Janssen Healthcare Innovation, part of Johnson & Johnson’s reconstituted R&D operation in San Diego, is announcing an incentive prize challenge with awards totaling $250,000 for technology solutions that improve care for patients who’ve just been discharged from a hospital.

Janssen says it’s working with the National Transitions of Care Coalition to establish criteria and to recruit experts in transition care to serve as judges. The coalition was established in Little Rock, AR, almost six years ago to address a variety of care issues that often arise after discharge. The lack of coordination often means the primary care physician is unaware a patient was hospitalized (or released), newly prescribed medications don’t get reconciled, and patient complaints go unheeded, which can result in a range of adverse events and increased health care costs.

Hospital readmissions under Medicare cost $15 billion a year, and $12 billion of these readmissions are considered preventable, according to a Janssen spokeswoman. The challenge was announced at the Health Care Innovations Summit in Washington, D.C.

In a statement today, Diego Miralles of Janssen Healthcare Innovation says, “We hope that the Janssen Connected Care Challenge will inspire the best and the brightest entrepreneurs to develop effective, scalable solutions that can be deployed and truly make a meaningful impact in patients’ lives.”

Johnson & Johnson, based in New Brunswick, NJ, has consolidated a variety of its business units over the past year under the umbrella of Janssen Healthcare. Janssen says its incentive prize competition is intended to prompt “a crowdsourcing-inspired effort to rally entrepreneurs’ best ideas.” The goal is to create technology for coordinating patient care within and between different healthcare practices.

More information about The Janssen Connected Care Challenge is available on the Janssen Healthcare Innovation website. Janssen plans to award $50,000 to each of three finalists, as well as the chance to consult with healthcare experts to refine their solution. A winner will be selected in May, awarded $100,000, and get help to advance their concept toward commercialization.

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Two trends are driving the current job market: globalization, where everybody is becoming part of the economy, and innovation, which increases productivity and allows fewer people to do the same jobs. These two trends will not slow down during the next few decades. How should students train in college to build careers under these conditions?

The situation is similar to 150 years ago, when 98 perecent of people farmed. Now we need only 2 percent of the population to look after the farms. The other 96 percent are engaged in businesses that did not exist 150 years ago. Similarly, the globalization of the workforce and the concurrent productivity gains will take care of people’s current needs. New graduates over the next decades will be part of businesses that don’t exist today.

What are these new businesses? We know that the world faces several big challenges such as energy, sustainability, poverty, education and healthcare. We need to solve these problems, but no one is sure how they will lead to specific businesses. This is the challenge and the opportunity for new graduates.

New graduates who want to be players in the new economy will need a strong work ethic, rigor in their thought process, and entrepreneurial energy. In the old economy, individuals mastered a specific skill and practiced it over the course of a 50-year career. In the next 50 years, new graduates will probably change their field of practice every 10 years. They need a good work ethic to be able to learn new things. They need rigor in their thought process to learn to learn. They need to be flexible and be entrepreneurial to adapt to new businesses.

No matter what students study, whether it is technology, journalism, art, medicine, business, or law, they will have to be entrepreneurial to survive and prosper in the next 50 years. In universities they learn to solve problems. In addition to solving problems posed by others, students need to learn how to pick problems that they are passionate about solving. A big part of being an entrepreneur is to learn to pick problems that you want to solve.

I am a big believer that students should create experiential learning opportunities during their university years. They should treat the whole world and its problems as their laboratory, as opposed to confining themselves to their campuses. Picking a problem that they feel passionate about and finding a way to solve it builds confidence and gives students a taste of taking charge. New graduates have to be entrepreneurial and innovative in creating opportunities for themselves as opposed to waiting for others to do it for them.

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The Who once sang, “I hope I die before I get old.” Despite their best efforts to exit the planet early, most of them didn’t. They and their fellow Baby Boomers represent the greatest technology and business opportunity of the 21st Century.

It is typical for each of us to be drawn to areas for which we feel the most affinity. For that reason, most students looking forward see themselves surrounded by people of a similar age while they conjure up products and services attractive to their peers. I teach an MBA class at the Haas School at U.C. Berkeley and so many of the students have great ideas on how to innovate in areas deeply relevant to their day-to-day worlds. The problem is: that is not where the action is. If you are a student today preparing to be the Steve Jobs or Oprah of the next generation, you should be thinking a lot more about what your parents and grandparents need than what would interest your friends.

There are approximately 76 million baby boomers (people born during the years 1945 and 1964). The first of the boomers turns 65 years old in 2011 at a rate of approximately 10,000 people per day, and that trend will continue for the next 20 years. According to the Census Bureau, an estimated 72 million people, or 19.3 percent of the population, will be 65 and older by 2030, compared with 40 million, or 13 percent last year. By 2030, people aged 18 to 24 will represent 9.1 percent of the population, down from 9.9 percent in 2010, according to the Census Bureau. The share of people aged 25 to 44 will drop to 25.5 percent from 26.8 percent. Young people: it is time to start thinking old-you are outnumbered. The best thing you could possibly study is how to conceive of technologies, products, and services that would appeal to the aging demographic—that is where the spending and trending power will reside. “No other force is likely to shape the future of national economic health, public finances and policy making,” analysts at Standard & Poor’s wrote in a recent report, “as the irreversible rate at which the world’s population is aging.”

