In our VitalBlog we frequently share our thoughts and opinions on healthcare-related topics.

No Pain No Gain

Laurens van der Tang wrote this on Tuesday, October 22, 2019

Who actually invests in improving healthcare? Is it the healthcare systems? Not really. They have to deal with hefty cutbacks and may invest only sparsely. Is it the insurance providers? Sometimes they invest a little, but ultimately better care is not the core business for these providers. The government? Not really. For example, a large portion of care in the Netherlands is reimbursed from public funds and the necessary funding and facilities are there. But a substantial investment for improved care is not an opportunity for the government. The science sector perhaps? Certainly. They invest when necessary, but mainly to do fundamental research. In the long term research is extremely important, but the practical application is often limited.

The question remains: who is investing? Recently, I attended an investment company board meeting. We were evaluating the request to participate in a $20M financing round from a company where the investment company has been a shareholder for ten years. The company needing financing has developed a smart and simple product for monitoring patients, which until now is mainly used in hospitals and nursing homes. The product has clinically proven itself through scientific studies in many countries, and the product has received FDA approval. Positive user feedback is abundant.

Nevertheless, sales have been slow and laborious. In 2013, the company made between $1M and $2M revenue. Investors so far have invested around $50M. But the money is running out which is why they have submitted the application for another $20M. Hopefully it is enough for a breakthrough and to reach the breakeven point. It seems that this financing round will succeed. It is uncertain that the investors will recoup their money but it is not impossible.

Who invests in improving healthcare? Mostly benefit companies and private investors. Together they invest hundreds of billions worldwide annually to improve healthcare. Naturally, they strive for profitability. But these investors are willing to take risks that the healthcare sector can’t or doesn’t want to take. Increasingly, there are companies and investors who seek profit, but also pursue social impact. They are in it not only for financial gain, but also to achieve social return on investment.

Healthcare administrators are often skeptical of ‘fast business guys' that are always contacting them about their latest products. That is understandable. There are too many overpromises that turn out to be little more than mirages. Yet companies investing in the future need innovative opportunities. Smart business people know that. They take early advantage of the investment potential of these startup companies with new innovations and get high discounts in return.

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