March 11, 2011
Angels, VCs Come Together to Back Health-Care Tech Makers
A group of Silicon Valley venture capitalists, angel investors, corporations and health-care providers have banded together to invest in companies that assist in the delivery of health care, a market some investors say has been woefully underserved.
"I've been a lonely pioneer in funding health-care technology," said Anne deGheest, a founder and managing director of newly formed HealthTech Capital, who is also a managing partner at MedStars Venture Partners, a two-person early-stage firm with an emphasis on health care.
DeGheest and the 45 other members of HealthTech Capital define health-care technology as tools to more efficiently deliver care, and technologies for the health-care industry that do not require regulatory approval or reimbursement from insurers.
Launched several months ago, HealthTech Capital has already made an investment, an undisclosed round for stealthy, Web-based wellness-management company WellnessFX Inc., deGheest said. The group has several other deals under consideration, she said, declining to give further details.
HealthTech Capital has not yet raised a formal fund, but may raise a $50 million to $100 million vehicle in the near future, she said.
The investment in WellnessFX--and investments to be made in the near future--were direct investments from individual angels affiliated with the group, she said.
Along with deGheest, board members at HealthTech Capital include Don Ross, who is also a board member at Sand Hill Angels, and Kathy LaPorte, co-founder of NewLeaf Ventures, deGheest said.
Advanced Technology Ventures and Canaan Partners have also become members of the organization, she said, along with the California Healthcare Foundation and a number of other VCs, angels and corporations whose names have not been disclosed.
Each member helps with deal flow, screening, due diligence and other work, she said. The partners will also form investment syndicates, she added.
The group is looking to do about ten deals per year, investing between $100,000 and $1 million in each fledgling enterprise, she said.
According to deGheest, 80% of the country's multi-trillion-dollar annual health-care spend is on delivery, whether to emergency rooms, hospitals or patient's homes. Yet the delivery of care is rife with inefficiencies, she said, as it is dependent on patient behavior and the participation of a wide range of players.
HealthTech Capital will be looking to fund companies that make delivery more efficient, especially those that migrate a proven business model from another industry and apply it to health-care delivery.
"For example," deGheest said, "Look at Visicu. They brought air-traffic control type of technology to patient monitoring."
The company, which went public in 2006 and was later acquired by Royal Philips Electronics Inc., beamed the vital signs of hospital patients to a central location, where technicians--like air traffic controllers--monitored many patients at once.
DeGheest also cited the example of Pyxis Inc., a medication dispenser fashioned after an ATM.
"These are the kinds of things we're looking for," she said.