XR IN THE HOUSE

The COVID-19 pandemic has put a spotlight on the increasing need for a wide range of innovative healthcare solutions, which has been reflected in a surge of venture-backed deals and a significant inflow of new capital into the market.

According to the Deloitte global healthcare outlook 2021 report, the healthcare sector was found to be performing exceptionally well, despite the overall uncertainty of the pandemic. The report analyzed biopharma, HealthTech, diagnostics/tools and device investment trends and found that venture fundraising in healthcare soared to $10.4B in the first half of 2020, nearly matching 2019’s full year record.

One such company is XRHealth, headquartered in Boston, Massachusetts, with its R&D center located in Tel-Aviv, Israel, that developed a unique Extended Reality (XR) technology (virtual and augmented reality) with which it operates Virtual Clinics. The company provides a virtual telehealth alternative to physical and occupational therapy, addressing a wide range of conditions from Parkinson’s symptoms to pain, stress and anxiety disorders -- all from the comfort of the patient’s home.

“We are proud to say that as a banking partner we recently provided $9m of venture debt for XRHealth. We are big believers in the company, its vision, and most importantly, its incredible executive team, led by CEO and founder Eran Orr.” says Guy Navon Head of Discount Tech.

From a financing perspective, our support in the company through venture debt, reflects a new philosophy and growing trend among fast growing companies, especially in HealthTech, called Venture debt financing or Hybrid financing. This is a combination of VC funding and debt financing. Unlike the traditional approach of depending solely on VC financing which heavily dilutes the founders’ equity in the company, this form of incorporating new sources of financing gives fast growing companies more control over their future and protects them from external circumstance. It also provides them with more leverage to maneuver future rounds by increasing their runway, allowing them to raise future rounds at a higher valuation.

XRHealth founder & CEO Eran Orr says “as our company was seeking funding to accelerate growth and we already had steady monthly revenues...it made sense to explore debt financing. This helped us extend our runway, without giving up further equity, and is sure to strengthen our position towards the next round of VC funding.”

Venture debt can often fund several additional months of operating burn to help stretch cash runway. Adding a layer of debt on top of equity can further cash runway and help reach key milestones and drive higher returns.

Given the volume of VC fundraising in healthcare and biotech in 2020 and Q1 & 2 of 2021, growth venture debt is becoming an increasingly attractive alternative to funding. When utilized smartly, it can provide leverage to push for competitive rates and favorable terms. 

All signs are pointing that 2021 will continue to bode well for capital investments in healthcare. There is perhaps no better time for LifeScience entrepreneurs and leaders to capitalize on the favorable terms of debt financing and adopt a smart hybrid approach to rapid growth. 

After all, there is no better time to seek debt than when you don’t necessarily need the money but are looking for the commitment.