According to various reports, Boomers already control over 80 percent of personal financial assets and more than 50 percent of U.S. discretionary spending power. A MetLife study shows Boomers stand to inherit over $11.6 trillion in their lifetime in addition to the incomes they make, and the vast majority of Boomers expect to work through their retirement. Boomers already comprise over half of all consumer spending and yes, while they account for over 75 percent of all purchases of prescription drugs and a whole lot of chronic illness (itself a stunningly large business opportunity), they also account for about 80 percent of all travel purchases.

For those of you who think of the Boomers as old and out of touch, note that retirees age 65 and older are the fastest-growing group of social networking site users, according to the Pew Research Center, which adds that over half of baby boomers use social networking sites. If you think that the latest and greatest technology doesn’t apply to the older crowd, you are wrong. New technology is essential to finding ways for Boomers to maintain their vibrancy and independence, as well as ways for us to reduce the skyrocketing costs in our current healthcare system, something that all economists agree is essential to maintaining our national economic viability.

Accordingly, students today would be best served by studying the fields that swirl around and intersect with the fields of gerontology and geriatrics. This means everything from the study of aging in medicine to the study of architecture, engineering and finance as it applies to the Boomer opportunity.

The future of caring for older Americans lays in technology, with vast green field opportunities available in the design of technologies and services that enable extending health and psychiatric well-being. Just one area, Alzheimers’, today costs the U.S. $172 billion annually; by 2020 this cost will be $2 trillion and by 2050, $20 trillion according to recent reports, and that is just one disease that needs innovation, both in treatment and in patient management.

Beyond healthcare, there is a screaming demand for technologies that ensure mobility, enable physical and financial autonomy, provide for social connectivity, and deliver education and work-place skills to those who are looking to their second or third career. People of a certain age don’t want and often can’t use the same products and services that appeal to the young, but also don’t want to buy things that make them feel old. Striking that balance is the innovation opportunity of the next several decades.

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College undergraduates today are faced with many choices of where to concentrate their studies. It is important to look down the road to determine where the major unmet needs of society will be. The healthcare industry offers many opportunities and challenges over the coming decades. As I look to the future of healthcare, there are several trends emerging which might help direct those especially interested in this field.

The most obvious trend is that the population of the United States and around the world is aging. The need to develop new drugs, technologies, devices and services to deal with this demographic shift will benefit those who have chosen careers in innovative fields to address this problem. Experience in chemistry, biology, applied mathematics, statistics, and biomedical engineering are all skills which will be in high demand. As medicine becomes more personalized—as each person gets diagnosed and treated based on their genetic make-up—new technologies will develop in conjunction with the computer science field.

The healthcare industry is also a global market. In addition to our aging population, hundreds of millions of people in developing countries will enter the middle class in the coming years. For example, more people will enter the middle class in China in the near future than the entire population of the U.S. A facility with the language and an understanding of the cultures of countries now making up the global economy will also be useful.

Healthcare will clearly play a bigger role in the global economy in the decades ahead. Innovation will be key to offer more effective, cost-effective cures and treatments for unmet needs. Hopefully, students will take advantage of their universities offerings across various disciplines to gain a broad, worldly education. And that their choice of concentration will lead toward new innovations which can lead to the betterment of the human condition.

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2011 has been a big year for health sciences technology and, specifically, mobile health. Venture capital investors, looking for the next big thing, are beginning to invest in companies developing mobile applications in the health and wellness sector. Smartphones are making new health care applications feasible, and one doesn’t have to look far to see tangible examples of companies creating some buzz. Fitbit, Lark, Zeo, and Jawbone (UP) have all raised capital and developed hardware solutions often tied to Apple’s iOS or Android based phones. Hundreds of companies are targeting weight loss, wellness/ fitness and women’s health with software-only applications. Incubators like Rock Health are popping up, bloggers are beginning to write about the sector, and gamification has become a term commonly used in healthcare. As cleantech investing predictably dies, mobile health and Health 2.0 are taking its place.

Many of these startups, however, are targeting rather niche applications. These applications can often get a large number of downloads when they are offered for free, but never generate big dollars or recurring revenue. So what kind of companies are venture capitalists looking for in the mobile health sector? Here are some of our criteria for what can make a mobile health company a viable, stand-alone business.

Make the output measurable and actionable. Many mobile health products capture data, but what’s important is that one’s progress is measurable and the information provided to the user is actionable. Sure, it’s OK to measure and track someone’s pulse or activity, but what does the user do with that data? What’s important for these products is that they lead to an actual lifestyle change, improve a person’s health, or lower healthcare costs. Startups should think about partnering with companies like WiThings, which has products that wirelessly track progress by capturing data like blood pressure, weight and body fat percentage.

