February 18, 2025 • 22 mins
This episode is coming to you from MTPConnect’s Development Workshop Series held in Sydney for 52 start-up organisations from around Australia. The 2-day program was a terrific opportunity for companies participating in our Accelerator programs to get ‘investor ready’.
Advisory firm Intrinsika’s workshop, ‘Finding Your Intrinsic Value’, focused on how to reframe a company’s value beyond the financials, by identifying and maximising unique assets and pitching this value to investors.
Intrinsika’s Brett Kensett-Smith and Michael Masterson joined host Caroline Duell at the event to discuss the importance of differentiating your company to capture investor attention and nailing a 30 second pitch. They share their list of intrinsic assets to consider including trade secrets and effective brand building and explain how cleverly navigating the patent landscape can make all the difference to companies looking to scale up.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Natalie Vella (00:01):
This is the MTP Connect podcast, connecting you
with the people behind thelife-saving innovations driving
Australia's growing lifesciences sector from bench to
bedside for better health andwellbeing.
MTP Connect acknowledges thetraditional owners of country
that this podcast is recorded onand recognises that Aboriginal
(00:23):
and Torres Strait Islanderpeoples are Australia's first
storytellers and the holders offirst science knowledge.
Caroline Duell (00:34):
Hello and welcome to the MTP Connect
podcast.
I'm Caroline Duell.
We're coming to you from Sydneyfor MTP Connect's Development
Workshop series.
Joining me from Intrinsika isMichael Masterson and Brett
Kensett-Smith, who have run anIntrinsic Value Masterclass.
It's a session designed to helpstartups and SMEs in our
accelerator programs to reframetheir company's value and pick
(00:57):
up some tips on pitching toinvestors.
Welcome, Michael and Brett.
Thank you.
Michael Masterson (01:04):
Thanks.
Caroline Duell (01:06):
You guys have worked with a lot of companies,
For companies wishing to scaleup.
What advice do you give themabout intrinsic value?
Michael Masterson (01:14):
I think the first thing you've got to work
out what makes you special, like, if you're not going to be
special, then you're not goingto be able to attract capital,
which means you're not going togrow and you're not going to end
up in the Fortune 100.
So we always start with workout what are the assets.
So what are the things that arenot captured in your
traditional financial statements, for example?
So I think it'd be fair to saythat very few businesses would
(01:34):
ever want to be bought based onpurely their balance sheet,
their fixed asset register andtheir P&L.
So if those documents don'texplain the value, then what are
the assets?
Next thing is well, what's goingto potentially pull the value
of those assets down, eg whatare the risks?
So they're the first two thingsthat we would always start with
, because that leads into wellnow, how are we going to grow
(01:56):
those assets faster than anyoneelse can to attract capital and
then ultimately generate abetter return on capital than
other investments could for aninvestor?
So it really starts with youknow, other than your mum,
saying you're special.
Why do you think you're special?
Caroline Duell (02:10):
And I understand that there are a list, I guess,
of these assets that are beyondyou know, the paper trail, so
to speak, or the accountancyinformation.
Brett, maybe you can talk to usabout that.
Brett Kensett-Smith (02:21):
Sure, yeah.
So you hear terms like IP,intangible assets.
We break it down into what wecall intrinsic assets, because
they're the assets that arecontributing to the intrinsic
value.
We have 10 categories,particularly MedTech.
The key categories are tradesecrets, perhaps their brand
Early stage, the brand doesn'thave as much value, but it's
(02:43):
building the brand.
Invention, which covers patents,so oftentimes they'll have a
patent position, maybe one ortwo patent families, maybe
several that over time couldcould really help protect from a
legal point of view what theydo.
But then also intorelationships, particularly in
medtech, where really no oneperson can grow a company from
(03:06):
the very beginning to the veryend and do it all on their own.
They need to build out theirnetworks and their relationships
.
So it could be key opinionleaders, it could be
well-regarded surgeons, it couldbe people from the local area
health service, so building outthat network of trusted
professionals and advisors inreimbursement and in regulatory
(03:27):
and so on.
So those relationships arecritical.
And the last one is regulatory.
So of course, medtech's unusualcompared to a lot of industries
where if you don't haveregulatory approval you can't
sell your device.
So having that clear pathway togetting the regulatory approval
so regulatory is anotherintrinsic asset.
(03:50):
So intellectual property is ageneral term which, when people
hear it, it's kind of vague.
People think it's patents,other people might think it's
trademarks, other people mightthink it's copyright.
So we prefer not to use theterm IP or intellectual property
because it's kind ofmeaningless.
You need to drill down a littlebit further.
(04:11):
On the patent side, though,really interesting something to
be careful of is over-patenting.
So a lot of companies think, oh, to have a really defensible
position, I just have to buildmy patent portfolio, file
patents Now, one or two patents,maybe five, depending on what
you have.
That might be the right way togo for part of your intrinsic
(04:34):
asset portfolio, but it's onetool in the toolbox.
So you need to expand beyondpatents.
So something you would haveheard me say was a former
director of the US Patent Officebasically was quoted as saying,
yeah, most patents have novalue, and other studies have
shown that 97% of patents willnot return a dollar to their
(04:59):
investors, to the people whopaid the bills.
So that's where we say, okay,patents are an important tool,
but they can be overdone.
Caroline Duell (05:08):
Michael, I wanted to ask you what are some
of the common mistakes you seecompanies making when they're
trying to put their value to aninvestor.
Michael Masterson (05:18):
Look, it really ranges and, as Brett said
, there are certain commonelements.
