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WSJ: Beware of Health IT Bubble: Not Enough ‘Actual Business Plans’
Veteran VC Says Beware of Health IT Bubble: Not Enough ‘Actual Business Plans’

Timothy Hay from the Wall Street Journal  wrote a great article after he interviewed me.
With software executives filling out the roster at this year’s JP Morgan Healthcare Conference, and with the reported IPO plans of medical cost-transparency software provider Castlight Health at a $2 billion valuation, information-technology for the health-care industry is beginning to look nearly bulletproof as a sector. But with feverish activity and high valuations comes the danger of a bubble, said veteran investor Anne DeGheest, who was an investor and entrepreneur through the tech boom of the 1990s, and who founded Sand Hill Road firm HealthTech Capital several years ago.

 

Ms. DeGheest has invested extensively in medical devices and in health-related information technology, and she said she learned in the ‘90s to read the signs of an economic bubble. She sees some of those signs today, telling Venture Capital Dispatch of a potential “Series B crunch” as a number of health entrepreneurs without solid business plans try to raise money from investors.

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Anne DeGheest | 04 February 2014

FutureMed panel on funding innovation in healthcare.
 

Funding of life science companies are going through drastic changes!


Today, I was on a funding panel organized by Singularity University during their FutureMed program. Traditional medical devices and biotech companies are facing a significant funding gap from the shrinking venture industry. This is due to the lack of clarity of the FDA approval process and the challenges in getting reimbursement for new products. As a result funding in traditional life science companies has decreased significantly especially for the earlier rounds. However a new sector is emerging under different names: digital health, mobile health, HIT or HealthTech. The direct to consumer applications have seen a surge of new startups in the last 12 months, followed by Angels or technology venture capitalist. There are two areas that are emerging with significant opportunities:



  • Improving the productivity of the existing healthcare providers in the existing fee for services payment system and under the upcoming patient population driven by the healthcare reforms.

  • Engaging the patient to take responsibility to manage their health or chronic disease conditions.

These two sectors will require new approaches in building businesses. Starting with a small amount of initial capital, these young companies need to be heavily mentored to understand the pain points of all the stakeholders in the healthcare systems, engage consumer to change behavior, leverage the new mobility and social platform.. Without requiring significant capital investment!


These are the time of defining pain points, quick prototyping, customer feedback, product iteration to understand user adoptions.....and the revenue model!


Too many entrepreneurs are developing cool apps... Without spending enough time on the business issues. Since there may be low IP protection, what are the barriers of entry on the business side? How will your acquire the customers..at an acceptable cost? How will you retain them? Who will pay..and why? What will you have to do to convince them? Do you have to interface with the existing medical information system? How scalable is you backend operation?   These are questions that you first investors will ask.. If you don't have these answers you will need a clear roadmap on how to get them!

Anne DeGheest | 09 February 2012

Health Innovation Summit

On January 20, 2012, I was a speaker on the panel "Funding Mechanisms" at the Healthcare Innovation Summit in San Francisco.


The key takeaway are:

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Anne DeGheest | 25 January 2012



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