Seamless and easy to use. Data must be transferred to the cloud in a seamless manner. Use Wi-Fi or Bluetooth but, for heaven’s sake, don’t make users connect a device to a USB cable to download data. On a similar note, the user experience must pass the Apple test. It’s got to be easy enough for your three-year-old daughter or 75-year-old grandmother to interpret and use.

Have some defensibility. Sure, if you get enough traction, users, or eyeballs you can monetize later, right? That’s true if you reach tremendous scale. But by and large, if you are not developing something that is inherently or legally difficult to copy, you’ve lost some value.

Address a large, no huge, market. Part of the success of Facebook and Twitter is that anyone in the world can use them. The obesity and weight-loss markets are large but their products are often fads and short-lived. Many mobile application companies addressing niche markets such as brain workouts, pregnant women, or hard core athletes are inherently limited.

Have the ability to monetize long term. Few venture capitalists want to invest in a one trick pony. If the application costs $.99 and you get 10 million downloads, that sounds cool and would be great for an individual founder, but it does not make an independent, sustainable company. Mobile health applications need to have a long-term development path and quick release cycle to add features and capabilities that:

1. Maintain stickiness and reduce churn, getting people to continue to use and pay

2. Increase initial premium uptake or conversions to a paid subscription from freemium.

Plan to work with the healthcare system. Yes, direct-to-consumer sounds cool and seems like a great approach, but it’s important to realize that consumers expect other people to pay for their health care. Certainly weight loss and some wellness markets are large, but … Next Page »

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Venture capital deals backed off just a tad during the last three months of 2011, but remained strong enough to carry VC activity during the year to a new high-water mark, according to data being released today by CB Insights, a financial data firm that maintains a venture capital database.

VCs invested $7.6 billion in 755 companies nationwide during the fourth quarter, bringing the total for 2011 back to pre-recession levels, with $30.6 billion invested in 3,051 deals. The New York firm says that marks a 10-year high for both dollars and number of deals.

In the regional breakdown, Massachusetts regained its No. 2 ranking, eclipsing venture activity in New York during the fourth quarter. CB Insights reports that a total of $959 million was invested in 93 Bay State deals. In New York, $568 million went into 73 deals, which ranked third in terms of both deals and dollars.

California maintained its usual poll position during the quarter, with the $3.8 billion invested statewide accounting for just over half of the nationwide total and the 300 deals representing 40 percent of the total U.S. number. There wasn’t a lot of variation in California’s deal count over the previous four quarters, but the capital invested during the quarter was 45 percent higher than the $2.6 billion that went into the Golden State during the same quarter of 2010.

In Washington State, venture activity remained well behind the big three, with $146 million invested in 24 deals during the quarter, prompting the wags at CB Insights to write, “We’ll bring back our ‘Sleeping in Seattle’ metaphor as Washington continued its … Next Page »

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In short order, startup incubator Rock Health has become one of the Bay Area’s hubs for entrepreneurs working on technology ideas that could change healthcare delivery.

Formed last year to test whether the startup accelerator model pioneered by organizations like Y Combinator and TechStars will work in the healthcare industry, Rock Health has already graduated its first class of 13 startups and assembled a high-powered group of entrepreneurs, investors, and other advisors to mentor the early-stage companies in its network. (A second group of startups enters the program this month.)

Rock Health drew on this community to fill a banquet hall at Farallon in downtown San Francisco this Sunday, on the cusp of the annual JP Morgan Healthcare conference, which draws much the leadership of the U.S. biotech and pharmaceutical communities. Loosely designed to recognize the 50 leading influencers in digital health, the dinner also served as a prime networking opportunity—and, for some entrepreneurs, a chance to show off their wares. AliveCor chief medical officer David Albert, for example, gave live demonstrations the company’s portable cardiac monitor, which is built into an iPhone case (see the third image in our slide show below).

“We organized the event to recognize and celebrate the leaders making things happen in digital health,” says Leslie Ziegler, creative director at Rock Health. “We hope the format of the evening allowed these diverse minds to talk freely about the future of the space, meet and support newcomers, and find new ways to collaborate.”

San Francisco-based photographer Toni Gauthier was on hand to document the event, and Rock Health has shared some of the resulting images with Xconomy, which was a media sponsor of the event. The dinner’s main supporters were Rock Health partners Silicon Valley Bank and Fenwick & West.

	NEXT IMAGE >>
	L to R: Michael Esquivel (Fenwick & West), Leslie Ziegler (Rock Health), Jackson Wilkinson (WeSprout).
	Photo by Toni Gauthier

… Next Page »

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EveryMove, a member of the Seattle TechStars 2011 class, has filed regulatory paperwork for a $375,000 investment round. Investors weren’t disclosed, but BuddyTV founder Andy Liu and Premera BlueCross vice president Kent Marquardt were listed on the SEC form as directors (Liu also is listed as an executive).

EveryMove is building a health-tracking software service that will connect users with rewards from employers, insurers, and consumer brands. A user who checks into their gym via Foursquare and completes a series of runs via Runkeeper, for instance, could qualify for a discount from their insurance company.