You know, typically over 70% ofthe companies we deal with
don't own their brand in the waythey think they do.
Eg, for example, they'veregistered their logo, but they
haven't actually registeredtheir word.
It'd be like Apple, for example, only having their logo, but of
course anyone else could go andcall themselves Apple computers
(05:40):
and get around it that way,because it's only the visual
representation.
Again, brett talked about, youknow, using a patent when you
should keep it as a trade secretor, vice versa, keep it as a
trade secret when you shouldpatent it.
Probably I think the biggestmistake that I see companies
doing is fundamentally look, theecosystem is full of really
(06:01):
lovely, well-intended people.
You know, no one wakes up andsays how do I give bad advice
today?
But you've got to be able tostep out of how you generate
income for what you do.
And so, for example, if you'rea particular service provider
that provides service A andsomeone comes to you and says,
hey, do I need service A?
Well, unfortunately, you'reprobably in a conflicted
position.
(06:21):
So you really want to takeadvice from people that, ideally
, aren't benefiting from thatadvice but, more importantly,
have got what we describe asbattlefield experience.
You know it's where they'veliterally been in a license or a
sale transaction with a large,typically US medical device
company and you've actually gotthe deal through.
Not that you had a meeting oryou know the discussion didn't
(06:42):
go ahead, but did you actuallyconclude that and ultimately
generate your client a return oncapital?
That, to me, is the ultimatelitmus test.
Or, as we joke and we'retalking about some of the
participants today it's how dowe turn you into a case study?
But again, I would come back toask the right questions, which
is 90 of the problem.
If you ask the wrong question,you are always going to get the
(07:02):
wrong answer.
So again, understand what yourassets are, deal with the risks,
but ultimately ask it of peoplethat ideally don't benefit from
that.
And there's some amazing people.
You know we work with peoplelike Rob McInnes and others that
you know are great.
I mean, they're they're theones we don't want to be up
against in a negotiation andhopefully Rob feels the same way
.
So there are some prettyamazing people in the ecosystem.
(07:24):
And the other one I would sayis Anne Angel.
You know, I mean, we workedwith Anne for many, many years
and again, what they're reallygood at is directing you to the
right people to ask thosequestions of.
Caroline Duell (07:34):
So you're really talking here about trusted
advisors for startups and peoplethat are new, perhaps, to this
space, perhaps being overwhelmedby the amount of advice they're
getting in the sector.
Who do they turn to and who cangive them an objective view of
their intrinsic value?
Right, yeah, and I think again.
Michael Masterson (07:53):
You know I talked earlier today about the
partnership we have with MTPConnect.
It's critical.
You know MTP Connect's role inthe ecosystem is to try and be
that traffic cop where you cometo them and say, hey, look I,
this is what I'm trying to do,where should I go next?
And again, people like ann androb deeply connecting the
community as a we and, moreimportantly, what you you want
(08:13):
to do is identify who else is inthe community, both from a
capital side, advice side and,again, this is why one of our
most valuable intrinsic assetsand has been for some time is is
that relationship with mtpconnect, because we trust each
other and that's why we alsorefer our clients to come and
look at funding options throughmtp connect, but not just a
funding option, but who are therelationships that we might know
(08:36):
?
You know duncan mckinnis is likean encyclopedia in new south
wales.
You know amelia, same um.
So you've got some amazingintrinsic assets within the MCP
Connect that people essentiallyget free access to just by
picking up the phone and saying,hey, I'd like some help.
Caroline Duell (08:50):
Perhaps, brett, I'll ask you.
In the workshop this afternoonyou've been asking some of these
startup companies andinnovators who are moving along
the development pathway withtheir medical device products to
do a 30-second pitch abouttheir intrinsic value.
Can you give us some tips onwhat does success look like?
How can you nut that out in 30seconds?
Brett Kensett-Smith (09:13):
It's really hard that's what I say,
particularly when we did puteveryone on the spot.
It's the sort of thing to naila 30-second pitch actually takes
time and curation of languageand getting to the nub of things
.
So we were a bit mean on thegroup.
Now most people went over aminute, but never mind, it was
(09:33):
all good fun.
But the key thing is to keepremembering what it is.
It's an introduction.
It's not hey, do you want tobuy my company, it's starting a
conversation.
So if you can really get out afew key things in those first 30
seconds to get people excitedand on the hook, then you can
(09:55):
worry about building thatrelationship again with the
people who you're trying toeducate about your business and
then going deeper.
So, starting with really simply,what do you do?
And the what do you do is not a20-page journal article
submission.
It really is really short andsuccinct.
(10:16):
It's, you know, 10 words whatdo you actually do?
And the second part is what'sthe unmet need?
Why is someone going to buyyour product?
What's that unmet need thatyou're trying to to fulfill?
That's part two.
Third one is particularlybecause today we're talking
about, you know, gettinginterest from, from external
capital investors is how are youactually going to derive
(10:38):
revenue that's going to givethem a return on their
investment?
That's one thing that's oftenmissed in information
memorandums and pitches and soon is actually letting the
investor know how they're goingto get their money back.
So what's the market look likeand why are you going to take
part of it?
And the last one is and thatcomes back to that intrinsic
(10:58):
asset value proposition, whichis what assets do you have in
your kit bag that are going toeither stop or prevent followers
coming?
Caroline Duell (11:08):
in and taking your market and, Michael, do you
have anything to add to that?
That pitch advice for startups?
Michael Masterson (11:13):
Yeah, I think , as we talked about today is
don't pitch explain.
