One of my favorite venture capitalist bloggers (yes, I’m a nerd like that) is Fred Wilson from Union Square Ventures. He’s been posting something like every day for the past 10 years or something close to that. I’m sure I take a lot of my blogging style from him which is funny since I mostly write about EMR and healthcare IT, but I’m only at 6 years of blogging. [Excuse the digression]
Anyway, yesterday Fred wrote a post about his view of Healthcare investment. Being in the healthcare IT world where he’d want to invest I read with keen interest to hear his thoughts. The first and last paragraph of his post sums up his position on healthcare investing:
A few weeks ago, I met with a VC who has been investing in healthcare for over 30 years. He asked if we invested in healthcare and I told him that we’d like to but we don’t really know how to fit it into our investment thesis which is focused on large networks of engaged users disrupting large markets. Clearly healthcare is a large market, possibly the largest measured as a percent of GDP. But we haven’t seen many large networks of engaged users emerging in healthcare.
It is likely that we’ll be doing more looking and studying and less investing in healthcare for a while (as we did in education). But I’m hopeful that entrepreneurs, industry observers, and of course all of you, will help us develop a thesis that allows us to start investing in healthcare. Like education, it feels like a market where you can make strong returns and also help facilitate important and needed changes.
Fred does clarify in his post that there are probably a lot of great healthcare IT investment opportunities out there, but that doesn’t mean that those opportunities meet the investment thesis for their VC investment portfolio.
I left my gut reaction to Fred’s post in the comments as follows:
One challenge with your investment thesis for healthcare is that healthcare is somewhat unique in that a HUGE amount of market power (see pharma, other medical procedures) is held by such a small number of people (see doctors). So, there’s a huge market, but there’s not a huge number of users to engage. Of course, there’s still the consumer (patient) side where you could have the large engaged users. Plus, patients are slowly becoming more engaged in their healthcare.
As a side note, I’ve started kicking around the idea of hosting a Healthcare “Disrupt” for healthcare IT companies to pitch their companies. Could be a great place to continue your research.
Fred then replied:
yes, that consolidation of market power is the primary reason we have avoided healthcare to date
As I’ve thought more about the consolidation of market power, healthcare is not completely unique in this but it does make for an interesting dynamic that doesn’t exist in a lot of consumer applications which Fred Wilson usually focuses on. Although, the patients getting involved could swing that pendulum the other way enough to get Fred Wilson and similar investors to start investing in healthcare.
Also, I’m dead serious about the idea of doing a Healthcare “Disrupt” like conference. We’ll see if we can get all the right people in place to make it happen.