EveryMove already had a deal with BlueCross worked out as of last fall’s TechStars Demo Day, and announced at that time that it had secured investment commitments for $1 million. Today’s paperwork indicates this round could climb to about $2.5 million overall.

In an e-mail today, co-founder and CEO Russell Benaroya says the SEC filing reflects “a first close that we wanted to get done in calendar year 2011.” EveryMove’s technical co-founder is Marcelo Calbucci, known most recently for founding the website and events company Seattle 2.0.

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‘Tis the season for end-of-year acquisitions to be announced, now that everyone’s back at work. Hopkinton, MA-based VelQuest, a maker of pharmaceutical and medical device-related software, has been acquired by San Diego-based Accelrys (NASDAQ: ACCL), the scientific R&D software firm, for $35 million in cash.

VelQuest started in 1999 and is led by CEO and co-founder Ken Rapp. Its investors include GE and MedEquity Capital. The company makes software that helps life sciences organizations manage lab test procedures efficiently and in compliance with FDA regulations. “All key members” of the VelQuest management team are staying on post-acquisition, according to the press release.

Accelrys makes a wide range of modeling, simulation, lab management, workflow, and data management software. The VelQuest acquisition adds another piece to the corporate strategy that Accelrys CEO Max Carnecchia outlined last year. He said the company aspires to help its customers manage the entire process of scientific development by offering a range of software products that can harness the innovation, experiments, modeling and simulation, and other work being done in labs on a global basis, both within their own organizations and within their collaborators.

The company says it has more than 1,300 customers across pharma, biotech, energy, chemicals, aerospace, and other industries.

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[Editor's note: As a New Year's exercise, we asked a select group of Xconomists to answer this question: "What's the craziest idea out there that just might succeed?"]

Reinventing the absolutely dysfunctional healthcare delivery system in the U.S. It is a daunting idea, as it requires major changes in 100 years worth of doctor and patient behavior, as well as an enormous shift in our healthcare payments ecosystem. Why might it succeed? We have no choice. If it does not change, the “American Dream” is over – and we now have the tools to do it. What will be the underpinnings of this change? Firstly, turning people into consumers of healthcare—where they investigate, compare, and shop for services with an eye towards the most efficient use of resources (time, money, etc.) for the best outcome; and secondly, evolving the way in which we pay for healthcare from a pay-for-volume approach to a pay-for-outcomes approach.

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I didn’t know the full extent to which the Boston area has a thriving data and analytics startup scene.

I had always associated the city primarily with biotech innovation. My company, Chart.io, provides hosted business dashboards to help companies visualize their database data. We’re based out in San Francisco (we were part of the 2010 Y Combinator class), but our investors, Avalon Ventures, call Boston home. When my friends at Avalon-backed Kinvey (mobile backends as a service) and Boston-based SessionM (a platform to spark deeper consumer engagement with mobile content and ads) and I decided to co-host a data visualization and analytics meetup for the local community, we expected to get 20-30 RSVPs at most. Instead, we broke 100 in a flash and saw a steady torrent of emails from data enthusiasts pleading for admission.

In fact, a deeper look into the Boston tech scene reveals quite a rich history of data and analytics companies, including Netezza, Endeca, ITA, EMC, and other giants. And it turns out, the startup scene is equally rich, with companies innovating around NoSQL, data storage, search, healthcare, and a variety of cloud computing ventures. Here’s a quick tour of the Boston- data landscape. And this is only the tip of the iceberg.

As data volumes have exploded in the past decade, so have the number of companies building tools to store, retrieve, analyze, and generally manage the deluge of data.

Two Boston-area companies, Cloudant and Basho, are tackling the big data problem through non-relational databases (NoSQL), designed to handle hundreds of gigabytes and even terabytes of data and enable applications to elastically scale out to meet the demands of millions (or hundreds of millions) of concurrent users. In this vein, Cloudant offers tools to help companies use Apache CouchDB, while Basho developed its own data store called Riak.

Meanwhile, other local firms are focusing on the next generation … Next Page »

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Last year about this time of year I wrote a parody of ‘Twas the Night Before Christmas about the coming of healthcare IT and meaningful use. I decided to make these holiday parody songs an annual event. I figure I have years of material, as there are so many ways of ruining an otherwise joyous holiday gem by mixing it with healthcare and public policy.

This year’s victim, Santa Claus is Coming to Town, was written by J. Fred Coots and Haven Gillespie in 1934. The original lyrics to the song can be found here. The song is a little weird because it lets kids know that Santa Claus is watching them all the time like some sort of red velvet-clad big brother machine. If the children aren’t good they won’t get any presents for Christmas, so the song has the extra-added attraction of veiled threat. Kind of reminded me of what’s happening with health reform and the Patient Protection and Affordable Care Act (PPACA). For those in the healthcare industry, there is definitely a feeling the eyes of government are upon them. Insurers, employers, medical device and drug manufacturers had all better watch out or the best thing PPACA is going to leave them come 2014 is a lump of coal.