And I think this is a reallykey key part of that sort of
that discussion proposal is thatfirst sort of 30 seconds is how
do I engage you in aconversation?
And the better and moresuccinctly you can do that, the
more likely it's going togenerate interest and intrigue
(11:34):
from the other party to say, oh,tell me more.
And you know, as the otheradvice that we quoted today is,
you know, if you want advice,ask for money.
If you want money, ask foradvice.
So when you take people on that, that journey, and really
that's the first 30 seconds ofthe start of the conversation as
to what you do, and then thatlets them, oh, let me ask you
(11:55):
some questions, and then youknow to follow on from that
first 30 seconds is really thenext three minutes as well.
How do you answer thosefollow-on questions in a way
where that person's ultimatelyseeing value in what you do,
whether it be by way of theproduct or service, the
customers or them making areturn on their money or
(12:20):
ultimately becoming the dominantplayer in your sector?
Because if you do thatcorrectly, people will normally
want to give you their money.
In fact they will almost begyou to take their money.
And at that point, from thecompany's perspective, who's
receiving that income?
They can now sit back and let'ssay they've got 10 different
investors and look at well, okay, you're bringing capital me,
but what are the intrinsicassets you're also bringing to
me?
What are the networks, therelationships, et cetera?
And the example I gave is youknow the easiest way to increase
(12:43):
someone's valuation by one, ifnot two, zeros.
You just put Warren Buffett onyour board, and that one's
pretty hard to kind of argueagainst.
Oh yeah, so my point there isthat it's not that he's
investing money or he's doinganything else.
He hasn't even agreed to buythe product or the service, but
he's essentially putting hisbrand around, your brand.
To brett's earlier point.
So again it's if you play thegame the same way everyone else
(13:05):
is playing, then you will fallin the same pitfalls.
So you've got to differentiateyourself, because these
investors they could bereceiving, you know, 20, 100s a
day, and so you've got to bedifferent.
And you've got to do that inthat first page, in fact,
ideally just one page.
This is basically why youshould have a conversation.
Caroline Duell (13:22):
What are you sort of seeing out there in the
biotech midtech space at themoment?
Is there interest for newmidtech and biotech innovations
or are you seeing any trendsaround investment in the space?
Michael Masterson (13:41):
I'm going to start with what I see as a key
problem in the space.
As we said at the MTPconference last year, the point
I finished with is probably thebest point.
If you've come out of aresearch lab or kind of a
scientific background, you'renormally not standing on that
burning platform.
You're getting paid, you've gota job and now you're in a
startup or an early stagecompany and most investors will
give you 12, maybe 18 monthsworth of cash.
Not many research projectsconclude in that timeframe, so
(14:04):
the speed of pace is often oneof the biggest impediments, and
so when we hear, in particular,from investors say, oh no, I'm
not going to invest in biotech,again it's a bit like saying I
don't believe in patents.
Both extremes are wrong and Ithink, as we've seen with you
know, companies like agros anduh, many others in this space of
which we're working with youknow these are absolutely
(14:25):
billion dollar companies, butwhat they traditionally are not
great, as they're great at thescience, but they're not great
at the explanation.
And again I come back to that'sone of mtp connect's role is to
, you know, give theseresearchers, these amazing
people who create great productsand services, the ability to
explain through working witheither people like ourselves or
others to investors, so thatinvestors can give them money.
(14:47):
So I don't think there's anissue with capital in this
market.
In fact, I think it's quite theopposite.
I think the problem is the sameproblem that's always been
around is that they're not greatat explaining.
Or you have the other extremewhich we use today is Theranos,
who were great at telling thestory and the narrative, but
couldn't actually deliver on thescience, and so both are
equally as bad.
Caroline Duell (15:08):
Do you have anything else to add to that,
Brett?
Brett Kensett-Smith (15:10):
From a technical view, of trends, for
example, I'm not seeing anynecessarily, I mean other than
the obvious, such as artificialintelligence.
However, having said that,because there are quite a few
from a diagnostic point of viewat the moment, but they've
actually been around for a whilewe worked with a company five,
six years ago who was working ona software platform for using
(15:34):
AI for early diagnosis of lungtumours.
So it's not five or six yearsago it doesn't sound like that
long ago, but really AI has onlytaken off thanks to ChatGPT and
so on.
So from a trend point of view,that is trendy, but whether it's
long-term, sustainable, etcetera, you need more.
(15:56):
This is where people get stuck.
They've got the AI and theythink it's all about the
software, when in fact, give ita few years and the AI software
will be writing the AI software.
So it's not actually thesoftware and it's really
interesting.
It's actually access to data totrain the AI.
If you get some exclusiverelationships around access to
certain data pools, that's wherethe value lies.
(16:19):
So it's that aspect.
And then, of course, the otherthing is well, what's it
replacing?
What's the impact on the healthsystem?
So, if you look at a companylike Artria, their software
platform, which is AI-based, andthey've got excellent data that
they have access to.
It can basically get throughfour times as many scans versus
(16:43):
going through human eyes, sothere's an instant value
proposition right there.
So, in terms of trends, ai, butI'd say it's trendy.
That's what I'd say.
Caroline Duell (16:54):
You say that most companies' valuations are
inaccurate.
Yes, can you expand on that?
Michael Masterson (17:00):
Yeah, it's predicated on the first
assumption that the valuationcaptures all the assets.
And if the person who's donethe valuation only understands
the tangibles or the balancesheet, the P&L, the fixed asset
register, then they're missing,in most cases, 90% plus of the
value.
