Podcast - Building Value Through Strategic Seed Investing

Patrick Driscoll: Welcome, everyone, and thanks for tuning in to "The Innovation Imperative." My name is Patrick Driscoll, and I'm the Director of Client Development for Emerging Companies and Venture Capital at Holland & Knight, where we work closely with founders, VC firms and investors navigating the full life cycle of innovation, from company formation and early fundraising, through growth, scaling and ultimately that exit. A big part of our work sits at the intersection of law, capital and strategy, helping innovators and investors think clearly about how they build, fund and protect durable businesses and firms. "The Innovation Imperative" is really about that journey. Each episode we sit down with founders, investors and operators who are shaping the innovation economy, oftentimes behind the scenes, to unpack the real stories, lessons learned and inflection points that don't always show up in pitch decks or press releases.

I am thrilled by our guest today. The episode focuses on why do a fund now? What's exciting to fund managers, and why are they the best to achieve high returns for LPs, and how do they determine their investment thesis and what's exciting in market? Finally, we'll hear about how prior experience as an advisor and entrepreneur truly changes the way that a VC sees opportunity in market.

Joining me first is my colleague, Brad Van Buren. He's a partner and head of Private Investment Funds at Holland & Knight, and he's going to lead today's interview. Brad works closely with fund sponsors on formation, structuring and capital raising, and brings a highly practical perspective to how firms launch and scale successfully. We're also thrilled to be joined by our special guest, Gopal Chopra, the founding partner of Validare Capital. Gopal is a neurosurgeon, healthcare entrepreneur and investor with more than two decades of experience across clinical practice, operating roles and investment, bringing a unique perspective on how early-stage companies move from scientific promise to real-world impact. So with that, Brad, I'll hand it off to you, and we can go ahead and get started.

Bradley Van Buren: Thank you, Patrick. First, Gopal, thank you again for taking the time to join us today. It's a pleasure to have you. As Patrick laid out in his opening comments, you have sort of a unique story of how you came to where you are today with Validare Capital. We'd love to hear how you got from that unique past of yours to where we are today.

Gopal Chopra: Thank you very much, Brad. Excited to be talking about innovation and the markets today. I think we're in a sea change that I think is creating quite the buzz. My journey has been a fun one. It started with fascination of biology and neurosciences, how the brain works, and then really getting into surgery, which is an exercise of intervention, safe intervention for the benefit of patients, using technology. And so I was, from out of the gate, had been holding technologies in my hand and seeing them on the screen and that curiosity kind of built my repertoire, what I wanted to do with my career, and started doing research, both in the lab, basic science, but also in collaboration with corporations. They were building new things. They were exploring ways to test them and understand how they created benefit.

And then when I got excited about what corporations did, it was just pure ambition. I went and did my MBA out of Duke Fuqua School of Business and took on roles in business development at large corporations, advisory to startups and investment firms. And then got pulled into investment banking, where the exposure to how markets work, how investors think, how capital is deployed, strategic discussions with how CEOs and boards manage small companies to behemoths, and doing a lot of the M&A there really opened up my eyes to the mechanics of having seen how innovation is made, how innovation is brought to market, and then also, how innovation is sustained. And so, building from fundamentals is really core to who I am, and that's been the journey.

Bradley Van Buren: Very good. With respect to your background as far as the science and medicine, do you find that that's quite an advantage for you as you evaluate technologies and evaluate companies and evaluate their objectives? Does having that science background, you find, as the intersection between it and then, as you said, with your business background, are you finding that to be a market advantage for you as you go into these companies and evaluate their processes?

Gopal Chopra: Yeah, very much so. I think everything is a language, and communicating and understanding that language is critical, but it's also applicable. It can be in health sciences, but it's also in data sciences as it's used in healthcare or healthcare also has education in it. How do you educate somebody in a highly technical field? So it's broad-based from the insight perspective, and I think I always kept my eyes open and asked interesting questions to be able to see the interrelationships that are occurring. And the advantage is really not to spend too much time on trying to understand a biological mechanism, but really looking at what the capability of a technology, the insight of that technology, the applicability of that technology, because you're really looking at what are the hurdles. Have they really sold something, you know, are the hurdles surmountable? And so I think it gives you a quick window. It also allows you to bring on experts and interview them and get a really deep understanding of something, and I think depth is really important in this day and age.

