find conventional sources of financial backing for their ideas. Many of them described a venture capital field that has mirrored the risk aversion of the buyer market, leaving healthcare innovators to max out their credit cards and do damn near everything short of selling pencils on a street corner to find ways to finance their ideas for revolutionizing the universally acknowledged mess of a healthcare system.
Those investors among us who caught the arrows slung by our dinner companions described the conundrum that we face because our own backers, the community of institutional limited partners, is wholly unimpressed with healthcare returns and as a result is uninterested in shifting money away from finding the next Instagram. It is classic trickle-down economics: it’s a struggle for VCs to raise investment capital to fund healthcare innovation, so there isn’t much to hand out to those seeking it to deliver healthcare innovation. The good news is that we are starting to see the emergence of non-traditional limited partners (e.g., corporations with a strategic interest and socially-oriented non-profit foundations) investing with a combined business and social mission that is squarely focused on improving the healthcare system. But the volume of capital they bring to the market is no where near enough to finance the changes in the system we all know we need. While there are still a few healthcare-focused VCs, those targeting seed and early stage investments are a bit like white tigers—a genetic mutation known to exist in nature but rarely seen with the human eye.
It is a worrisome state of affairs, in my opinion, to breed a generation of highly frustrated entrepreneurs who ultimately throw up their hands to go build photo sharing websites, or worse, turn to other countries more eager to fund the healthcare innovation that should be Made in the USA. We are already seeing evidence that innovation leadership is moving offshore to India and China and elsewhere in the medical device industry as similar issues surfaced in that sector. We had better be careful or healthcare IT will follow behind it, leaving us with Flintstones-era technology and technology-enabled (disabled?) services while we watch Medicare lapse into insolvency, taking the rest of our economy with it.
Revolutionizing the U.S. healthcare system is truly a matter of national economic security. Nibbling at the edges simply isn’t going to cut it. We need to fundamentally and profoundly change the way our citizens care for themselves by helping them have access to healthy food choices and preventative health products and services, while ensuring that those who are sick get treated in a way that delivers true value, both in terms of quality and cost. We don’t really have the time for incrementalism. Medicare hits the insolvency brick wall around 2024 and it’s is estimated that our current trajectory will bring the U.S. from our current $2.8 trillion national healthcare spend to $4.8 trillion by 2020—only slightly more than the likely M&A purchase price of the next Instagram.