So if that 90% plus hasn't beencaptured, either by just even
(17:22):
replacement asset value or, moreimportantly, how those assets
are going to generate futurecash flow, because most
companies are in the process ofscaling and, in particular, if
you're investing into a growthcompany, you're typically buying
forward revenue.
So if you're not telling thatrevenue story very well, then
guess what your valuation is toolow.
Second of all is that if you'renot talking to the right
(17:43):
potential buyer, investor,partner, et cetera then the
context is out and clearly yourbusiness is probably worth a lot
more to Medtronic or BostonScientific than it is to any of
us.
Third is timing.
As we saw with COVID, if youwere doing anything around
vaccine development pre-COVIDnot that exciting During COVID,
your valuation went through theroof.
(18:03):
But last but not least, if youwere doing anything around
vaccine development pre-COVIDnot that exciting During COVID,
your valuation went through theroof.
But last but not least, if youcan't explain it in a way where
the other party can be able toexplain it internally.
It's not going to happen.
And the reality is that ifyou've developed, you know, a
product or a service, you'realmost certainly, in biotech and
medtech, not going to be takingthat through to a full
(18:24):
execution like a CSL has.
And everyone forgets CSL wasfunded by government to begin
with.
You know Commonwealth SerumLaboratories.
So when you've got an abundanceof capital, unlimited capital,
it's pretty easy to grow.
So if you're in those sectorsyou're going to be exiting
probably to a large American orEuropean biotech medtech company
.
And the people you're in thosesectors you're going to be
(18:44):
exiting probably to a largeAmerican or European biotech
medtech company.
And the people you're going tobe dealing with, as we are
dealing with now, acrossmultiple clients, they're not
that senior, they're normallysenior within their region but
not within the company.
Then you've got to enable themby explaining where the value is
so that they can go andchampion you internally.
But then you might get to saythe M&A team, depending on the
(19:05):
value and you're hoping it's abig check you've got to get to
the credit committee andpotentially even the board, and
it always comes down toexplaining those first three.
What are the real assets thatdifferentiate you?
How are you going todifferentiate them from
competitors?
In other words, why do theyhave to buy you?
And then the other classicmistake we see a lot of people
make is that they go and talk toone party.
They don't run a process, andit's like taking your house to
(19:28):
auction and only having onebidder.
That's not good for you.
So again, that's why younormally are bought by either a
supplier, a competitor, acustomer, or you go through some
sort of financial exit.
It might be an IPO or a PE firmbuying you.
They're really sort of yourfour exit points.
But again, these are sort ofsome of the classic mistakes is
(19:50):
people are not thinking aboutwhat's the other person?
Who's never heard about whatyou do?
How are they going to explainit internally?
And I think during the pitchestoday you know really
demonstrated that the strugglethat pretty much all of them had
was explaining what they didreally succinctly, let alone the
other three parts, as Brettwent through.
So if you can't even get thatfirst bit really short and I
(20:13):
mean that should be under five,ten seconds then you're going to
struggle with the other bitbecause most people have
switched off.
Caroline Duell (20:19):
How do you move from pitching to investors to
them pitching to you, Michael?
Michael Masterson (20:24):
You've got to offer them something that they
don't think they can getsomewhere else.
It's scarcity.
You know, everyone wants to bethe investor who was first money
into Google or Tesla or Amazonor, you know, microsoft, and
most people talk about theirwins, not their losses.
Soft um, and most people talkabout their wins, not their
(20:47):
losses.
And most investors have had areally bad experience,
especially if they've been at itfor a little while, and in
particular, at the smaller intown the angel investors because
they're taking the biggest risk.
You know they're investing whennothing's really been de-risked
.
There's probably no duediligence, probably someone like
us hasn't worked with them.
So at that point you really areplaying roulette.
You're taking lots of smallbets and hoping one of them pays
off.
So it's about again explainingto that investor why you're
(21:10):
different.
Why are they going to miss outon the next air trunk, as we
talked about today?
It went from literally peoplesaying to Robin Kuda, go get a
job, you're uninvestable.
Literally people saying toRobin Kuda you know, go get a
job, you're uninvestable.
You know they've exited twoweeks ago for $24 billion and,
looking at it in hindsight, itwas all really logical to us.
(21:31):
You know, from the first call Ihad with Robin, I could see why
he was going to attractinvestment.
My job was to help him explainto investors, and in particular
because he didn't file a singlepatent.
And so Robin and I spent quitea bit of time actually
practicing how he was going tonot pitch to them but actually
explain to them and start itwith something quite logical,
(21:52):
which is we've deliberately notfiled a patent because we've
taken external advice and thisis why.
And then actually justregurgitating exactly why, we
said to him not to patent whathe was doing.
But to Brett's earlier point in,in certain industries, in
particular biotech, medtechpatents can play a really
significant role, but in a datacenter probably not so much,
because you can't detectinfringement.
So again, it's always aboutlooking at it through the
(22:14):
investor's eyes, because they'reseeing lots of different things
and if they're seeing, say, 20companies in a day, what makes
you special?
And if you can't explain that,not just explain it, but explain
it succinctly so you keep theirattention they're not going to
engage with you, which meansyou're not going to go
investment, which means you'renot going to be able to turn
that capital into growth andthen use that growth to then
(22:34):
drive additional capital, egyou're not going to be an agross
or an air trunk.
Caroline Duell (22:38):
Well, I think you've wrapped it up perfectly.
Thanks.
Well, I think you've wrapped itup perfectly.
Thanks, michael.
Thanks, brett, for coming ontothe MTP Connect podcast to talk
about valuing your company,pitching to investors or
possibly getting investors topitch to you.
