2017 Trends: Strategic Venture Funding

It’s clear investors see huge potential to profit from healthcare – venture capital funding has more than doubled in the past five years from less than $8 billion in 2010 to more than $16 billion in 2015. Yet, beyond the financial benefits, these capital backers may very well be the solution to much of healthcare’s woes.

In an industry rife with inefficiencies, antiquated systems, bloated business models, and cash-strapped organizations that make it nearly impossible to drive or adopt innovation, healthcare-savvy investors offer not only much-needed capital, but an outside perspective of how business – even a mammoth like healthcare – can operate smartly, efficiently, and profitably.

Here’s four reasons to believe venture capital funding will re-shape healthcare in 2017 and beyond:

It’s Rising at Unprecedented Levels

Healthcare has benefitted from a steep rise in venture capital and private equity investment in over past few years. A Wall Street Journal article earlier this year indicated venture capital funding in healthcare rose to $16.1 billion in 2015, more than $4 billion higher than the record set in 2014 of $12.04 billion. And, despite suggestions that investments could plateau or decline in 2016, the market suggests the upward trajectory continued right through this year.

It’s Not All Biotech

Despite suggestions that investments are only in the sexiest of healthcare sectors like biotech, some of the biggest deals and potential for strong margins exist in notorious beasts such as health insurance and revenue cycle management.

A great example was the late 2015 announcement of Pamplona Capital Management’s acquisition of a struggling MedAssets. The deal, which ultimately resulted in a sell-off of MedAssets’ Spend and Clinic Resource Management (SCM) arm and a merge with Pamplona-owned Precyse, as well as a strategic acquisition of Equation and partnership with PatientCo, formed a complete end-to-end revenue cycle solution rarely found in the healthcare space. The resulting solution is not only fulfilling a deep need to increase capture of dollars for hospitals and health systems, it’s shifting the entire landscape of the cumbersome billing cycle into a more technologically-savvy, heavily streamlined function that could only be achieved with the infusion of capital from a venture fund.

It’s Bridging Tech and Healthcare

With tech start-ups claiming almost daily that their gizmos, gadgets, services, or solutions are going to revolutionize healthcare, and healthcare executives rolling their eyes while simultaneously trying to adopt tech innovations and solve complex problems, investors are serving as the bridge to bring these two disparate groups together for real change.

Earlier this year, Zenefits was the latest tech subject of scathing media reports about its inability to effectively navigate the healthcare industry – a problem that could have been avoided with the help of a strategic venture funding partner. Investor organizations like Heritage Group, HLM Partners, and UPMC Enterprises are helping tech companies avoid the pitfalls of operating in a Silicon Valley vacuum by understanding the unique business challenges of healthcare companies, navigating regulatory mazes, and ensuring their business models offer real value and much-needed solutions to healthcare executives.

It’s Here to Stay

If the past few years are any indication, venture capital and private equity in healthcare are here for the long haul. While the past several years have seen investments in larger or more stereotypical spaces, interest in and opportunities to expand into niche investment areas such as behavioral health, dermatology, case management, population health, and pain management are rising rapidly and showing strong financial growth. With venture funding’s tremendous potential to move the healthcare industry toward improved profitability for businesses, and more affordable, better quality healthcare for consumers, we see no end in sight to the demand for funding or to the potential for investor profit.

What It Means for Marketers

A strategic partnership with a venture capital investment partner is the new name of the game in healthcare. Whether a small healthcare tech start-up or a behemoth healthcare services organization, marketing leaders should consider these three things to begin to build a relationship:

  1. Research and identify your target healthcare investor(s) and leverage existing marketing calendar opportunities, like events or conferences, to connect with them.
  2. Use PR to tell interesting trend, financial, or innovation stories. Leverage as much data as possible and target publications that investors are likely to read.
  3. Consider shifting some resources away from customer-only marketing efforts and allotting them toward efforts that will get you noticed by potential venture capital partners.
November 11, 2016
Your funding comes with strings attached — so where do you go from here?
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