Show Me The Money Featuring Roz Ben-Chitrit, President of Sanford Rose Associates – Southern Connecticut

||Show Me The Money Featuring Roz Ben-Chitrit, President of Sanford Rose Associates – Southern Connecticut

BY: ROZ BEN-CHITRIT
Published: Tuesday, September 3, 2013

Telehealth and mHealth are “hot” in terms of expected growth. While “experts” disagree on the rate and size of growth, and what solutions are included under these terms, the numbers are still huge.

Transparency Market Research predicts growth of the mHealth global market from $1.3B in 2012 to $10.2B in 2018. Looking only at telehealth, BBC Research predicted in 2012 that the market would reach $27.3B in 2016.

These are big numbers. And they are attracting both entrepreneurs and investors.

For this week’s newsletter, our regular contributing expert Roz Ben-Chitrit spoke with several high profile investors (including Dr. David Brailer) to get their insights on what’s hot in the growing industries of mHealth and telehealth. This article is for you if you’re trying to figure out

  1. where to evolve your telehealth / mHealth solutions (as a user or as a vendor),
  2. what you’ll be competing with, or
  3. where to invest your time and funds for future growth

The mHealth and telehealth sectors are bursting with new and entrepreneurial products and services. So it’s no surprise that the niche has attracted the attention of investors – from private equity to venture capital to angel investors. In July, Ken Terry at Information Week wrote that “investment in ‘digital health’ companies grew 12% in the first half of 2013 to $849 million”. The number of deals grew by 25%. And while the numbers are good, some people believe they could – and should – be bigger, especially for start ups, which rely mostly on angels and venture capital firms.

Once upon a time, not so long ago, medical device entrepreneurs drew in buckets of cash from investors committed to healthcare technology. But whether the impact of the medical device tax, FDA hurdles or other challenges are to blame, those investors have all but disappeared.

So where is a savvy healthcare-loving investor going to put her money? Products or services? Infrastructure or apps? B2B or B2C plays? Hardware or software?

With so many avenues to consider, it can be bewildering at times.

I had the privilege to speak to some investors who have a fondness for “connected health” and who shared some thoughts about why they like this space and what they’re looking for.

Risk and Reward – Venture Capital Funding

Michael Greeley, general partner at Flybridge Capital Partners, is based in the firm’s Boston office. This venture capital firm, has historically focused on early stage investing in consumer technology and enterprise IT companies, but Michael is excited about Connected Health and spends much of his time looking at companies in this niche.

Asked why Connected Health was so interesting to him, Michael identified items, including:

  • a smarter consumer of healthcare and some changes in consumer behavior
  • transparency to price and cost in healthcare
  • the push for physician-centric ACOs
  • the low infrastructure costs of many connected health technologies
  • huge transitions happening in the payer and provider world.

But there are some double-edged swords.

Regulatory pressure is good, because it can drive behaviors and generate opportunities for creative companies to develop solutions to challenges posed by the regulation. But relying on the regulatory imperative can be perilous. Let me just say this about that….ICD-10. Michael noted that investors must be patient. These technologies typically roll out slowly, growing regionally and then (hopefully) taking off in a big way.

Some other thoughts on where his interests lie?

  • He’s not a fan of consumer-focused apps; they haven’t proven to be “sticky” enough, and user interest drops off after a short period of time.
  • “Closing the loop” in therapeutics where results are reported back to a provider with sensor-based tools is very interesting… like measuring lab values and reporting, then dosing meds in response.
  • Chronic illness management for diabetes and cardiac problems looks like a good opportunity.
  • Next generation? He’s looking at analytics and reporting tools that take all the data gathered and use them to improve health, workflows, access and reduce cost.

I asked Michael what type of people he looks for as leaders of the companies in which he invests.

If he invests, he wants the right team in place.

So, while they “mine the campuses” for brilliant entrepreneurial and technical minds, in this market he believes it’s really important to have “an executive team that has gravitas” to address the weighty issues involved in healthcare with the confidence and experience to speak to the market and understand the nuances that are so important.