It's been a pleasure, thank you.
Michael Masterson (22:52):
Thanks for the opportunity.
Caroline Duell (22:55):
You've been listening to the MTP Connect
podcast.
This podcast is produced on thelands of the Wurundjeri people
here in Narm, Melbourne.
Thanks for listening to theshow.
If you love what you heard,share our podcast and follow us
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Until next time.
This is the MTP Connect podcast, connecting you
with the people behind thelife-saving innovations driving
Australia's growing lifesciences sector from bench to
bedside for better health andwellbeing.
MTP Connect acknowledges thetraditional owners of country
that this podcast is recorded onand recognises that Aboriginal
(00:23):
and Torres Strait Islanderpeoples are Australia's first
storytellers and the holders offirst science knowledge.
Caroline Duell (00:34):
Hello and welcome to the MTP Connect
podcast.
I'm Caroline Duell.
We're coming to you from Sydneyfor MTP Connect's Development
Workshop series.
Joining me from Intrinsika isMichael Masterson and Brett
Kensett-Smith, who have run anIntrinsic Value Masterclass.
It's a session designed to helpstartups and SMEs in our
accelerator programs to reframetheir company's value and pick
(00:57):
up some tips on pitching toinvestors.
Welcome, Michael and Brett.
Thank you.
Michael Masterson (01:04):
Thanks.
Caroline Duell (01:06):
You guys have worked with a lot of companies,
For companies wishing to scaleup.
What advice do you give themabout intrinsic value?
Michael Masterson (01:14):
I think the first thing you've got to work
out what makes you special, like, if you're not going to be
special, then you're not goingto be able to attract capital,
which means you're not going togrow and you're not going to end
up in the Fortune 100.
So we always start with workout what are the assets.
So what are the things that arenot captured in your
traditional financial statements, for example?
So I think it'd be fair to saythat very few businesses would
(01:34):
ever want to be bought based onpurely their balance sheet,
their fixed asset register andtheir P&L.
So if those documents don'texplain the value, then what are
the assets?
Next thing is well, what's goingto potentially pull the value
of those assets down, eg whatare the risks?
So they're the first two thingsthat we would always start with
, because that leads into wellnow, how are we going to grow
(01:56):
those assets faster than anyoneelse can to attract capital and
then ultimately generate abetter return on capital than
other investments could for aninvestor?
So it really starts with youknow, other than your mum,
saying you're special.
Why do you think you're special?
Caroline Duell (02:10):
And I understand that there are a list, I guess,
of these assets that are beyondyou know, the paper trail, so
to speak, or the accountancyinformation.
Brett, maybe you can talk to usabout that.
Brett Kensett-Smith (02:21):
Sure, yeah.
So you hear terms like IP,intangible assets.
We break it down into what wecall intrinsic assets, because
they're the assets that arecontributing to the intrinsic
value.
We have 10 categories,particularly MedTech.
The key categories are tradesecrets, perhaps their brand
Early stage, the brand doesn'thave as much value, but it's
(02:43):
building the brand.
Invention, which covers patents,so oftentimes they'll have a
patent position, maybe one ortwo patent families, maybe
several that over time couldcould really help protect from a
legal point of view what theydo.
But then also intorelationships, particularly in
medtech, where really no oneperson can grow a company from
(03:06):
the very beginning to the veryend and do it all on their own.
They need to build out theirnetworks and their relationships
.
So it could be key opinionleaders, it could be
well-regarded surgeons, it couldbe people from the local area
health service, so building outthat network of trusted
professionals and advisors inreimbursement and in regulatory
(03:27):
and so on.
So those relationships arecritical.
And the last one is regulatory.
So of course, medtech's unusualcompared to a lot of industries
where if you don't haveregulatory approval you can't
sell your device.
So having that clear pathway togetting the regulatory approval
so regulatory is anotherintrinsic asset.
(03:50):
So intellectual property is ageneral term which, when people
hear it, it's kind of vague.
People think it's patents,other people might think it's
trademarks, other people mightthink it's copyright.
So we prefer not to use theterm IP or intellectual property
because it's kind ofmeaningless.
You need to drill down a littlebit further.
(04:11):
On the patent side, though,really interesting something to
be careful of is over-patenting.
So a lot of companies think, oh, to have a really defensible
position, I just have to buildmy patent portfolio, file
patents Now, one or two patents,maybe five, depending on what
you have.
That might be the right way togo for part of your intrinsic
(04:34):
asset portfolio, but it's onetool in the toolbox.
So you need to expand beyondpatents.
So something you would haveheard me say was a former
director of the US Patent Officebasically was quoted as saying,
yeah, most patents have novalue, and other studies have
shown that 97% of patents willnot return a dollar to their
(04:59):
investors, to the people whopaid the bills.
So that's where we say, okay,patents are an important tool,
but they can be overdone.
Caroline Duell (05:08):
Michael, I wanted to ask you what are some
of the common mistakes you seecompanies making when they're
trying to put their value to aninvestor.
Michael Masterson (05:18):
Look, it really ranges and, as Brett said
, there are certain commonelements.
You know, typically over 70% ofthe companies we deal with
don't own their brand in the waythey think they do.
Eg, for example, they'veregistered their logo, but they
haven't actually registeredtheir word.
It'd be like Apple, for example, only having their logo, but of
course anyone else could go andcall themselves Apple computers
(05:40):
and get around it that way,because it's only the visual
representation.
Again, brett talked about, youknow, using a patent when you
should keep it as a trade secretor, vice versa, keep it as a
trade secret when you shouldpatent it.
