Earlybird Health's Inaugural Impact & ESG report reveals opportunities and gaps in investor and startups' commitments

Earlybird Health's Impact & ESG Report offers useful insights on how startups seeking funding can boost their attractiveness with strong ESG policies. 
Earlybird Health's Inaugural Impact & ESG report reveals opportunities and gaps in investor and startups' commitments

Whether you like it or not, you'll be hearing a lot about ESG (Environmental Social Governance) metrics, commitments, and actions from now to forever. 

Earlybird is one of Europe's most established and active Venture capital firms published its inaugural Impact & ESG Report.

Why am I writing about it? Well, it offers actionable insights to business leaders, investors, and startups on approaching ESG. It also features many portfolio companies, highlighting their impact on society in general and healthcare in particular.

Specifically, Earlybird Health is a wing (excuse the pun) of Earlybird. It focuses on early-stage and late-stage healthcare opportunities in Europe and selectively in the US and Israel. 

Its technology-agnostic approach aims for positive patient outcomes, investing across digital health, diagnostics, medical devices,R&D tools and biopharma.

Earlybird Health has invested in 15 companies; notable investments include Oculis,  Oviva, Perfuze, and ImCheck Therapeutics.

I'm not going to summarise the whole report (it is, however, an interesting read) but rather offer some highlights.

Key takeaways for health tech startups 

Based on 2022 data from across the company and its portfolio companies, the report offers insights into commitments and, more importantly, what actions look like in practice. 

One takeaway is that startups seeking funding can boost their attractiveness with strong ESG policies. 

Let's face it, investment in women-led companies is dire in most of Europe (although Lithuania shows another way forward is possible).

And Investment firms aren't much better. Currently, just 36% of team members identify as female and six nationalities are represented at Earlybird Health. 

In 2022 Earlybird Health revised all major investment processes, documents (e.g. Private Placement, Memorandum and Term Sheets) and evaluation criteria to incorporate ESG.

Earlybird Health is now evaluating ESG criteria before investing, stating:

"Prior to any investment, the Earlybird Health team performs extensive due diligence, which includes ESG screening. The team prepares an investment memorandum, including a dedicated section to ESG risks/opportunities as well as health impact objectives."

It further asserts:

"We require a commitment to ESG from all our portfolio companies – Our term sheets and investment documents include legal clauses with clear ESG requirements for our portfolio companies. 

These range from defining and implementing an ESG strategy to putting ESG as a discussed topic on the Board Agenda."

So how are the startups fairing?

It's fair to say that ESG is not the first goal of any startup. Digital-first, security-first, customer-first, there are many firsts to prioritise. But 11 portfolio companies agreed to share their ESG data (presumably, the others are too busy with those other firsts). The results are not terribly surprising.

A survey of 11 portfolio companies revealed

  • Just four companies (36 per cent) measure their carbon footprint, and only one company screens suppliers for carbon efficiency.
  • Only two have board directors that identify as female, But 8 provide physical and mental health and well-being support (not sure if that's more than health insurance and free counselling?) 
  • Perhaps the area that I wish surprised me but doesn't is governance. Of the 11 companies, only five have a Code of Conduct — I'm sure I'm not the only writer asked more than once to write a startup's CoC. 
  • Only 6 have Anti-Harassment policies, and only two have any ESG/Sustainability policies.

But importantly, Earlybird Health provides support to portfolio companies to develop their ESG strategy and to ensure that ESG fundamentals are in place. 

It also commits to outreach such as:

Networking and Mentorship

Earlybird offers networking, mentorship, and initiatives connecting aspiring women entrepreneurs with experienced professionals to help bridge the gender gap by facilitating guidance, support, and career advancement and fosters inclusive and supportive ecosystems. 

It also participates in initiatives such as Women in VCDiversity VC and Level 20.

Vision Lab is a great example of walking the talk

In 2020, Earlybird established Vision Lab, an Incubator and Impact Fund based on the idea that in Germany, structural or bureaucratic barriers often prevent people with a migration background (especially women of colour in Germany) from turning their ideas into successful businesses. 

Vision Lab is set up as a 6-month program consisting of workshops, networking events and mentoring – and also provides funding for entrepreneurial ideas from migrant founders. 

In June 2023, Earlybird kicked off the fourth cohort – the largest one yet, with 12 teams representing at least 12 countries. ( I went to the demo day, it was excellent!)

As I alluded to earlier, there are going to be a whole lot of these reports coming out and a whole lot of PR spin. But there's also a lot of value if you go from plans to action, and Earlybird has its wings set to do so. 

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