Healthcare investors are increasingly interested in financing companies focused on specialty pharmacy, women’s health, the patient experience and more, according to a Tuesday panel of three venture capitalists at the MedCity INVEST conference in Chicago.
However, there are some areas in healthcare investors are trying to distance themselves from. During the panel discussion, moderator David Kereiakes, managing partner of Windham Capital Partners, asked the VC panelists for their controversial takes on the industry. Here’s what they said:
Does every startup need to be AI-powered?
One of the panelists, Aman Shah, vice president of new ventures at VNS Health, noted that almost every pitch deck he sees is for AI these days, which he argued isn’t entirely necessary.
“Does every business have to be an AI business? … When I started with companies earlier, like there weren’t AI companies, and 24 months go by now they’re like, ‘We’re AI-powered.’ And I’m like, ‘Are you really AI-powered? Like, what does that really mean?’ And I’m not smart enough to figure out if these models actually are the right ones,” he said.
He added that companies should be focused on building a good business first, and then they can work on leveraging AI to make that business better. But you don’t have to use AI to be successful.
There aren’t a lot of new things to build anymore
The way companies are getting started is changing now, according to Dipa Mehta, managing partner of Valeo Ventures. It used to be that startups would identify a problem and a way to solve it, and then build the technology and sell it to customers.
However, nowadays “healthcare and technology are at a point where there are not a lot of new things to do,” Mehta said.
“Where I’ve seen the most success now is creating companies with customers versus trying to create something on their own,” she said. “If you’re an entrepreneur in the room that’s got really great ideas, that could be a really interesting place to start because I think that it’s really hard to start new innovative companies in technology and healthcare right now.”
Value-based care isn’t everything
The healthcare industry is trying to move away from fee-for-service and towards value-based care. However, another panelist, Raffi Boyajian, investor/principal at Cigna Ventures, argued that value-based care isn’t the “holy grail,” especially for early-stage companies.
“If you start transitioning into that, you can get upside down on your contracts very, very quickly in terms of a financial perspective. Or what happens is, you find success, you have to raise even more incremental capital, put those on your books for capital reserves. Now, all of a sudden you’ve got shareholders, management teams, employees, they’re already diluted. So I think it’s a great idea. I just think you have to have the right business model for it,” he said.
Photo: Nick Fanion, Breaking Media