Note: for purposes of this song, PPACA is pronounced PEE-Packa

PPACA Is Coming To Town

Oh,
The doctors will pout
The Demos whine
The health plans will shout
I’m telling you why
PPACA is coming to town

Hospitals get dissed
By patients checking-in twice
Payers won’t find the profit caps nice
PPACA is coming to town

And all the states are freaking
’bout the individual mandate
Here’s hoping an exchange is good
For the ones health plans forsake

Consumers scream out
“You can’t force me to buy”
Republicans shout
“We’re all gonna die!”
PPACA is coming to town

New taxes mount
On drugs and new knees
Everyone pays
In two thousand fourteen
PPACA is coming to town

Court-watchers doubt
The Supremes can soon find
A way to uphold
And not to unwind
PPACA is coming to town

And CMS is hoping
ACOs will light the way
But CFOs are choking
Bundled payments make them pray

We all better hope
What we get from D.C.
Will drive quality up
And get costs to decrease

PPACA is coming to town!

And in case you forgot the tune, here is a version of the original song sung by the great Frank Sinatra

Happy Holidays everyone! And to all my Jewish friends, sorry about the Christmas song bias…not much you can do with Dreidel, Dreidel, Dreidel.

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If you’re a hammer, you just want to smash nails; if you’re a programmer, you just want to build features. But features do not a successful product make. This is the central myopia that eventually blinds even the most brilliant engineer-entrepreneurs, unless they’re smart enough to surround themselves with people who can check their bias.

If you want an interesting example of this phenomenon, look no further than Adam Bosworth, the co-founder and chief technology officer at San Francisco-based health gamification startup Keas. There’s no question about this guy’s brilliance. At Citicorp in the late 1970s, he invented an analytical processing system that helped the bank predict changes in inflation and exchange rates. At Borland, he built the Quattro spreadsheet, and at Microsoft, he built the Access database. He was one of the first to propose standards for XML—the foundation of most Web services today. At Google, he helped to develop Google Docs before moving on to start Google Health.

But as everyone knows, Google Health was a failure—and so was Bosworth’s next effort, Keas, at least until the venture-backed startup went through a dramatic pivot in 2010. How Bosworth figured out that his old approach wasn’t working, and how Keas reinvented itself as a provider of health-focused games for large employers, is the tale I want to tell you today.

It’s looking like there will be a happy ending: Keas (pronounced KEY-us) is bringing on 90,000 new users per quarter and has grown to 20 employees, thanks to continued backing from Atlas Venture in Cambridge, MA, and Ignition Partners in Bellevue, WA. But to hear Bosworth tell the story, things were touch and go for a while, and Keas didn’t really turn itself around until Bosworth stopped looking at his beautiful software code and his analytics dashboards and started listening to young psychology majors and game designers.

“Most software people don’t start by thinking about psychology,” Bosworth says. “Most software people think about features first, because they are concrete and they know how to implement them. They think, ‘I would want this, therefore my users would want this.’” But sometimes—perhaps most of the time, Bosworth argues—they’re dead wrong.

Keas CTO Adam Bosworth

Bosworth grew up in New York and graduated from Saint Ann’s, a private academy where his father, Stanley Bosworth, was the founding headmaster. He says he discovered early on that he is dyslexic, and that he learned to compensate by thinking in pictures. This gave him a talent, he says, for “basically taking Lego blocks for adults, and finding really simple ways to help people build solutions to hard problems.” Those skills enabled him to make breakthrough after breakthrough in the software world, and turned him into one of the hottest commodities in Silicon Valley—Bosworth has ducked recruiting attempts by Facebook’s Mark Zuckerberg, among others.

But it was during the Google Health project that the limitations of Bosworth’s data-centric point of view began to show through. The idea behind Google Health was to get millions of people to put their health records—medications, lab results, immunizations, chronic conditions, and the like—on the Web in a central, secure repository accessible to them and their caregivers. “The idea I had was that in order to help anyone be healthier, you would need their health data,” he says. “This was in 2006, when only 10 percent of doctors had access to electronic health records, and only 10 percent of them would share it with patients, meaning that 99 percent of people weren’t able to get their own health data electronically.”

At the same time, coincidentally, personal financial management startup Mint.com was getting off the ground. “I had in mind doing Mint.com for health,” says Bosworth. Mint had three features that Bosworth wanted to emulate: … Next Page »

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If you are simply reading the paper or engaging in any random cocktail party conversation these days, it doesn’t take long before you are reading or talking about healthcare. Health and healthcare issues have been a dominant topic in the national media since the 2008 Presidential election and have been constantly in the news as the Patient Protection and Affordable Care Act (PPACA) has taken center stage. Even if PPACA weren’t always in the headlines, stories about employers who are grasping for solutions to their healthcare cost crises would still be.