Probably I think the biggestmistake that I see companies
doing is fundamentally look, theecosystem is full of really
(06:01):
lovely, well-intended people.
You know, no one wakes up andsays how do I give bad advice
today?
But you've got to be able tostep out of how you generate
income for what you do.
And so, for example, if you'rea particular service provider
that provides service A andsomeone comes to you and says,
hey, do I need service A?
Well, unfortunately, you'reprobably in a conflicted
position.
(06:21):
So you really want to takeadvice from people that, ideally
, aren't benefiting from thatadvice but, more importantly,
have got what we describe asbattlefield experience.
You know it's where they'veliterally been in a license or a
sale transaction with a large,typically US medical device
company and you've actually gotthe deal through.
Not that you had a meeting oryou know the discussion didn't
(06:42):
go ahead, but did you actuallyconclude that and ultimately
generate your client a return oncapital?
That, to me, is the ultimatelitmus test.
Or, as we joke and we'retalking about some of the
participants today it's how dowe turn you into a case study?
But again, I would come back toask the right questions, which
is 90 of the problem.
If you ask the wrong question,you are always going to get the
(07:02):
wrong answer.
So again, understand what yourassets are, deal with the risks,
but ultimately ask it of peoplethat ideally don't benefit from
that.
And there's some amazing people.
You know we work with peoplelike Rob McInnes and others that
you know are great.
I mean, they're they're theones we don't want to be up
against in a negotiation andhopefully Rob feels the same way
.
So there are some prettyamazing people in the ecosystem.
(07:24):
And the other one I would sayis Anne Angel.
You know, I mean, we workedwith Anne for many, many years
and again, what they're reallygood at is directing you to the
right people to ask thosequestions of.
Caroline Duell (07:34):
So you're really talking here about trusted
advisors for startups and peoplethat are new, perhaps, to this
space, perhaps being overwhelmedby the amount of advice they're
getting in the sector.
Who do they turn to and who cangive them an objective view of
their intrinsic value?
Right, yeah, and I think again.
Michael Masterson (07:53):
You know I talked earlier today about the
partnership we have with MTPConnect.
It's critical.
You know MTP Connect's role inthe ecosystem is to try and be
that traffic cop where you cometo them and say, hey, look I,
this is what I'm trying to do,where should I go next?
And again, people like ann androb deeply connecting the
community as a we and, moreimportantly, what you you want
(08:13):
to do is identify who else is inthe community, both from a
capital side, advice side and,again, this is why one of our
most valuable intrinsic assetsand has been for some time is is
that relationship with mtpconnect, because we trust each
other and that's why we alsorefer our clients to come and
look at funding options throughmtp connect, but not just a
funding option, but who are therelationships that we might know
(08:36):
?
You know duncan mckinnis is likean encyclopedia in new south
wales.
You know amelia, same um.
So you've got some amazingintrinsic assets within the MCP
Connect that people essentiallyget free access to just by
picking up the phone and saying,hey, I'd like some help.
Caroline Duell (08:50):
Perhaps, brett, I'll ask you.
In the workshop this afternoonyou've been asking some of these
startup companies andinnovators who are moving along
the development pathway withtheir medical device products to
do a 30-second pitch abouttheir intrinsic value.
Can you give us some tips onwhat does success look like?
How can you nut that out in 30seconds?
Brett Kensett-Smith (09:13):
It's really hard that's what I say,
particularly when we did puteveryone on the spot.
It's the sort of thing to naila 30-second pitch actually takes
time and curation of languageand getting to the nub of things
.
So we were a bit mean on thegroup.
Now most people went over aminute, but never mind, it was
(09:33):
all good fun.
But the key thing is to keepremembering what it is.
It's an introduction.
It's not hey, do you want tobuy my company, it's starting a
conversation.
So if you can really get out afew key things in those first 30
seconds to get people excitedand on the hook, then you can
(09:55):
worry about building thatrelationship again with the
people who you're trying toeducate about your business and
then going deeper.
So, starting with really simply,what do you do?
And the what do you do is not a20-page journal article
submission.
It really is really short andsuccinct.
(10:16):
It's, you know, 10 words whatdo you actually do?
And the second part is what'sthe unmet need?
Why is someone going to buyyour product?
What's that unmet need thatyou're trying to to fulfill?
That's part two.
Third one is particularlybecause today we're talking
about, you know, gettinginterest from, from external
capital investors is how are youactually going to derive
(10:38):
revenue that's going to givethem a return on their
investment?
That's one thing that's oftenmissed in information
memorandums and pitches and soon is actually letting the
investor know how they're goingto get their money back.
So what's the market look likeand why are you going to take
part of it?
And the last one is and thatcomes back to that intrinsic
(10:58):
asset value proposition, whichis what assets do you have in
your kit bag that are going toeither stop or prevent followers
coming?
Caroline Duell (11:08):
in and taking your market and, Michael, do you
have anything to add to that?
That pitch advice for startups?
Michael Masterson (11:13):
Yeah, I think , as we talked about today is
don't pitch explain.
And I think this is a reallykey key part of that sort of
that discussion proposal is thatfirst sort of 30 seconds is how
do I engage you in aconversation?
And the better and moresuccinctly you can do that, the
more likely it's going togenerate interest and intrigue
(11:34):
from the other party to say, oh,tell me more.
And you know, as the otheradvice that we quoted today is,
you know, if you want advice,ask for money.
If you want money, ask foradvice.