Bradley Van Buren: That's a good segue, Gopal, into where do you see the best opportunities for Validare in the marketplace? Obviously, you're coming in very early when these technologies, in some cases, are just being developed. So how do you identify what is an ideal target for Validare that's consistent with your investment strategy?

Gopal Chopra: Yeah, so I remember when I went to entrepreneurship class at business school and there were seven of us, and now everybody's an entrepreneur. So things have changed dramatically and there's a plethora of companies, there's a plethora of technology. There's zero dearth of strategic view on what is a technology really providing, you know, and what kind of capital does it need to sustain itself? So I think, when I look out at the market, the excitement is that the change that has occurred from a company that I would have built 10 years ago, even five years ago, is the speed at which it can be built. The fact that it can be built with a lean team. The fact that it doesn't need as much capital, but warrants evaluation that's quite significant because the buyers out there see the economic in-a-market threat. And they need to jump in. They can't be left behind. Nobody can be left behind in the dramatic change that we're seeing now. Whether it's in life sciences and data analytics for proteomics, all the way to, do I need a robo-tutor to get vocational licensing for critical resources? All of these things are mattering now. It's becoming kind of the essential ingredient. And that DNA is really what Validare is. We come from that DNA of just fundamentals.

Bradley Van Buren: Yeah, that's really interesting. So it's sort of the technology and then the efficiencies of the process and then the intersection, I would think, with founders. Can you talk a little bit about what, for you, makes an attractive founder? I assume it's not just about the technology and the company potential. A lot of that potential is derived from the founders and your view of those founders from an ability to take it to the next step, right? And how do you evaluate those founders? And how important is that determination or evaluation for Validare as they look at a company?

Gopal Chopra: So as I created companies and became co-founder and then founder, I then began investing in companies and really became the CEO's colleague or friend, not necessarily co-CEO, but co-piloting with the CEO. And so we're rolling two of those companies into the fund that I was an angel investor in, we're about to invest in two more, and each time the founder, I think, expresses the insight and empathy of what they need to build, what they need to focus on, and they're asking for that insight, you know, what should we be doing here? How should we be structuring it? Should we be going after such a large corporation? Where do we do our pivotal, our pilot or our POV? And being an entrepreneur, being a founder, I understand those mechanics and then communicating it back to their board, back to their investors. There's a whole cycle of managing a company that I think, having seen and worked with, founders find what we bring to the table way more strategic and highly valuable and critical because they need to make those decisions now. They're going to have to live with those decisions for quite some time. They'd like to get that focus and precision quickly.

Bradley Van Buren: There's an added value from Validare of an operational understanding that is part of your partnering with your portfolio companies, it sounds like. It's more than just, I'm a provider of capital, I'm a resource for your entrepreneurial efforts, I am a resource for your development as a company. Is that fair to say with respect to Validare?

Gopal Chopra: Absolutely, and I would add one other, I think, really the key secret sauce, and I call it engineering markets, is that we come in and we're able to understand the pitch because the pitch is, here's a technology and here's how it works. What's running through my mind and Validare's team thesis, is that we're all asking the second most important question, and that is, why does that matter? What nuance of this technology or insight drives it to become essential to an ecosystem? And that may not be obvious to the entrepreneur, and we're going to either discover it immediately, or together, but that's what we bring to the table.

Bradley Van Buren: Right. And sometimes in that context, there could be a change of vision for that founder or entrepreneur in a way. So when Validare comes to them, they may have thoughts in their minds as to how that company will develop. What Validare seems to be doing is, perhaps it's the same perspective, perhaps it's a different perspective, and sometimes those different perspectives can cause a shift in the direction of that company that ultimately is more beneficial or advantageous to the company to take that next step. So it sounds to me, with your experiences, you're able to come in, work closely with founders and entrepreneurs, be aligned with their ultimate objectives as everybody is, but at the same time, adding value in a sense that you've seen these, your experiences have allowed you to provide adequate and sufficient input into how, the direction the company should go. And trying together to come to a realization of what the ultimate objective or ultimate approach may be. Is that fair to say?

Gopal Chopra: Absolutely. You know, you can bring capital to the table – and we see some magnificent venture capital teams go after big ideas with a lot of capital – but someone needs to put the fins on the rocket and you really need to give it direction.

