The eleventh session of the day at Vator Splash Health 2016 this week brought several investors on stage to discuss finance in the digital health ecosystem.
Panelists (left to right above) included Tony Miller (Managing Partner, Lemhi Ventures), Steve Barsh (Chief Innovation Officer, Dreamit Ventures), Nancy Brown (Partner, Oak HC/FT), Jack Young (Partner, Qualcomm Life Fund), Dave Schulte (Partner, McKesson Ventures), and the session was moderated by Mark Ginestro (Principal, Healthcare & Life Sciences, Strategy, KPMG).
Here were a few key takeaways from the session.
Mental health, big data, and other hot sub-sectors
Ginestro started the conversation by asking the panel to describe subsectors that they found interesting.
Barsh said both mental health and smoking cessation are hard problems to solve, which is why we’re starting to see interesting technology and data-drive approaches. Young concurred, adding that it’s difficult to develop drugs for mental health because there are so many side effects. He pointed to virtual reality as a potentially very interesting way of addressing that market.
Schulte said he looks at broad categories like “consumerism” and the “data value chain,” or companies that are coming up with new ways to capture data, use cases, analytics, and basic infrastructures.
On the topic of big data and machine learning, Brown heeded entrepreneurs to actually be able to explain what they mean when they drop those buzzwords in a pitch. As for subsectors, she said it’s “remarkable that services are coming back” and that her firm is strongly attracted to tech-enabled services that bring a human element to the process of healthcare tech.
Advice for pitching a VC
When it comes to companies approaching firms for funding, Ginestro asked panelists to share advice for how the pitch should go.
“If you run into us at a conference, make sure to follow up,” said Brown, because they get bombarded. When the actual meeting comes around, she encouraged companies “get to the value proposition in a clear statement” so that it’s obvious the problem you’re trying to solve and how you’re solving it.
And when it comes to describing your differentiation, Brown insisted that you “don’t discredit your competitors.” This aversion to hubris was a common theme not just on the panel but throughout the conference.
“Don’t tell me you’re going to be ‘Internet of Healthcare’ or the ‘Uber of Healthcare’ or the ‘Google of Healthcare,’” said Schulte. “Hyperbolic statements destroy your credibility in healthcare.”
The best way to get the meeting, he said, was to get introduced by a credible person. And once you have the conversation going, don’t bother describing how big the market is because VCs have already done their research. Miller agreed, adding that you should always do your homework on the fund or VC you’re approaching.
A conservative future for VC funding
An audience member stepped up to the microphone to ask the panelists where they see VC funding going in the near-future.
Young says digital health has been growing year after year, which is true, though he recognized that you have to be realistic and pay attention the global market. Digital health investment activity, perhaps as a result of the global situation, decreased significantly in the fourth quarter of 2015.
This will be a difficult year for digital health companies trying to go public, Young continued, and it will be more arduous for companies trying to raise new funding. Miller went a step further, suggesting that companies trying to raise capital should either consider M&A options or prepare for a down round. (In fact, data from Q4 2015 shows that down rounds are already on the way up across most venture stages.)
Schulte and Brown both talked about how parties that don’t typically invest in healthcare have been crossing over, but Schulte believe tech-focused VCs will lose interest in healthcare when they realize how difficult it is to scale.
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Angel group/VC
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Lemhi Ventures is a health care services venture capital firm headquartered in Minnesota. With over $330M in assets under management, Lemhi leverages a point of view investing approach and the operating background of its team to invest in and build innovative and disruptive companies. www.lemhiventures.com
Service provider
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KPMG LLP, the audit, tax and advisory firm, is the U.S. member firm of KPMG International. KPMG International's member firms have 137,000 professionals, including more than 7,600 partners, in 144 countries.
KPMG's Venture Capital (VC) Practice was created to provide the unique guidance and insights our clients in the VC community need to ensure success in the marketplace. Our services are specifically designed to help venture-backed companies navigate each stage of development—from inception to market leadership. Our seasoned VC professionals are dedicated to assisting clients through the many challenges faced in founding and growing a new venture.
Just getting started? Closing that big growth round? Contemplating an IPO? KPMG’s Venture Capital Practice can help prepare you for the opportunities as well as the obstacles that lie ahead. KPMG developed its service suites to align with the interrelated needs of growing companies on their journey to leadership. Each service suite draws on KPMG’s
knowledge, experience, networks, and commitment to quality and can help deliver significant benefits to growing companies. The Venture Capital Practice includes a large network of professionals who have experience working with new and established companies.
Angel group/VC
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We invest in early stage entrepreneurs at all levels to create breakthrough technology companies. We provide them with resources, advisors, investors, strategic partners and customers looking for innovative solutions.
Forbes ranked us one of the top 10 business accelerators in the world and we have the track record to back it up. We seek out the best teams that are adaptable and willing to do whatever it takes to succeed.
We are currently accepting applications for Dreamit Health and Dreamit Education.
Startup/Business
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McKesson Corporation, currently ranked 11th on the FORTUNE 500, is a healthcare services and information technology company dedicated to making the business of healthcare run better. We partner with payers, hospitals, physician offices, pharmacies, pharmaceutical companies and others across the spectrum of care to build healthier organizations that deliver better care to patients in every setting. McKesson helps its customers improve their financial, operational, and clinical performance with solutions that include pharmaceutical and medical-surgical supply management, healthcare information technology, and business and clinical services.
Angel group/VC
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Oak HC/FT is the premier venture growth-equity fund investing in Healthcare Information & Services (“HC”) and Financial Services Technology (“FT”). We are focused on driving transformation in these industries by providing entrepreneurs and companies with strategic counsel, board-level participation, business plan execution and access to our extensive network of industry leaders.
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Steve Barsh is Chief Innovation Officer and Managing Director - Health for Dreamit. Steve has over 30 years of experience launching, leading and building multi-national companies as well as early stage venture work.
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Jack heads up the Qualcomm Life Fund (QLF) at Qualcomm Ventures, which has been ranked as one of the most active venture investors in digital health. He is also a fund manager at dRx Capital, a Novartis and Qualcomm joint investment company.
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