So when you take people on that, that journey, and really
that's the first 30 seconds ofthe start of the conversation as
to what you do, and then thatlets them, oh, let me ask you
(11:55):
some questions, and then youknow to follow on from that
first 30 seconds is really thenext three minutes as well.
How do you answer thosefollow-on questions in a way
where that person's ultimatelyseeing value in what you do,
whether it be by way of theproduct or service, the
customers or them making areturn on their money or
(12:20):
ultimately becoming the dominantplayer in your sector?
Because if you do thatcorrectly, people will normally
want to give you their money.
In fact they will almost begyou to take their money.
And at that point, from thecompany's perspective, who's
receiving that income?
They can now sit back and let'ssay they've got 10 different
investors and look at well, okay, you're bringing capital me,
but what are the intrinsicassets you're also bringing to
me?
What are the networks, therelationships, et cetera?
And the example I gave is youknow the easiest way to increase
(12:43):
someone's valuation by one, ifnot two, zeros.
You just put Warren Buffett onyour board, and that one's
pretty hard to kind of argueagainst.
Oh yeah, so my point there isthat it's not that he's
investing money or he's doinganything else.
He hasn't even agreed to buythe product or the service, but
he's essentially putting hisbrand around, your brand.
To brett's earlier point.
So again it's if you play thegame the same way everyone else
(13:05):
is playing, then you will fallin the same pitfalls.
So you've got to differentiateyourself, because these
investors they could bereceiving, you know, 20, 100s a
day, and so you've got to bedifferent.
And you've got to do that inthat first page, in fact,
ideally just one page.
This is basically why youshould have a conversation.
Caroline Duell (13:22):
What are you sort of seeing out there in the
biotech midtech space at themoment?
Is there interest for newmidtech and biotech innovations
or are you seeing any trendsaround investment in the space?
Michael Masterson (13:41):
I'm going to start with what I see as a key
problem in the space.
As we said at the MTPconference last year, the point
I finished with is probably thebest point.
If you've come out of aresearch lab or kind of a
scientific background, you'renormally not standing on that
burning platform.
You're getting paid, you've gota job and now you're in a
startup or an early stagecompany and most investors will
give you 12, maybe 18 monthsworth of cash.
Not many research projectsconclude in that timeframe, so
(14:04):
the speed of pace is often oneof the biggest impediments, and
so when we hear, in particular,from investors say, oh no, I'm
not going to invest in biotech,again it's a bit like saying I
don't believe in patents.
Both extremes are wrong and Ithink, as we've seen with you
know, companies like agros anduh, many others in this space of
which we're working with youknow these are absolutely
(14:25):
billion dollar companies, butwhat they traditionally are not
great, as they're great at thescience, but they're not great
at the explanation.
And again I come back to that'sone of mtp connect's role is to
, you know, give theseresearchers, these amazing
people who create great productsand services, the ability to
explain through working witheither people like ourselves or
others to investors, so thatinvestors can give them money.
(14:47):
So I don't think there's anissue with capital in this
market.
In fact, I think it's quite theopposite.
I think the problem is the sameproblem that's always been
around is that they're not greatat explaining.
Or you have the other extremewhich we use today is Theranos,
who were great at telling thestory and the narrative, but
couldn't actually deliver on thescience, and so both are
equally as bad.
Caroline Duell (15:08):
Do you have anything else to add to that,
Brett?
Brett Kensett-Smith (15:10):
From a technical view, of trends, for
example, I'm not seeing anynecessarily, I mean other than
the obvious, such as artificialintelligence.
However, having said that,because there are quite a few
from a diagnostic point of viewat the moment, but they've
actually been around for a whilewe worked with a company five,
six years ago who was working ona software platform for using
(15:34):
AI for early diagnosis of lungtumours.
So it's not five or six yearsago it doesn't sound like that
long ago, but really AI has onlytaken off thanks to ChatGPT and
so on.
So from a trend point of view,that is trendy, but whether it's
long-term, sustainable, etcetera, you need more.
(15:56):
This is where people get stuck.
They've got the AI and theythink it's all about the
software, when in fact, give ita few years and the AI software
will be writing the AI software.
So it's not actually thesoftware and it's really
interesting.
It's actually access to data totrain the AI.
If you get some exclusiverelationships around access to
certain data pools, that's wherethe value lies.
(16:19):
So it's that aspect.
And then, of course, the otherthing is well, what's it
replacing?
What's the impact on the healthsystem?
So, if you look at a companylike Artria, their software
platform, which is AI-based, andthey've got excellent data that
they have access to.
It can basically get throughfour times as many scans versus
(16:43):
going through human eyes, sothere's an instant value
proposition right there.
So, in terms of trends, ai, butI'd say it's trendy.
That's what I'd say.
Caroline Duell (16:54):
You say that most companies' valuations are
inaccurate.
Yes, can you expand on that?
Michael Masterson (17:00):
Yeah, it's predicated on the first
assumption that the valuationcaptures all the assets.
And if the person who's donethe valuation only understands
the tangibles or the balancesheet, the P&L, the fixed asset
register, then they're missing,in most cases, 90% plus of the
value.
So if that 90% plus hasn't beencaptured, either by just even
(17:22):
replacement asset value or, moreimportantly, how those assets
are going to generate futurecash flow, because most
companies are in the process ofscaling and, in particular, if
you're investing into a growthcompany, you're typically buying
forward revenue.
So if you're not telling thatrevenue story very well, then
guess what your valuation is toolow.
