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Private Equity 101: Part one – Glossary

August 05, 2021 + Jessica Di Palo
3 Min read

Are you new to the healthtech space? Maybe even the investment sector? Was that a “Yes”? Don’t worry, in the beginning, everything seems overwhelming and all the definitions and keywords are tricky to keep in mind. But there is always hope…

Private Equity 101

It happens every day that the investment sector, or specifically the private equity sector, finds new prospects or new investors in fundraising processes. Private Equity and Venture Capital are sometimes not even established in some countries or regions.

Our job is to deploy capital and help companies operating in the healthtech sector grow. How? By investing in them and selling our shares when the time is right. Sounds easy? If you sum it up like this of course it does. But there is more to it and we are happy to show you. To give you a little guidance on how to correctly understand some terms used on our website, we want to offer you a glossary in this blog post.

 

Let’s start and dive into the (private equity) business…

 

Acquisition

An acquisition is the process of one company purchasing most or all of another company’s shares. In the end, the control of the company is transferred from the original company (or companies) to the new owner. If more than 50% of a target firm’s shares were bought the new owner can take decisions without consulting or the approval of the other shareholders.

Angel investor

Angel investors are individuals who provide a certain amount of capital to a startup for a stake in the company. This usually happens when the startup is in its infancy. Angel Investors can offer guidance and sometimes even serve as mentors to these startups.

Board of Directors

This is a group of influential individuals, elected by stockholders, chosen to oversee the affairs of a company. A board typically includes investors and mentors. Not all companies have a board, but investors typically require a board seat in exchange for an investment in a company. The board of directors is an entity that meets regularly. You can meet our board of directors here.

Buyout

A buyout describes a common exit strategy. It involves the purchase of a firm’s shares and with that, the buyer receives a controlling interest in the company.

ESG

ESG is short for environmental, social, and governance. These are a set of criteria and standards for a company’s operations that investors use to screen potential investments. These investors, MTIP included, focus on social responsibility and ESG guidelines to help them analyze the potential of a company. The environmental criteria evaluate if the company takes the right measures to preserve nature. Examples of the social part are how the company manages interactions and relations with its customers, its own employees, or its suppliers. The governance part covers leadership aspects, executive pay, shareholder rights, and much more.

We have been using these standards to analyze potential and current portfolio companies for many years. Here you can learn more about ESG at MTIP.

Exit

An exit is the process of selling a stake in a company that has been acquired in the past. Of course, the target is always to make a profit by selling the shares of a company.  Unfortunately, this is not always the case.

Fund

A fund is a pool of money that is allocated for a specific purpose. A fund can be established for many different purposes: a city government setting aside money to build a new park or a foundation setting aside money to award scholarships. In private equity funds are used to invest in companies and create a portfolio.

We at MTIP currently manage two funds. The purpose of these two funds is to invest in companies that we define as healthtech champions. Learn more about us here.

General Partner

In private equity, the General Partner (or short GP), refers to the private equity company that supervises a PE (private equity) fund. The third-party investors that are acquired through a fundraising process are the limited partners (LP). The GP is responsible for operating the fund, deal sourcing, and investing as well as exiting invested companies and assisting the portfolio companies to help them grow.

Growth

Growth refers to an investment approach and strategy, which focuses on increasing an investor’s capital. These investors typically invest in growth stocks from young and small companies. The earnings of these companies are expected to get higher and higher- exceeding the average rate (in comparison to their overall market).

Healthtech

Healthtech is the fastest-growing vertical within the healthcare sector. It includes any technology-enabled healthcare product and service that can be delivered or consumed outside of a hospital or physician’s office.

MTIP’s investment strategy focuses on healthtech in all its varieties. With companies like Oviva, Trialbee, and Koa Health we have already made 3 investments with our second fund. Every investment is unique and covers a specific niche. Have a look at our portfolio companies.

Holding period

The holding period is the time frame between the acquisition and the exit of a portfolio company.

Investor

That is what we are! A company or a person (e.g. angel investor), that invests capital with the intent to receive financial returns.

Later-stage

Companies that are defined as “later-stage” are no startups anymore. These companies have established themselves in their specific market sector and usually, the invested capital can be converted faster into returns.

Limited Partner

You’ve already heard about the general partner (GP) in this glossary and now comes the limited partner (LP). Basically: Two or more partners form a limited partnership. When we at MTIP talk about LP’s we mean our limited partners that invested in our funds.

Private equity

This term refers to funds that invest and restructure companies that are not (yet) publicly traded.

Digital health

Digital Health is a subcategory of healthtech. The broader scope of digital health includes categories such as mobile health (mHealth), health information technology (IT), wearable devices, telehealth and telemedicine, and personalized medicine.

Patient-centric

With patient-centric, we describe the process of “Putting the patient first in an open and sustained engagement of the patient to respectfully and compassionately achieve the best experience and outcome for that person and their family” (Yeoman G. et al.  BMJ Innov. 2017;0.1-8).

Social responsibility

Instead of primarily focusing on maximizing profits, the term “social responsibility” adds society into the equation. Meaning that the actions of a company must benefit society. This term has become more and more important among investors and consumers since climate change and social issues are dominating the news nowadays. We at MTIP take social responsibility very seriously. Take a look at our investment approach and how we incorporate social responsibility into our strategy.

Working together

For us teamwork means everything. As a company, we celebrate working together in every aspect of our daily business. We also partner up with our portfolio companies to lead them to success. Have a look at our amazing portfolio.

 

In the next 101, we will deliver you more insights into our daily work!

 

 

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