Bradley Van Buren: I think that's a differentiator for Validare. I'm not suggesting others don't have that skill set, but you're committed to that approach, right? So in every partnership you have with a founder or an entrepreneur, there is that understanding of your expertise from an operational-directional perspective, that I think makes Validare a great partner in this world, right, where entrepreneurs can have ideas – particularly in the fast-paced world today – can have technological advances, significant ideas, but the execution of those ideas, identifying next steps to ultimately manifest the greatest realization of that company, is what they need in that partnership. So to me, that's what Validare is and is striving to be and differentiates them from others that perhaps I've worked with in the past and see in the marketplace. You have an added quality, I think, that is attractive to a lot of founders. So tell me, just give me an example of a certain technology that you've seen, that you evaluated, that you have gone in and had a meaningful conversation with entrepreneurs and founders and helped to maybe redirect, as you said, put the fins on the rocket, I think you said. Will you help them sort of navigate or their meandering path may have been straightened by your input into something like that?

Gopal Chopra: Yeah, absolutely. And I think just in the backdrop of, you know, what other major innovation sea changes have I been a part of and seen? And people talk about market fit, it's timely innovation alignment of stakeholders. These are all kind of euphemisms. But practically speaking, you know, you look at a transformative technology like endoscopy, that is surgery with a tube and a vision system. You know, we took away a seven-inch incision in a patient to something that's half an inch. So you made measurable impact, and it transformed the entire surgical market literally overnight. And we saw this again, you know, when we brought navigation to the surgical suite. You can't do surgery without navigation now, because of its accuracy and its speed of workflow, so that there's no second-guessing of target and delivering therapy. And then you look at the EMRs. You made a transaction system that everyone is entirely dependent on. The person who's paying and the person who is getting paid is, you're now on the Square or Plaid platform for healthcare, which is the medical record. And then all the innovations get stacked on top of that.

And I think that's really, you know, seeing that, being a part of all of that, I come into a company that's saying, oh, we do data extraction for healthcare. Great, well, what's it for? To make efficient the idea of a payer authorizing a prescription for a treatment to a patient easy. Well, how much do you reduce that friction by? 100-fold. Excellent. You're already excited that we're able to bring this capability. And it's a big ask. It's a tall ask to get the right clinical data into the right form. It's no easy solution.

The next question is, why does that matter? And what I was able to do with the company is guide them into understanding that they had a unique dataset. What's lost in the medical record is the conversation that's occurring in the physician's head, not between the patient and the physician, but in the physician's head, they're doing the super sleuth diagnostic of what do I need to be excluding here? And the answer to what that discussion is, is the prescription, or a scan, or a blood test, or a particular intervention. That then goes to the payer for authorization. Those events, if tied together with the clinical diagnostics, becomes a risk analytic tool, and we completely transform the company. Everybody wants to talk to them now. And it's really kind of understanding the value of the platform's capability, technically, and then understanding the value that it's uncovering, that is defensively unique.

Bradley Van Buren: So Gopal, it's my understanding in your strategy, that Validare is focused on seed investing. What is the reason, and why is it important to Validare to be part of that seed capital in a company?

Gopal Chopra: As an angel investor, it's really at that stage that I get the opportunity to make a difference, to come in, not just provide capital, but inside capital. And I found, shared with other individuals, you know, high-net-worth individuals, family offices – some individually themselves – they're making investments alongside with me, and their anxiety is they want to get into these high-wealth creation, high-outcome return situations, but they need someone to do the diligence. And they're always leaning on me like, Gopal, can you take a look at this? Then we end up co-investing together, if I like it, if we like it. And it grew because strategic companies were like, Gopal, I like some of the companies you're in, can we provide our services to them? And then it goes into, can we invest in them? And so I found that the seed stage capital was relying on strategic input, strategic insight, fundamental diligence. And as an asset class, we've kind of called it angel, and it's a mix-match of high-net-worth individuals who like the category, companies who deliver service to the category but don't understand the technology, and then friends and family. What the entrepreneur wants is capital at that stage to create immense value uptick that can help them actually build the business. So I think we're building a new asset class, and that's strategic seed capital.