It Takes Money to Make Money – Private Equity

Dr. David Brailer, managing partner and CEO of Health Evolution Partners (HEP), was the first National Coordinator for Health Information Technology (often referred to as the healthcare IT czar) and founder of a web-based health information sharing platform. Brailer took over the reins of this private equity firm in 2007.

HEP invests in rapidly growing – already profitable – middle market companies in the healthcare industry, including service providers, life sciences, and healthcare IT. Their investment philosophy is to look for leaders of important commercial spaces – he’s looking for what’s rising and falling…and what has proven that it can make money. Brailer said it’s pretty clear that mobile and connected health are “on the come” [an analogy from the casino game Craps], but that when they’re going to be profitable is still unclear.

He said there are a “thousand things going on,” but that the profit pool in this space is very limited now. He’s assured me that he’s bullish, but guesses that things will be more active in the next two years (after the ACA and EHR adoption are mostly behind us), and that in five years the first real wave will have hit in the connected health space.

There are a number of really interesting areas within the space, Brailer told me, but he mentioned two, in particular.

  • He’s not a fan of consumer-focused apps; they haven’t proven to be “sticky” enough, and user interest drops off after a short period of time.
  • Companies and technologies that focus on Machine-to-Machine infrastructure improvements and reduce the friction in getting data that are useful for improving health are very interesting. It’s wrapping technology with data to have products like smart, “learning” prosthetics that gather and feed back data to improve the ability of a mechanical foot to run. (Very cool.)
  • Improving the healthcare information stream is another winner. There’s a lot of “noisy data”, and finding ways to supplement and perfect the data stream will result in better care at lower costs.

At the end of the day, winners will be the companies that identify an existing problem and develop a solution that reduces cost, eliminates the friction in getting from point A to point B, and improves outcomes. (He mentioned opportunities for pharma to reduce costs and improve data collection during clinical trials as an example of how connected health can leverage existing challenges.)

HEP works with company founders and inventors, but is involved through mentoring and supporting those individuals. They are often involved in helping build discipline and assisting in putting a world class management team in place – one that complements the founders and helps to increase sales and improve operations.

The Halo Effect – Angel Investing

On the other end of the spectrum, angel investors, either alone or as part of a larger group, select entrepreneurs at a very early stage in a company’s life cycle. Luckily, there are a number who have a fondness for the connected health space.

Angel investors are driven by a passion for a particular technology or solution in some cases, or may like a particular entrepreneur and his/her leadership team. Often, angels stay involved with the companies they invest in, through mentoring, introductions, and direction-setting.

Angel groups like Life Sciences Angel Network (LSAN) in New York City, run by Dr. Milena Adamian, look at a wide array of healthcare-related businesses. Investors with strong healthcare backgrounds guide decision-making about when and how much to invest. I attended an LSAN meeting where entrepreneurs gave their 15 minute pitches to a room full of investors…there were lots of good ideas and limited money, creating a lot of competition.

The Bottom Line

At the end of the day, though there are huge projections about where Connected Health will be in 2 to 5 to 10 years — in terms of total dollars spent on the technology — there is still hesitation in the investing world about where, when and in what to invest. Activity hasn’t dried up, but investors are cautious.

If you’re looking for money, chances are that you’ll have to have all of the following – more or less, depending on the stage at which you find yourself:

  • an air-tight business plan
  • a novel technology (ideally with Intellectual Property to back it up)
  • a solution to a problem that your target audience will buy and continue to use
  • a strong management team with experience and the ability to make things happen
  • having one’s own skin-in-the-game doesn’t hurt either – if you show that you’re willing to make an investment in your own company, investors are likely to believe that you’re serious.

And if all else fails, you can always try Shark Tank, on TV!

Roz Ben-Chitrit is managing director of Sanford Rose Associates’ telehealth/mHealth recruitment practice. To learn more about career opportunities or talent searches in telehealth/mHealth, contact Sanford Rose Associates’ recruitment practice at http://www.sanfordrose.com/ct.

You can also contact Roz Ben-Chitrit at rozb@sanfordrose.com

Read the full article

Source: http://www.handsontelehealth.com/past-issues/195-show-me-the-money-the-hottest-investment-opportunities-in-telehealth-and-mhealth

By | 2013-09-03T14:56:57-04:00 September 3rd, 2013|SRA News|0 Comments