The New Landscape of Healthcare Venture Investment

Structural changes in the economy always create investment opportunities.

Right now, and for years to come, one sector of the economy is changing faster, and more deeply, than any other: healthcare. And the biggest changes will not be new drugs, devices, or therapies, but new organizations, new business models, whole new value chains.

Some of these structural changes are driven directly by the Patient Protection and Affordable Care Act, and some by 2009’s HITECH Act aimed at computerizing all of healthcare, but most are not. Most, in fact, are private-sector responses to the overwhelming cost and inefficiency of healthcare, responses that use new technologies and business models to bring healthcare customers what they really need and demand: better care for less money. Some of the structural shifts will involve large-scale consolidation, but most are new, disruptive models that can work at a variety of scales.

The good news is: Those new technologies and business models are already springing up. The opportunities for their growth are very large.

But investors face the age-old question: What’s the best bet? There are thousands of opportunities out there. Many of them seem to really clever solutions to healthcare problems, or seem to have found a perfect niche. How do you evaluate the true opportunity, the one that is more than just clever?

Any look at a start-up or investment opportunity, of course, requires the basic business questions: Does the management seem sound? Do the pro formas add up? Does the path to revenue streams and then to profitability make sense? Can they gather sufficient capital? Are there significant regulatory or technological hurdles?

But one key line of questioning requires a much deeper and broader perspective: How does this particular solution line up with the direction the industry is going? Will it find a market in the evolving healthcare landscape? Is it filling a need that is deepening, or one that is disappearing?

To answer that question is to understand deeply what is actually happening in healthcare, what is likely to happen over the next three, five, seven years, and which of those trends will depend on new business structures and models.

We are preparing a report and a keynote talk that lays out the deep changes in healthcare, and the kinds of new enterprises that are likely to thrive because of them. If you would like to receive the report when it is finished, or if your organization would like a keynote at your investor conference, contact me directly.

Disclaimer: I do not invest in healthcare. Neither I nor The Change Project, Inc. have any financial relationship with any company that I might mention (except speaking fees, which I will mention when they occur). I am not a financial adviser, and have no specialized inside knowledge of any company’s management ability, access to capital, or future prospects. Individual companies will be featured only as examples of industry trends. Investors may not rely on anything said in any written or verbal discussion from myself or The Change Project, Inc., as advice to buy, sell, lend to, or otherwise engage with any particular company. Investors must perform their own due diligence for, and take all risk for, their own investments.