Bradley Van Buren: That's interesting from your investor perspective as well. You mentioned high net worth, but there is, because of what you're doing and how you're coming in from an investment perspective at the seed level, there is a strategic element to your investor base as well, which I think is an interesting dynamic that exists for Validare. Companies who are in the shoes of investors are seeing Validare as their due diligence and optics into companies and their technologies and execution. So I think that is a really interesting thing for Validare, a distinguishing characteristic of Validare as well, with respect to the interest of others in your processes, to be strategic in aligning their investments with you and Validare. And as far as the asset class is concerned, are you looking to – after development of these companies, where does Validare see their process begin and end? I think we've gone over where we began. We come at the seed capital strategic. Where is the exit where you would typically see Validare considering types of exits from companies?

Gopal Chopra: So I think we enter at the stage where it's usually a SAFE (Simple Agreement for Future Equity). It's occasionally a convertible note. And that SAFE then extends. So we would like to go into the next one. And often, because we're strategic, we get pro rata rights into the next SAFE. So we will continue to invest with the company at this seed stage and then syndicate with the Series A, at which point we'll bring in bigger players. So we'll be seed and participate some in the A to hold our position. I think by that time, the valuation uptick is so significant that you've already got M&A hovering around it. You've got companies saying, we need to tuck this in, at what price? You've got entrepreneurs saying, we're going to hold out for the IPO. And it's an amazing, I think, incredible dynamic. And now's the time to be in a fund like this. Now is the time to be in an investment class like this. Because you're going to have multiple outcomes. You're going to have quick exits. You're going to have long-term plays that can extend out where you may want to exit because a private equity company comes along and takes it in. Or you're holding until it's an IPO. And I think the pre-IPO story doesn't tell the whole story because you are looking at just before the IPO. We're saying well before that, is where all the value and wealth is created.

Bradley Van Buren: I see. Gopal, what you've described in the contributions that Validare makes in these companies are significant. But what do you see as a successful outcome for your founders, for your investments?

Gopal Chopra: Well, we're betting big. We're betting on ecosystem shifts, and we're picking ideas early that enable something significant to change. And we see ourselves as the engagement engine, the market engineer. So we're looking for impact. We're looking for something that fundamentally changes what we do today and makes it a better tomorrow.

Bradley Van Buren: That is wonderful, and Gopal, we'd like to thank you again for your time today. We appreciate you as a client, and I certainly can tell you I appreciate the partnership we have. It's been a wonderful experience for me, getting to know you and helping Validare through its processes of being the success it's going to be. So again, thank you for your time, and we will speak soon.

Gopal Chopra: Thank you very much, Brad.

Bradley Van Buren: My pleasure. Patrick, I turn it over to you.

Patrick Driscoll: Thank you. Yeah, that was incredible. Love the conversation. I think there were some really cool little tidbits and actionable takeaways. So the first one I have is this idea of strategic seed capital as kind of the new asset class. You know, core concept, there's expert-led diligence by folks that actually understand the sector. There's active strategic guidance at the earliest stage. There's also bringing in other co-investors later down the line, so there's more of an active approach in the way that you think through things and the way the fund will work. The second one, which I really enjoyed, was kind of helping founders find the true signal or what the actual value proposition is with the service or technology they've created, so you can help founders either be redirected, be adaptable or pivot when necessary, and I like some of the anecdotes that you shared about being able to do that because founders get bogged down with what they think, and sometimes they can't see the forest through the trees. The third piece that I wanted to bring up was your background bringing science, technology and business all together to create kind of the best way to diligence companies. This is a core advantage that you have, and I think a lot of VCs really need to think through their backgrounds or either bring in somebody who understands the operational efficiencies or how to run a business, and the scientific kind of technological background that you bring is a really key asset to the team.

And, yeah, I'm excited to see where you take this fund. It sounds like you have a lot of great momentum, and as a former VC, it's always exciting to hear these stories. And I want to say thank you again, Gopal, and to Brad for leading the conversation, for taking the time, and thanks to everyone who has joined us today to listen to the episode. We really appreciate you taking the time. And if you found the conversation valuable and walked away with a few insights you can apply in your own work, feel free to reach out to myself or Brad or anyone else at Holland & Knight. And you can find our email addresses and ways to contact us online. So thanks so much, we'll talk to you again soon.