Given the massive amount of change currently underway in the U.S. healthcare economy that has resulted from PPACA, the earlier healthcare IT stimulus legislation (ARRA) and the acts of employers saying that they’re mad as hell and not going to take it anymore, we have bona fide industry upheaval on our hands. And where there is upheaval, there is opportunity. Today more than ever there is a tremendous opportunity to find new ways of doing business in the world of healthcare through changing delivery systems, insurance models, technology solutions, drug discovery, device innovation and just about everything else that takes place in the healthcare system. Never before has there been so much energy and so much necessity to produce innovation in our field.

So given this, why are venture capitalists in the healthcare field fleeing like female co-workers from Herman Cain? Historically the source of funding for so much innovation and employment in the healthcare field, venture capitalists with lengthy histories funding the drug, device, service and IT companies of tomorrow are picking up their marbles and going home. Last guy out turn out the lights.

Last week the National Venture Capital Association (NVCA) said the following in their blog:

“…today we can say officially that we are seeing an alarming trend in the area of life sciences investing with the announcement that Scale Venture Partners will cease healthcare investing permanently. This exit follows the announcement last week that long time, established funds Morgenthaler and Advanced Technology Ventures would be effectively spinning out their healthcare investment practices and the announcement just over a month ago that Prospect Ventures would not raise a fourth healthcare fund and return committed capital to limited partners.”

What they didn’t include in their article were the additional facts that Highland Capital Partners recently decided to cut back its healthcare practice, CMEA Ventures has decided to make no more medical device investments and that Versant Ventures appears to be on the verge of reducing its healthcare practice if the industry buzz is correct. There are rumors afoot that a slew of others firms on Sand Hill Road are in the process of divesting themselves of their healthcare practices and there are several others that I know for sure already have taken steps in this direction but have not yet announced it formally.

To add to the pile, the NVCA released a report in October called Vital Signs. The report documents a survey that found that U.S. venture capital firms have been decreasing their investment in biopharmaceutical and medical device companies over the past three years and are planning to decrease their commitments to these areas even more. 39 percent of the 150 firms surveyed report decreasing their investments in life sciences companies over the last three years and the same percentage expect to further decrease these investments over the next three years, some by greater than 30 percent. According to NVCA, this is twice the number of firms that plan to increase healthcare investments.

Given this, I suppose the mass extinction we are now watching is predictable, if sad. It is certainly possible there was too much capital chasing healthcare deals, but now we are likely to swing too far in the other direction. Also, … Next Page »

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Twitter has already sucked away 20 percent of your life. What’s another 30 minutes?

If you don’t know Kabir Shahani or his startup, Appature, here is your chance. I will be hosting a live Twitter chat with him tomorrow (Thursday, Nov. 3). This open chat will start at 2 pm Eastern / 11 am Pacific Time, and you can ask him whatever you want for 30 minutes.

What’s the occasion? Well, Shahani will be one of our featured speakers at Xconomy’s “6×6: Six Cities, Six Big Tech Ideas” conference in Boston on Dec. 1, and I want to give him a hearty welcome.

I got to know Shahani and Seattle-based Appature while I was living in the Northwest a couple years ago. The company has a remarkable story. It started in 2007 and bootstrapped itself to profitability before taking a VC round in late 2009. Appature is also interesting because it is complementary to many companies in Boston’s marketing tech cluster, like HubSpot, Constant Contact, BzzAgent (Tesco), and Buzzient. It works with a lot of healthcare companies and institutions around Boston and the East Coast. And, of course, it is going through many of the same growing pains that young companies around Boston (and elsewhere) talk about, as it expands its customer base across the country.

Appature’s founders are hardcore techies with a social networking background, but they chose to go after the healthcare market—making new kinds of software tools for medical device and pharma companies to build relationships with their customers (mostly hospitals and doctors), all in a fundamentally different way from traditional marketing.

So, in our live chat, I’m interested to hear what the big idea is all about at Appature and why it chose its particular niche. Other areas up for discussion include social marketing trends in healthcare and other industries; startup/VC lessons and tech advice; and maybe a little Boston vs. Seattle talk (in terms of innovation ecosystems, talent, and coffee). I’ll bet the tech and healthcare communities will have some good questions for Appature, too—so please get them ready.

Here’s how it will work on Thursday. I’ll send off a few questions to Shahani from @Xconomy, and then we’ll open it up to everyone’s questions. Shahani will be responding from his personal account, @Kabir, with an assist from his team @Appature. And we will all keep track of the running dialogue using the hashtag #XCappature. That’s the key for you to follow the conversation on Twitter. (You can use TweetChat or another app to focus on the half-hour discussion, or for however long you want to tune in.)

See you online at 2pm ET / 11am PT on Thursday…

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Anthony Loiacono was hunting around for startup ideas a couple of years back when he came across a statistic he had a hard time believing: Every two weeks, $12 billion worth of pharmacy claims flows through the health-insurance system, and not a single one of those claims is checked for accuracy before it’s paid. “People just pay those invoices blindly,” Loiacono says. “I said, ‘That can’t be true.’”

