You Say You Want A Healthcare Revolution?

6/21/12Follow @venturevalkyrie

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find conventional sources of financial backing for their ideas. Many of them described a venture capital field that has mirrored the risk aversion of the buyer market, leaving healthcare innovators to max out their credit cards and do damn near everything short of selling pencils on a street corner to find ways to finance their ideas for revolutionizing the universally acknowledged mess of a healthcare system.

Those investors among us who caught the arrows slung by our dinner companions described the conundrum that we face because our own backers, the community of institutional limited partners, is wholly unimpressed with healthcare returns and as a result is uninterested in shifting money away from finding the next Instagram. It is classic trickle-down economics: it’s a struggle for VCs to raise investment capital to fund healthcare innovation, so there isn’t much to hand out to those seeking it to deliver healthcare innovation. The good news is that we are starting to see the emergence of non-traditional limited partners (e.g., corporations with a strategic interest and socially-oriented non-profit foundations) investing with a combined business and social mission that is squarely focused on improving the healthcare system. But the volume of capital they bring to the market is no where near enough to finance the changes in the system we all know we need. While there are still a few healthcare-focused VCs, those targeting seed and early stage investments are a bit like white tigers—a genetic mutation known to exist in nature but rarely seen with the human eye.

It is a worrisome state of affairs, in my opinion, to breed a generation of highly frustrated entrepreneurs who ultimately throw up their hands to go build photo sharing websites, or worse, turn to other countries more eager to fund the healthcare innovation that should be Made in the USA. We are already seeing evidence that innovation leadership is moving offshore to India and China and elsewhere in the medical device industry as similar issues surfaced in that sector. We had better be careful or healthcare IT will follow behind it, leaving us with Flintstones-era technology and technology-enabled (disabled?) services while we watch Medicare lapse into insolvency, taking the rest of our economy with it.

Revolutionizing the U.S. healthcare system is truly a matter of national economic security. Nibbling at the edges simply isn’t going to cut it. We need to fundamentally and profoundly change the way our citizens care for themselves by helping them have access to healthy food choices and preventative health products and services, while ensuring that those who are sick get treated in a way that delivers true value, both in terms of quality and cost. We don’t really have the time for incrementalism. Medicare hits the insolvency brick wall around 2024 and it’s is estimated that our current trajectory will bring the U.S. from our current $2.8 trillion national healthcare spend to $4.8 trillion by 2020—only slightly more than the likely M&A purchase price of the next Instagram.

Lisa Suennen is Managing Partner at Venture Valkyrie Consulting, a firm providing advisory services to companies, organizations, and private equity firms in the healthcare field, and the co-author of Tech Tonics: Can Passionate Entrepreneurs Heal Healthcare With Technology? Follow @venturevalkyrie

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  • retrievethis

    The medical device industry has “jumped the shark” for many consumers and perhaps for VC, too.  Demands for quicker approvals of unproven, more expensive ‘innovations’, no tax, no warranty, no post-market independent data and judicial entitlements at the expense of patient harm/citizen rights may eventually prompt revolutionary rethinking.  The #1 expense of Medicare is joint replacement.  Anybody listening?

  • Fsowa

    The joint-venture between IBM Watson’s Healthcare Solutions, Nuance Communications, Apple (iPhones and iPads with Siri); and Google Android (smartphones and tablets with Google Go) and Dragon Naturally Speaking Software from Nuance — will create the disruptive innovation potential for a speech-recognition (SR) “voice-driven user interfaces” a “VUI” (at least in healthcare, and in investment banking and other situations where speed and ease of voice supercedes the need for “graphics” i.e. NOT the best for manufacturing and engineering) that will replace the traditional web-based graphicl and text-based user interface (GUI).

    That would be a monumental shift in the stale healthcare industry — as it would at least half the costs going forward under the Affordable Care Act, and the Health Records Act — making the projected deficit spending trendline flatten out through 2024. And it would create a deep data mined “big data” collective, that would act as a “physician’s assistant” and rapidly diagnose health issues using smart-AI to autonomously ‘learn’ about human health.

    It was driven by the DARPA CALO Initiative — and was designed to provide field military and surgical assistance in disaster areas and war zones — and has already been deployed in special operations and the US Army Medical Corp. Now, it’s time to reap rewards in the civilian sector through IBM’s Solutions for a Better Planet work in SR and linguistics. Because of this, as a futurist, I’d have to disagree with the conclusions drawn in your opinion piece.