‘Sys­tems are look­ing to part­ner with other play­ers to help them vet these deals’

Modern Healthcare - - Q & A -

“If an en­trepreneur can get an As­cen­sion or Prov­i­dence to be both a cus­tomer and an in­vestor, that’s a strong sig­nal to the mar­ket­place.”

Karen Grif­fith Gryga is a part­ner and chief in­vest­ment of­fi­cer at Dreamit Ven­tures, one of the na­tion’s largest ac­cel­er­a­tors for tech­nol­ogy star­tups. The Philadel­phia-based com­pany also in­vests in early-stage health tech­nol­ogy firms. A third of Dreamit’s 80plus com­pa­nies are in­volved in pop­u­la­tion health man­age­ment. South­ern Bureau Chief Dave Barkholz in­ter­viewed Grif­fith Gryga. The fol­low­ing is an edited tran­script.

Mod­ern Health­care: What’s driv­ing the ac­cel­er­at­ing in­vest­ment in health­care tech­nol­ogy star­tups?

Karen Grif­fith Gryga: Op­por­tu­nity. The HITECH Act in­cen­tivized providers to in­vest in EHR sys­tems and in­te­grate tech­nol­ogy into their prac­tices. That cre­ated a tremen­dous op­por­tu­nity for in­no­va­tion. Be­cause the op­por­tu­nity was there, the ven­ture cap­i­tal dol­lars are there.

MH: Has health­care lagged other in­dus­tries in har­ness­ing data?

Grif­fith Gryga: Ab­so­lutely. Health­care was dra­mat­i­cally be­hind other in­dus­tries in terms of lever­ag­ing in­for­ma­tion and tech­nol­ogy to de­liver bet­ter care. The in­cen­tive wasn’t there to do it. When you’re in a fee-for-ser­vice en­vi­ron­ment, you de­liver your ser­vice and you get re­im­bursed for it. But now the whole land­scape is mov­ing to value-based care and pop­u­la­tion health, a dra­matic shift that ne­ces­si­tates the lever­ag­ing of tech­nol­ogy and data.

MH: How are hospi­tal sys­tem ven­ture cap­i­tal funds af­fect­ing star­tups?

Grif­fith Gryga: They’re hav­ing a big im­pact on the in­dus­try. They’re now a sig­nif­i­cant per­cent­age of the deals and a sig­nif­i­cant per­cent­age of the dol­lars de­ployed. That’s both a good thing and a bad thing.

The one big ad­van­tage is if an en­trepreneur can get an As­cen­sion or Prov­i­dence to be both a cus­tomer and an in­vestor; that’s a strong sig­nal to the mar­ket­place. These cor­po­rate ven­ture firms have so­phis­ti­cated in­di­vid­u­als who un­der­stand the health­care mar­ket­place and are very ac­tive in get­ting the com­pa­nies ex­posed through­out their or­ga­ni­za­tion.

MH: What are the po­ten­tial neg­a­tives to a startup re­ly­ing on hospi­tal VC spon­sor­ship?

Grif­fith Gryga: Not all cor­po­rate ven­ture cap­i­tal play­ers re­ally un­der­stand what it means to be a startup com­pany. Larger or­ga­ni­za­tions can put the needs of their or­ga­ni­za­tion ahead of the needs of the startup. There have been cases where the startup com­pa­nies have had a choke­hold put on them by the cor­po­rate part­ners, who are very fo­cused on their own needs and agenda. They don’t nec­es­sar­ily un­der­stand the im­pact that has on the startup com­pany in con­strain­ing their growth in the broader mar­ket.

MH: What about tra­di­tional VC fund­ing?

Grif­fith Gryga: Tra­di­tional VC funds are driven by fi­nan­cial re­turns. They have to be pas­sion­ate about the in­vest­ment and pas­sion­ate about the vi­sion of the en­tre­pre­neur­ial team. But at the end of the day, it is a fi­nan­cial in­vest­ment.

MH: Are hospi­tals be­ing over­whelmed by all this new tech­nol­ogy?

Grif­fith Gryga: Hospi­tals aren’t re­ally in the busi­ness of vet­ting new tech­nol­ogy. You have a spec­trum of hospi­tals that are more in­no­va­tive and those that tend to fol­low along later. Most hospi­tals are not struc­tured to con­tin­u­ously vet in­no­va­tion. So these hospi­tal sys­tems are look­ing to part­ner with other play­ers in the mar­ket­place to help them vet these deals.

MH: How big does a startup have to be be­fore it gets eas­ier to get ven­ture cap­i­tal?

Grif­fith Gryga: Rais­ing cap­i­tal is never easy. The past cou­ple years there has been an ex­pan­sion within the seed stage. You have much more ac­tive in­di­vid­ual an­gel investors and mi­cro VCs. Where it’s the eas­i­est to raise money is at the growth stage. These com­pa­nies have at least $5 mil­lion in rev­enue, maybe mak­ing a profit, and have nailed their tar­get cus­tomer and their cus­tomer ac­qui­si­tion process. There’s still ex­e­cu­tion risk in driv­ing hy­per­growth, but there’s re­ally no mar­ket risk, not a lot of prod­uct or IT risk or busi­ness model risk. It’s been fig­ured out.

MH: Do you see any­thing

slow­ing the money go­ing into these star­tups?

Grif­fith Gryga: If there are some dra­matic shifts in reg­u­la­tion and re­im­burse­ment, you might see some pull­back in strate­gic in­vest­ment. Iron­i­cally, that’s when these in­no­va­tions to re­ally help them de­liver bet­ter care and more cost-ef­fec­tive care will be needed most. Tra­di­tional VC in­vest­ing might be af­fected if the exit en­vi­ron­ment closed down dra­mat­i­cally. Then you’ll see kind of a drop-off in the pri­mary in­vest­ment side.

When the exit en­vi­ron­ment be­comes chal­leng­ing, peo­ple tend to say, “I’m prob­a­bly go­ing to have to sup­port my ex­ist­ing port­fo­lio longer with more cap­i­tal.” So they pull back a lit­tle bit and do less deals to have more re­serves.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.