think we could really give themselves permission to do in terms of the global approach and really having an impact on those who need it the most. That often resonates with companies. The other is, because of the thesis and the global approach, we can give them access to other forms of capital, non-dilutive forms of capital, that not many investors are as plugged in as we are in these networks and often what we see, just to unpack that a bit, you typically have to add more machine learning and AI when when you want to more in a lower resource setting, and often you can get capital for these types of activities. The donors are very welcoming of the fact that you may use that IP for other commercial purposes, so long as you live up to the promise you make to them. And so, a lot of founders value that approach and that network.

VN: What are some of the investments you’ve made that you’re super excited about? Why did you want to invest in those companies?

AT: We’re brand new, so let’s talk in three months. We have a really rich pipeline, so we’ve screened a couple thousand companies or more, and so we’ve got our top two or three plans we want to do but we’ll discuss them once the deals are done.

VN: So, you haven’t closed any deals yet.

AT: No, but hopefully in the next few weeks we’ll have ones to announce and then we’ll be able to talk about it publicly.

VN: If you can’t talk about investments at Cross-Borders, maybe you can talk about some from earlier in your career?

AT: This is a new investment thesis and so naturally, we have to draw from examples from the market for good examples. Companies that look like what we’re interested would include companies like Butterfly, which had a SPAC recently, or Zipline or Babylon health, or Elegia Health; these would be success stories that very much have helped us shape the investment thesis of the fund. If you think of Zipline, they tried and tried to make a go of it in the US, but it was a lot easier for them to scale in a market in Africa where bringing in drone technology was life saving. And so, that’s an example of a company that was trying to scale in typical markets, and they had to go to emerging markets to really strengthen their tech. And now they’re coming back into traditional markets for the return phse. And then an example of the opposite pathway, if you think of Babylon health, they were successful in the UK, went to Rwanda to offer health services there, a diagnostic or I guess an AI-based platform for medical care. They’re continuing to scale in Africa, but they’ve entered the US, they’ve entered Canada since then. That’s a slightly different approach, but the deals that we’re interested in have that general profile of being applicable and where you can align the impact with a return.

VN: Tell me about your career and how you ended up in venture.

AT: I’m a nerd by trade; I did my first degree in physical chemistry. Went to consulting for a bit then the tech bubble burst and I decided to do a PhD in financial engineering, and then ended up wanting to be on the trading floors doing hedge fund investing and that type of stuff. Then the credit crisis happened and the CEO of the firm I was at decided it would be an interesting idea to go work on a new project, a new version of credit derivative markets, because I had a PhD in finance. I worked on a credit derivative project with the founder of the company and at the same time, we raised a fund that was an intellectual property fund designed to invest broadly in intellectual property. This included investing in companies that had patent infringement cases to help them defend themselves against that, theatrical rights and those kinds of versions of IP and some of what we did was also investing in early stage companies that have big portfolios of patents.

I was kind of early in my career but ended up helping a lot on some cleantech deals, I ended up on a few boards. I moved to another firm to do some of the same kinds of investment in clean technologies. I ended up at a lending shop for a few years and needed to get my soul back because we were a high interest rate lender and so you end up in some pretty unpleasant conversations with those who don’t pay their debts and I just couldn’t do that anymore. I wanted to get back to equity and when I came across Grand Challenges Canada it was just what I knew I wanted to do. And that’s the story.

VN: What are some lessons you’ve learned in your career, especially as a VC? What are some things that surprised you?

AT: How much the basics apply. It’s funny because when you talk to VCs they always say, ‘the team is the key.’ The team is the key. If you have the best technology in the world but a mediocre team, or a technology that’s pretty good but just a little bit below or equal and you have an awesome team, nine times out of 10 you’ll make more money with the awesome team, because they know how to place the product, they know when to ask for help, they know how to make their own decisions and not listen the investor’s voice as gospel, so to speak. They always have the right judgment, they hire the right people. It never ceases to amaze me how important that principle is.

