iGan Seeks Cash as Valuations Go From ‘Ridiculous’ to Reasonable

(Bloomberg) — Venture capital firm iGan Partners Inc. is raising $400 million to invest in health-care technology startups, seeking to capitalize on lower valuations for private companies after this year’s broad selloff in stocks. 

Toronto-based iGan is looking to raise $150 million for a 10-year fund known as iGan Fund 2 to invest in North American companies, Managing Partner Sam Ifergan said in an interview. It’s also seeking $250 million for companies that want to expand production or sales capacity in the Middle East, especially Saudi Arabia, the United Arab Emirates and Egypt, he said. 

The firm’s investment focus is on software and medical devices. “We look for two primary things in our investments. One is that they’re dramatic improvements for patient care,” said Ifergan. And the technology “has to reduce costs to the system very substantially.”

Current portfolio companies include RetiSpec, which is focused on technology to detect neurodegenerative diseases through eye exams, and MolecuLight, which is developing an optical device to improve the process of treating wounds.

The average health-care expenditure of countries in the Organization for Economic Cooperation and Development rose 5% in 2020 and another 6% last year, according to preliminary data. The US tops the list at $12,318 in health spending per capita.

Market Correction

iGan’s companies “sell in the US market, which is the largest market for health care in the world,” said Emilio Botin D’Ornano, whose family office is investing in iGan Fund 2. Its portfolio firms — many of them Canadian– may trade at lower valuations than in better-known tech hubs like San Francisco, New York or Boston, even as they often benefit from government financial support, said Botin, a member of the Spanish finance dynasty associated with Banco Santander SA. 

Other investors in Fund 2 include Mexico’s Coppel family and Canada’s Francis family office. 

iGan is targeting an internal rate of return above 20%, said Ifergan, adding that he expects to have several companies reach a valuation of $1 billion over the next two to three years. The iGan Arabia Fund will be focused on companies that can solve specific needs of the health systems in Middle Eastern countries. 

iGan is raising funds at a time when lower stock prices are filtering into the venture capital market, Ifergan said.

“During the Covid boom the valuations got ridiculous for us to invest,” he said. Now that equity prices have fallen, “that makes it more interesting for us.”