From disbelief came Truveris, a company that Loiacono co-founded in New York with fellow entrepreneur Leon Greene in 2009. Truveris markets a software-as-service platform that enables health care payers such as insurance companies and large employers to review their pharmacy benefit manager (PBM) invoices for cost accuracy and other metrics prior to paying them. The product not only summarizes the claims in an online report, but it also provides tools for payers to reconcile any improper charges that are caught during the review.

The idea is clearly catching on. In the two years since it was founded, Truveris has attracted several big-name customers, including Northrop Grumman, Morgan Stanley, and AXA Equitable. It raised $3.8 million in a Series A round in February from GSA Venture Partners (now Tribeca Venture Partners), New Atlantic Ventures, and First Round Capital. On October 6, the company recruited a new CEO: Bryan Birch, whose experience includes running the health maintenance organization (HMO) Touchstone Health and managing employer accounts for pharmacy benefit giant Medco.

Birch has seen firsthand the inefficiencies inherent in pharmacy benefit claims. He learned about Truveris when he was CEO of Touchstone Health, an HMO for Medicare recipients. “Payers have no avenues for reviewing bills. When they protest, PBMs are reluctant to … Next Page »

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There seems to be a theme in Massachusetts venture investing right now. Things aren’t quite as hot as they were earlier this year, but are still trumping last year’s numbers for the same period. That’s what my colleague Greg noted about the MoneyTree report for Q3 2011 venture investing. And that’s what I’ve observed here with data from CBInsights FundingFlash—a daily roundup of companies receiving venture capital, angel investment, and growth equity funding—surrounding startup deals last month in Massachusetts.

On to the specifics. Twenty-nine Bay State startups raised a collective $253.8 million in equity-based deals in September. That’s an increase from the August ($156.5 million) and July ($250 million) funding totals. And September 2011′s funding is well above the total from September 2010, when startups pulled in $146.7 million in 25 transactions. But it’s still nowhere close to June’s massive $564.7 million pot, so talk of a bubble might have been premature.

The surge in September financing can largely be attributed to a $125 million Series F funding round for Westborough, MA-based Boston-Power, an advanced lithium-ion battery developer. (Note, this deal wasn’t included in the MoneyTree Report, likely because SEC documents for it had not yet been filed.) While the financing—which came largely from the Chinese government and a Beijing-based venture firm—helped plump up the deals total for the month, its overall effect on Massachusetts is mixed. As part of the deal, Boston-Power cut about 35 percent of its 80-person work force in the state as it shifts operations to China to pursue electric vehicle applications for its technology there.

The Boston-Power deal handily made energy the leading sector for the month, with $131.8 million raised across three deals. Healthcare followed with $71.2 million raised in eight deals, which included $23 million for Tokai Pharmaceuticals and $15 million for Tensha Therapeutics, both of Cambridge, MA. An SEC filing in September showed that Watertown, MA-based Arsenal Medical had raised $12 million, but just this week the company announced an $18 million financing round, which included $15 million for its new spinout, 480 Biomedical.

The Internet sector had the highest number of deals last month, with 10, and came in third for funding raised, at $39.2 million. The top deal in that sector and the fourth-largest deal of the month was a $13 million Series D financing for Boston-based Visible Measures, a maker of software that helps advertisers and publishers track the performance of online video. Massachusetts companies also raised another $10.5 million in 10 debt- or rights-based financings last month.

Check out the list below for details on the top 5 deals:

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Last week I was struck in particular by a comment that one reader appended to my post about the formation of a $100 million West Health Investment Fund by San Diego philanthropists Gary and Mary West.

The Wests say they created the fund (and are providing the entire $100 million themselves) to invest in “cutting-edge” medical technologies that offer “the potential to substantially reduce” healthcare costs. The comment left by my one skeptic argues that advancing new medical technologies will accomplish virtually nothing to lower health care costs.

“High health care costs are tied up not in technologies, but in administration and delivery of care,” the reader wrote. “It’s a people & process problem, not a tools problem.”

I thought it was an insightful comment. So insightful, in fact, that I decided to ask several healthcare leaders to respond. After all, haven’t innovations in medical technology historically driven healthcare costs higher—not lower? As luck would have it, I was able to put the question to several healthcare leaders at a downtown reception that was organized to celebrate the formation of the new West Health Investment Fund.

The experts I cornered were Eric Topol, the cardiologist, chief academic officer for Scripps Healthcare and director of the Scripps Translational Science Institute; Don Casey, CEO of the West Wireless Health Institute and manager of the new West Health Investment Fund; and David Gollaher, CEO of the California Healthcare Institute, an independent research and advocacy group that aims to advance the interests of California’s biomedical community.

Q&A with Eric Topol:

Xconomy: I’ve got a reader who says technology is the wrong area to focus on when it comes to lowering health costs. He contends that escalating costs are really the result of people and processes.

Eric Topol: I don’t agree with that.

X: Well, I’ve heard you talk about how moribund and ossified the medical community is, and FDA regulations and so forth.

ET: This puts out a grand challenge. It says, “Hey, we’ve got a … Next Page »

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San Diego philanthropists Gary and Mary West lifted the curtain today on a $100 million fund they have established solely to invest in “cutting-edge” medical technologies and services that offer “the potential to substantially reduce” healthcare costs.

