Next Things First


More Wake Up Calls by Rob Coppedge
October 6, 2008, 6:00 am
Filed under: economy, health it, start-ups, venture capital | Tags: , , ,

Since my posts over the weekend, I’ve been thinking more about the issues health care’s recession resistance and the attractiveness of investing in early stage companies in this sector.  I have been reminded of several data points that should serve as another wake up call to venture investors considering the space (not to mention those who give them capital):

  • Health care services and related health care information technology make up over 80% of health care spending (total spending is more than $2 trillion)
  • However, venture investing in the services sector makes up less than 8% of health care-related venture investments (the bulk of early stage capital  goes into the casino of biotechnology investing)
  • Of this 8%, the vast majority is dedicated to “traditional” health care facilities-based business models.

Amazing.

This creates a substantial opportunity for health care-savvy investors who can recognize value in new business models that can grow, and even thrive, during recessionary periods.

Unfortunately, from what I hear from CEOs of these sorts of start ups who have been knocking on VC doors this year, few investors see the opportunity so clearly or can effectively separate the wheat from the chaff.

Perhaps the chaos on Wall Street  will bring the attractive fundamentals of the health care services opportunity into clearer focus.

Posted by RobC

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1 Comment so far
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“…few investors see the opportunity so clearly or can effectively separate the wheat from the chaf.”

Boggles my mind that investors do not see the potential here. If services make up 80% of a 2 trillion dollar market, how can you not see opportunity? Wonder what the quality is like for these HC service start-ups. Could be a failure of VC’s to recognize opportunity but it could also be a reflection of the quality of the start-ups.

Sounds like maybe a changing of the guard is needed in Health Care VC.

Comment by theavidpenguin




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