“All VCs are trying to understand the ramifications of the recent economic and regulatory upheavals, and the Nordics are no different,” says Mala Valroy, whose interests include deep-tech startups with global reach and market-making potential.

We’re still trying to adjust to the impacts of COVID-19, so this amplifies a lot of the conservative behaviors we began to see after 2020.

Among her areas of interest are health technology, clean technology, and biotechnology. Other specialties outside of life sciences include artificial intelligence (AI) and machine learning, autonomous transport, Industry 4.0, and the Internet of Things. “We’re still trying to adjust to the impacts of COVID-19, so this amplifies a lot of the conservative behaviors we began to see after 2020,” she adds.

Navigating the changes

With the U.S. research landscape uncertain, the Nordics and other countries are turning to other outlets says Valroy. “The U.S. has often been the go-to market for both commercialization and exits for Nordic investors, and now we need to rethink that strategy,” she says.

“VCs and startups will be looking to conserve cash as we navigate the changes, so there will likely be fewer and smaller rounds. I can imagine new founders may hesitate to start something, and limited partnerships will prefer established funds over emerging ones. There definitely will be a dip in the deal flow and the capital in the near term.”

The current venture funding landscape is evolving, which any biologist will confirm is the right strategy, Valroy says. “I think everyone is collectively holding their breath, trying to see the macro (picture).”

I’m seeing a lot of concerted and intentional effort going into course-correcting and building local resilience.

At the same time, she characterizes her medium-to-long-term view of VC opportunities as optimistic. “I’m seeing a lot of concerted and intentional effort going into course-correcting and building local resilience.”

The Nordics currently have a flywheel effect of experienced life science founders who’ve successfully exited and are ready to build something new, Valroy continues.

“We have patient capital and sizeable investments, including the substantial endowments made by Novo Nordisk into the ecosystem. Securing our pipeline of new therapies, food, and production is an area of mutual interest for the growing defense-focused funds and traditional life science VCs. Governments are revisiting allocations to grants at the local and European Union level.”

AI and molecular tools

For this year, Valroy expects the industry focus to be on using AI to refine clinical trials and researchers to be making deeper dives to not just identify parts of cells but also their locations and functions. “I think people are exhausted of hearing about AI,” she says, “but I see it used in very niche applications. For example, I see a lot of use for it in the translation from animal studies to human, which is where most clinical trials fail.”

Other exciting discoveries include insights into the contextual expression and localization of DNA, RNA, and proteins in cells. “We’re seeing breakthroughs in certain molecular details,” Valroy says.

It’s the difference between having a globe and a map when it comes to being able to design drug targets, study disease mechanisms, and understand modalities.

“We can get spatial information that was previously unavailable. We’re not just seeing what and how much is being expressed, but how the transcription or translation is happening in relation to organelles and how proteins are organizing on the cell surface. At this very moment, for example, is the RNA near the Golgi apparatus or somewhere else in the cytoplasm, and are cell surface proteins clustering on one side of a cell or evenly dispersed? It’s the difference between having a globe and a map when it comes to being able to design drug targets, study disease mechanisms, and understand modalities. We’re seeing many unique approaches in the world of molecular tools.”

From science to investing in science

Mala Valroy took an unconventional career route, she describes. She was born in India to parents who were academics, and they moved frequently for her parents’ teaching positions. They lived in Stuttgart, Germany for several years, and in Utah in the U.S. before returning to India where Valroy completed high school and attended college. Not long after entering high school, she became interested in life sciences.

“I was fascinated that we had the ability to splice DNA; the fact that we could make differences in diseases by doing that really, really lit up my brain,” Valroy says.

But business and investing lit up her brain too. She earned an M.S. in general management from the Stockholm School of Economics, as well as an M.S. in biochemistry from Dartmouth College in the U.S. She began to work on a doctorate in biotechnology, feeling it was her job to maintain the family tradition of earning a Ph.D. But while she liked the idea of her work having an impact on people’s lives years down the road, Valroy did not feel at home in a lab.

“I started thinking I work better with shorter feedback loops,” she says. “I love science, but I love investing in science even more. I have more to contribute when science is ready to leave the lab.” And start-up businesses pique her interest the most. “I’ve always been more on the entrepreneurial side,” she says.

One of the best parts of her job, Valroy says, is the opportunity to connect with ambitious, creative people. “I love meeting founders with the ability and audacity to solve complex problems in health, climate, and food,” she explains.

My job involves constantly meeting capable people who are brave enough to try and find solutions – it makes you optimistic no matter how bad the headlines get.

“I’m seeing interdisciplinary teams emerge and really love supporting their journey to combine physics, chemistry, and biology to build products. My job involves constantly meeting capable people who are brave enough to try and find solutions – it makes you optimistic no matter how bad the headlines get. I love building relationships, landing a deal, and continuing to support them through board work.”

One of the main challenges is recognizing when changes must be made to the original plans for a company – including who will run it. “I have a lot of respect and admiration for founders who are able to step down as CEO because the company is not a job for them,” Valroy says.  “It’s deeply personal for them. It’s the result of late nights, long weekends, missed family events, and hard work.”

And sometimes you have to decide when enough is enough. “It’s not always crystal clear whether one last push will see us through or just prolong the inevitable,” she says.

5 pieces of advice from Mala Valroy

For small and medium-sized Nordic companies seeking to raise funds.

  • Don’t raise capital when cash runs out. Plan to raise capital when you have reached milestones to motivate the uptick in your valuation. If the two don’t line up, consider alternatives like soft funding or bridge rounds to steer you a little further out in time.
  • Clean up your cap table. Not all money is the same, and 20 smaller investors who can’t finance your next round but take away equity are a deadweight for your next round – sometimes a dealbreaker. 
  • Take your most pessimistic timeline for your next deliverable and add six months to it. Make a contingency plan because it’s going to take longer to raise your next round.
  • Diversify your investors through a syndicate. Make sure you have a mix of competencies, networks, and capital.
  • Make sure you pick investors that have enough reserves to do follow-on investments.