The other principle is also thinking about the workflow; when you introduce a new technology, if humans have to do things materially differently, then you should pause and think about that. When there’s an upgrade on your Microsoft software, how much time does it take you to appreciate it and not get angry with it? This is a very simple thing to change your computer, but the key’s in slightly the wrong place. And so, when you’re thinking about complicated technologies, whether it’s clean technologies or in the medical field or any of the areas of focus of venture capitalists, when humans have to change things, you just need to really think about that a little more deeply than any other parameter. Also, how people get paid, incentives,  particularly in healthcare you need to make sure that, as much as possible, you’re not just creating a situation, or at least you should pause when you see a situation, where you’re cutting someone’s income completely. What power do they have to stop your amazing technology from scaling? Because, perhaps, the new process is going to cause an important group who hadn’t thought about it to completely lose their income. So, these are some of the factors that come to mind at this moment.

VN: It’s interesting when you talk about people who get paid, are you investing in value-based care?

AT: I think you could call it that; I’m not as familiar with the expression but we’re really focused on expanding access to care. And so, generally speaking, you’ll have a better outcome for the same money or less money. If that’s how you’re thinking of that expression, that’s definitely part of it.

The other piece of it is, can you get a GP to do what a specialist does, or a less specialized specialist? If you can reduce the skill level of the user of the tool that’s of great interest because in the US, just like Canada, we’re heading for massive physician shortages in the next decade. So, while it’s painfully obvious that there’s a gap in skilled medical professionals in emerging markets, things are not right in our own house. And so, that’s a little bit what gets us excited about this fund is that, because we set the bar in such a challenging environment,  we should be able to have a deep impact in our own markets as well, because if it’s easier for a nurse in Africa to do something? Guess what: the nurse in the US should be able to do it too. It may take time and, again, it has to do with the way our markets work and the associations and the negotiations and all of that but, with time, these things can happen. Whereas in another environment there’s more need to do it because people are dying. We can have a cost saving and that’s a good thing for us.

VN: What excites you the most about your position as VC?

AT: It’s the focus area of our fund. When you raise a fund like this, and that took us a number of years to get it done, there’s a gut check moment. Like, ‘do I really want to do this?’ I look at the tech, whether it’s technologies that can help women who have abnormal menstrual bleeding and diagnose them with ovarian cancer years before they could have been in the past, or monitor their breast cancer after they’ve had surgery to ensure that it’s not coming back. When I look at all these subject areas, I have so much drive to get up in the morning because somebody needs to do it the way we do it. Not just to help improve health outcomes in our own markets, which I really care about, I have two daughters and I have a good group of friends and want to have impact for us, but when you can do it in a global way, that’s double the fun. If you ask me, that’s really what drives me is to do something that’s meaningful for a little bit more than myself.

VN: Is there anything else that you think I should know about you or the firm or your thoughts about the venture industry in general?

AT: Maybe something that’s not as appreciated is the fact that women’s health, in particular, is not a niche market; it’s a pretty big market and it’s exciting. There’s some really interesting companies out there, so we’re really excited about the impact approach of the firm but financially we think we’re going to have a very strong performance and we look forward to bringing other firms along to think a little more globally.

VN: I always like it’s kind of ridiculous that people call it a “niche market,” but women are more than 51% of the population, so how is that “niche”? 

AT: It’s very interesting: we were looking at certain deals in the contraception space and it’s hard to find other co-investors at the growth phase; there’s some funds that are focused at the early stage. And it was interesting because in multiple conversations we unearthed that if you have a male contraceptive, which, by the way, the side effects of that for a male are ones that males don’t typically want, it has to the same effect as cold water, and yet those deals are easier to finance than improved contraception for women. It’s bizarre because they’re less proven and more risky and, yet, the perception is that a new contraceptive for women is more risky. It’s well documented, more than 50% of pregnancies in the US are unplanned, so there’s plenty of women who feel uncertain by the options that are out there. It’s an interesting field, lots of data to be had, and we’re hoping that with funds like ours and a few others that are in the field, we’ll be able to move the needle and this “niche” comment can die.

VN: It’s space that’s growing very quickly, actually. Rock Health recently put out a report and they said that, while funding is still a small percentage, it’s way bigger than it was before, so it seems to be going in the right direction at least.

AT: It depends on the year. It goes up and everybody gets excited and then the next year it drops. But it is on the map, which didn’t used to be, so we should applaud that it’s maybe a little bit out of the cave.

Original article

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