Venture Capital Potential in the Healthcare SectorWed, 09/09/2015 - 14:53
Founded in 2012 and the first company of its kind in Mexico, Venture Partners is a venture capital company specializing in Seed and Early Stage Venture Investments. The emergence of this kind of company is due to a healthcare system that is evolving. More people have access to healthcare services, people are demanding better quality services, the general population is aging and becoming wealthier, the middle class is expanding, and, over the past ten years, Seguro Popular has insured 15 million people who did not previously have access to health services. Additionally, technology and innovation are beginning to change the face of the industry: health suppliers are becoming smarter, specialized, more efficient, offering more low-cost solutions, and smartphones now allow tracking, information exchange, and are connecting patients and doctors.
Five of the 12 companies in the Venture Partners portfolio are directly related to healthcare, and the rest are related more loosely. The company works with a network of hemodialysis clinics, diabetes prevention clinics, a company that sells welfare programs for clinics, a company that created a platform for patients and doctors to meet online, and a company that offers financial credits to patients who need money for immediate medical interventions to create a homologized and comprehensive healthcare system.
Federico Antoni, Director of Venture Partners, believes that public hospitals and public insurance systems require improved efficiency and lower prices. They are struggling with the growing demand and financing for health services. In this sense, the implementation of technology and data solutions for storage of health records as well as other administrative tasks can lead to an improvement in treatments and diagnosis, lowering the probability of patient relapse. Moreover, implementing technological solutions lowers the cost of consults, with physicians providing more accurate diagnostics, as well as an increasing convenience and accessibility through remote medical diagnosis. In terms of acquiring patients, Antoni reveals that the best channel for recruitment are social media websites like Facebook, meaning that technology is becoming an important aspect for the healthcare sector and is expected to become fundamental among younger generations. Not only do the information and education sectors benefit from data collected virtually, patients can also use online applications to track health outcomes. As both public and private insurance need to increase efficiency, according to Antoni, technology will constitute an efficient, cost-effective solution.
It is for these reasons that venture capital firms are interested in entering the healthcare sector in Mexico over the next few years. Therefore, Antoni believes that venture financing is necessary, now more than ever, to support entrepreneurial projects and industry growth. There are clear opportunities in the sector, particularly when comparing investment in healthcare. “We believe there continues to be significant room for innovation in processes and the use of technology,” says Antoni.
Though the industry has important players, no one of them is dominant. There are plenty of opportunities and there is still significant development potential, according to Antoni. Primarily, insurance companies have a significant challenge in understanding what the risks are for the insured clients and how to mitigate said risks. Antoni points towards communication between hospitals and insurance companies as a key strategic sector. “If hospitals do not reveal comprehensive information, insurance companies cannot measure the risk. On the other hand, if they are too open, the concern is that mistakes recorded during medical procedures and practices will damage their reputation. As a consequence, there is a huge opportunity for companies to provide information management systems for this kind of data.”
Venture Partners is mainly interested in services rather than investing in pharmaceuticals or devices. There are some important trends to consider, including hospitals outsourcing services, and prevention intiatives. In addition to this, information technology for healthcare is becoming smarter, cheaper, and more efficient, so big data projects are increasingly attractive business opportunities. Return on investments in the development of drugs tends are notoriously slow and high risk, due to safety issues around the emerging molecule. The investment target range for Venture Partners is US$500,000 to US$4 million.