Second of all is that if you'renot talking to the right
(17:43):
potential buyer, investor,partner, et cetera then the
context is out and clearly yourbusiness is probably worth a lot
more to Medtronic or BostonScientific than it is to any of
us.
Third is timing.
As we saw with COVID, if youwere doing anything around
vaccine development pre-COVIDnot that exciting During COVID,
your valuation went through theroof.
(18:03):
But last but not least, if youwere doing anything around
vaccine development pre-COVIDnot that exciting During COVID,
your valuation went through theroof.
But last but not least, if youcan't explain it in a way where
the other party can be able toexplain it internally.
It's not going to happen.
And the reality is that ifyou've developed, you know, a
product or a service, you'realmost certainly, in biotech and
medtech, not going to be takingthat through to a full
(18:24):
execution like a CSL has.
And everyone forgets CSL wasfunded by government to begin
with.
You know Commonwealth SerumLaboratories.
So when you've got an abundanceof capital, unlimited capital,
it's pretty easy to grow.
So if you're in those sectorsyou're going to be exiting
probably to a large American orEuropean biotech medtech company
.
And the people you're in thosesectors you're going to be
(18:44):
exiting probably to a largeAmerican or European biotech
medtech company.
And the people you're going tobe dealing with, as we are
dealing with now, acrossmultiple clients, they're not
that senior, they're normallysenior within their region but
not within the company.
Then you've got to enable themby explaining where the value is
so that they can go andchampion you internally.
But then you might get to saythe M&A team, depending on the
(19:05):
value and you're hoping it's abig check you've got to get to
the credit committee andpotentially even the board, and
it always comes down toexplaining those first three.
What are the real assets thatdifferentiate you?
How are you going todifferentiate them from
competitors?
In other words, why do theyhave to buy you?
And then the other classicmistake we see a lot of people
make is that they go and talk toone party.
They don't run a process, andit's like taking your house to
(19:28):
auction and only having onebidder.
That's not good for you.
So again, that's why younormally are bought by either a
supplier, a competitor, acustomer, or you go through some
sort of financial exit.
It might be an IPO or a PE firmbuying you.
They're really sort of yourfour exit points.
But again, these are sort ofsome of the classic mistakes is
(19:50):
people are not thinking aboutwhat's the other person?
Who's never heard about whatyou do?
How are they going to explainit internally?
And I think during the pitchestoday you know really
demonstrated that the strugglethat pretty much all of them had
was explaining what they didreally succinctly, let alone the
other three parts, as Brettwent through.
So if you can't even get thatfirst bit really short and I
(20:13):
mean that should be under five,ten seconds then you're going to
struggle with the other bitbecause most people have
switched off.
Caroline Duell (20:19):
How do you move from pitching to investors to
them pitching to you, Michael?
Michael Masterson (20:24):
You've got to offer them something that they
don't think they can getsomewhere else.
It's scarcity.
You know, everyone wants to bethe investor who was first money
into Google or Tesla or Amazonor, you know, microsoft, and
most people talk about theirwins, not their losses.
Soft um, and most people talkabout their wins, not their
(20:47):
losses.
And most investors have had areally bad experience,
especially if they've been at itfor a little while, and in
particular, at the smaller intown the angel investors because
they're taking the biggest risk.
You know they're investing whennothing's really been de-risked
.
There's probably no duediligence, probably someone like
us hasn't worked with them.
So at that point you really areplaying roulette.
You're taking lots of smallbets and hoping one of them pays
off.
So it's about again explainingto that investor why you're
(21:10):
different.
Why are they going to miss outon the next air trunk, as we
talked about today?
It went from literally peoplesaying to Robin Kuda, go get a
job, you're uninvestable.
Literally people saying toRobin Kuda you know, go get a
job, you're uninvestable.
You know they've exited twoweeks ago for $24 billion and,
looking at it in hindsight, itwas all really logical to us.
(21:31):
You know, from the first call Ihad with Robin, I could see why
he was going to attractinvestment.
My job was to help him explainto investors, and in particular
because he didn't file a singlepatent.
And so Robin and I spent quitea bit of time actually
practicing how he was going tonot pitch to them but actually
explain to them and start itwith something quite logical,
(21:52):
which is we've deliberately notfiled a patent because we've
taken external advice and thisis why.
And then actually justregurgitating exactly why, we
said to him not to patent whathe was doing.
But to Brett's earlier point in,in certain industries, in
particular biotech, medtechpatents can play a really
significant role, but in a datacenter probably not so much,
because you can't detectinfringement.
So again, it's always aboutlooking at it through the
(22:14):
investor's eyes, because they'reseeing lots of different things
and if they're seeing, say, 20companies in a day, what makes
you special?
And if you can't explain that,not just explain it, but explain
it succinctly so you keep theirattention they're not going to
engage with you, which meansyou're not going to go
investment, which means you'renot going to be able to turn
that capital into growth andthen use that growth to then
(22:34):
drive additional capital, egyou're not going to be an agross
or an air trunk.
Caroline Duell (22:38):
Well, I think you've wrapped it up perfectly.
Thanks.
Well, I think you've wrapped itup perfectly.
Thanks, michael.
Thanks, brett, for coming ontothe MTP Connect podcast to talk
about valuing your company,pitching to investors or
possibly getting investors topitch to you.
It's been a pleasure, thank you.
Michael Masterson (22:52):
Thanks for the opportunity.
Caroline Duell (22:55):
You've been listening to the MTP Connect
podcast.
This podcast is produced on thelands of the Wurundjeri people
here in Narm, Melbourne.
Thanks for listening to theshow.
If you love what you heard,share our podcast and follow us
for more.
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