The new West Health Investment Fund says it is targeting its investments in “early stage opportunities” with a strong preference for pre-commercial and early commercial companies. The fund, which is tied closely to the San Diego-based West Wireless Health Institute, already has invested in six startups throughout the nation, including San Diego-based Biological Dynamics and Sotera Wireless.

“Since Mary and I established the West Wireless Health Institute in 2009, we have seen literally hundreds of companies focused on innovative and low cost health care solutions that cannot find funding,” Gary West says in a statement today. “Without financial support for low-cost health care innovation, the research we do at the Institute and the work other agencies, institutions and entrepreneurs are undertaking will have a tougher path toward becoming a reality and actually lowering health care costs for the public.”

The fund comes at a time of rising apprehension about U.S. health costs, which amounted to 17.6 percent of the country’s Gross Domestic Product (GDP) in 2009—and are projected to escalate to 25 percent by 2025.

As Luke explained earlier this year, it’s no longer enough for life sciences companies to prove to federal regulators that a new medical technology is safe and effective. Cost constraints are enforcing a new reality—and a new imperative—to develop technologies that also drive down healthcare costs.

The fund says it is directing its investment returns to advance other medical research, and Gary and Mary West will not individually profit from the fund’s investments. Investment returns will instead go “to sustain the mission of philanthropic work to lower health care costs,” according to a statement released today. The Wests, who now live in suburban Rancho Santa Fe, made their fortune (estimated at more than $2 billion) from a series of Omaha, NE-based telemarketing companies.

A report by Keith Darcé today in The San Diego Union-Tribune says investment profits would be returned to the San Diego-based West Wireless Health Institute, the nonprofit medical research institute that is closely affiliated with the investment fund. The fund’s manager is Don Casey, CEO of the West Wireless Health Institute, and all of the principals identified with the fund are also senior executives at the institute. Unlike most venture funds, however, there will be no management fees and no carried interest for the fund managers, whose compensation is salaried.

Casey signaled that such a fund was in the works more than a year ago, during an open house attended by hundreds. He noted during his welcoming remarks there was an “opportunity at the West Wireless Health Institute to set up a venture fund that would serve as a beacon” for the institute’s mission. The Wests established the institute more than two years ago—and have pledged $90 million—to develop advanced wireless health technologies that can help drive down health costs.

The investment fund says its targeted areas of interest include health care technologies, data analytics, technology-enabled services, cost transparency, and interoperability—all areas that offer opportunities to transform health care delivery and lower health care costs.

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First of all, the name is Ginger.io, not Gingerd. The latter is how the company was incorporated; but the former is its real name.

And real is what Ginger.io is becoming. Since graduating with the most recent class of TechStars Boston startups, the MIT Media Lab spinoff (from professor Sandy Pentland’s research group) has been heads-down working on its product—software that helps healthcare providers and pharmaceutical companies monitor the behavior of patients via their mobile phones.

The startup has been busy fundraising too—and it is naming its investors today. Ginger has closed $1.7 million in first-round financing led by Silicon Valley-based True Ventures. Also participating were Kapor Capital (Mitch Kapor’s VC fund), Romulus Capital, and a number of angel investors, including Bill Warner, Walt Winshall, James Joaquin, and Ty Curry. All together, Ginger’s investors and advisors represent a pretty interesting mix of people with experience in big data, healthcare, and mobile software.

Here’s the idea. A mobile phone can provide crucial information about its owner’s activity level, location, and communication patterns—all in real time, more or less (assuming the person opts in). That information could be valuable to drug makers and hospitals looking to track the results of clinical trials, market medications to certain types of patients, or design new therapies for things like diabetes, obesity, or brain disorders. The data alternatives—behavioral self-reports, surveys, and the like—are famously unreliable by themselves. With this in mind, Ginger is not one of the dozens of startups developing consumer apps for tracking one’s own health and wellness (though that’s sort of where the company started). No, this is a business-to-business play.

But here’s the bigger idea. What’s really valuable is not so much the data as the insights and patterns that can be gleaned from that data. If Ginger’s software knows how you behave on a “normal” day, for example, it can figure out when your behavior changes—maybe you’re stuck in bed, or not calling your usual friends—and correlate that with indicators of problems such as doctor visits. If the software tracks a population of patients taking a drug, and some respond in an expected way but others don’t, the pattern might suggest a way to target the drug more effectively.

“If you’re a pharmaceutical company, to know a segment is behaving differently and doing better on that drug, that can help you market that medication,” says Anmol Madan, co-founder of Ginger.io and a Media Lab PhD.

What’s more, the company is harnessing its tools in computer science, machine learning, and data analytics for a much deeper purpose. “It’s about understanding people,” says Frank Moss, the former Media Lab director and software technologist who serves as an advisor to Ginger (he’s also an Xconomist). “I think it’s going to be revolutionary.”

Moss is talking about Ginger’s potential to “discover the principles behind … Next Page »

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