The Venture Capital industry has always come with some of kind of glow from both the investment community and the general public. Fifteen year ago, when people approached me and asked why I was investing in life sciences, I would invariably answer that nothing beats saving lives at a 30% IRR. I was pretty cocky back then and frankly I’ve had some success with what I thought was a great pick-up line.
But after living thru 3 investment cycles on one hand, and having the “pleasure” of using the healthcare system both as a father of two kids and oldest son of aging parents; my view of the investment opportunity has somewhat changed.
Don’t get me wrong, there is a lot of money to be made in the sector and I’m as convinced as others (LifeSciVC) that healthcare has much more robust fundamentals than IT or clean tech in the long run, thanks to demographics and limited global economic growth.
The investment thesis remains strong but this doesn’t mean our healthcare system is “healthy”. Governments are throwing increasing amounts of money at the system and yet, improvements are minor at best. Last week, the Health Council of Canada issued a report concluding that the increase by 67% in healthcare spending has had only very limited impact on accessibility. According to the same report, few notable improvements on measures of patient care and health outcomes were made, and our performance compared to other high-income countries is disappointing. This report is only one of many you can find for our country but this holds true for all OCDE countries
Throwing money into the system to increase accessibility of care doesn’t solve another disturbing fact of our current system: the hospital is a pretty unfriendly environment. . Amalberti and Leape compared healthcare with highly regulated industries and found out without surprise that the system was creating more fatalities than nuclear power, railroad, and… bungee jumping.
My partner Ela is a firm believer that therapeutics make a difference, both on delivery of care and financial return (see her post). I don’t dispute that as most of our fund’s bigger exits came from that segment, in which we are still investing massively. But there are other solutions out there than pills that can truly impact patient outcome. Portfolio companies like Medcurrent and Circle Cardiovascular are helping healthcare professionals making better decisions while improving their throughput and hence accessibility for patients. Other companies like Infonaut or Handymetrics are developing clever systems to prevent hospital-acquired infections using simple of-the-shelf technologies with powerful data analytics.
There are really only two levers we can use to make a meaningful impact in our suffocating healthcare system: we either keep the patient out of it, or we increase its efficiency. Pills continue to be a key component of the solution, but in the mean time, Health Tech rocks!
(1) For people wondering, I’m still working on this… Back to post
(2) R. Amalberti, L. Leape et al. Violations and migrations in healthcare: a framework for understanding and management. Qual. Saf. Health Care. 2006 December; 15(suppl 1): i66-i71 Back to post