Venture+ Forum shows IT the money

February 14, 2014 in Medical Technology

Here’s a sampling of Healthcare IT News headlines from just the past year: “Health IT VC funding sees ‘torrid’ Q1.” “Record quarter sees VC cash top $737M.” “VC funding sets yet another record.”

As then-U.S. Chief Technology Officer Aneesh Chopra put it when speaking at HIMSS the last time it was in Orlando, in 2011: “Today is the best time to be a healthcare entrepreneur in America.”

Things have only gotten better in the past three years, as technology has matured, startups have proliferated and the venture community has become much more attuned to the value and huge potential of health IT.

This year at HIMSS14, at the day-long Venture+ Forum on Sunday, Feb. 23, entrepreneurs, investors and other healthcare and technology leaders will gather in Orlando for live presentations from some of the most promising health IT startup companies.  

The day kicks off with keynote address from Lucian Iancovici, MD, investment manager at Qualcomm Ventures. His speech is titled “The Evolution of Digital Health,” and nothing illustrates the industry’s maturation these past few years than the slate of early-stage firms showcasing their products and services at HIMSS.

Whether focused on driving better outcomes, engaging patients, protecting privacy or enabling accountable care, the companies competing in the pitch contest from the Venture+ Forum stage represent an industry that’s changing fast – and creating huge opportunities for firms that know the right niches to target.

“It’s an incredibly exciting time to explore the future of digital health,” said Iancovici in a press statement. “There is a new generation of companies trying to disrupt the healthcare system by freeing data from their traditional silos to drive more efficient and effective care. The massive influx of investment dollars in the space has revealed a pattern in how new companies are approaching healthcare: using data from many sources to uncover insights and effect change.”

Joseph Volpe, managing director of Merck’s Global Health Innovation Fund, agrees.

“I’m a data guy,” he says.

Volpe is speaking on a panel at the Venture+ Forum titled, “Health IT Venture Trends.” And he says data – and all the capabilities related to it, from capture and storage to security to analytics – is one of the biggest trends he’s paying attention to nowadays when looking for companies in which to invest.

“Data is the currency of the future,” says Volpe. “And as that gets deeper and richer, we have to be able to do something with it.”

Merck’s Global Health Innovation Fund was spun off as a separate LLC from the pharmaceutical giant; its self-stated mission is “investing in transformative healthcare.”

With some $500 million entrusted upon it to invest, Merck GHI has so far funded 22 companies since 2010, says Volpe – mostly minority positions, to the tune of $5 million to $15 million.

“We’ve broken it into two areas,” he explains: “technology-enabled solutions and health IT platforms.”

In the former space, “We look at precision medicine, accountable care, provider and patient engagement, decision support,” says Volpe. The latter includes “health informatics, analytics, health data liberation” and more.

As the industry has evolved, Volpe has also noticed his investment priorities changing these past few years.

“We’ve gone from a high-level health IT focus to dig a little deeper,” he says. “I’m looking now at privacy and security, predictive analytics, machine learning.”

For instance, in 2012 Merck GHI invested $6 million in Remedy Informatics, which develops clinical registries, research software and informatics tools for translational medicine

“When companies like this get out into the Cleveland Clinics and Mass Generals of the world, you really start to get a view of disease-specific data and the ability to pull disparate sources together and actually do something with it, which we really haven’t been able to do, research-wise,” Volpe explains.

That investment may have been a no-brainer. But in a burgeoning industry such as healthcare, with so many different facets, so many types of technologies and so many new startups trying to make their mark, it can be a dizzying challenge knowing where to put money down.

“It’s a huge, broad area,” says Volpe. “Where do you start? You’re handed $500 million, where do you begin to strategize?”

One recent tack, he says, was to assess the broad swath of health IT and corral 40 or so different areas of technology into three categories: mature, growth and nascent.

“I took a look at the top seven in the growth area, and picked two in the nascent area, and started to look at the companies behind those, and mapped the ecosystem within that area,” he says.

“For example, one was remote monitoring,” says Volpe. “I feel that’s a huge area to start to look at now. In the cardio space there’s massive potential to reduce the number of strokes with atrial fibrillation patients, to reduce the risk of readmissions.

“We asked, ‘Remote monitoring is one thing in the cardiac space, but what is remote monitoring (in general)? What are the companies and gaps that exist today, and how can they get filled?’

“We drew a graph of remote monitoring and the needs around that,” he says. “Analytics. Data storage and capture. Registries around cardiovascular. Sleep monitoring. And then we started to invest.”

After nearly four years, “I feel like we’ve got a very strong portfolio of some very innovative spaces and companies,” says Volpe. “And we have the ability to maybe pull them together in some sort of way and leverage them where it make sense.”

That sort of synergistic utility is what a good VC firm should be looking for, he says – and what a smart fledgling that’s looking for funding should be ready to capitalize on.

“The key is to leverage strengths and abilities,” he says. “Don’t think single-point solution, but rather strategically aggregate: Pull these companies together with others like them. You may not have a crystal ball for what is coming, but if you start to arm these folks with game-changing bundles, it’s going to really change what comes along.”

Merck GHI tend to gravitate toward later-stage companies. “But everything starts at an early stage, right?” says Volpe.

“A lot of what these younger companies are coming in with is very interesting, and could be a piece of the puzzle, of something larger we’re looking at,” he says. “If you put an ecosystem together, it might be a missing piece. I tell (companies) to think like that. You don’t have to be everything to everyone; you could be a very interesting piece to a larger puzzle.”

Ultimately, the difference between a company that attracts venture investment and one that doesn’t comes down to fundamentals, says Volpe.

“If you want to be successful, and not be a flash in the pan, there has to be some element of cost reduction or efficiency gain: Making something more convenient or saving money.”

Another leg up? If a company helps solve something that’s government-mandated, “that’s attractive,” he says. “HIPAA compliancy. That’s a huge CIO issue right now. ACOs are another one. They’re coming. What are some solutions in that area?”

Says Volpe: “I’ve done a lot of deals, so I know what we want to see. You’d better have something that cost-reduces, is efficiency-ready, answers some type of mandated need or helps the reimbursement curve. If you don’t have any of those, or you’re missing some big piece of your model, you’d better start over or get a better model pretty quickly.”

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