Venture Capital Pitch Formula

Healthcare accounts for almost one sixth of the GDP of United States and is an area where heavy investment seems certain. Indeed, healthcare has already been a major focus of venture capital firms with almost 30% of investments in recent years relating to some aspect of healthcare such as biotechnology or medical equipment. Firms that specialize in healthcare will always be looking for a quick return on investment and this has never been more apparent than in the current global economic climate. 2008 saw the end of a five year cycle of steady increases in investment in healthcare industries in the United States.

Innovate To Succeed

It is clear that innovation is the way forward with new medicines constantly being developed and tested as the population’s average age increases. In 2030, there will be more than 70 million Americans over the age of 65, double the number living in the country in 2000. E-health is possibly one of the most innovative healthcare improvements of the next few years. The whole idea behind e-health is to streamline the nation’s medical services and products by using the power of the internet. If done correctly, it should connect patients and doctors online thus removing long waiting times for tests, medication and test results.

It seems certain that future medical treatments will be based on genetic and molecular testing. Currently, there is still an element of ‘hit and hope’ when it comes to prescribing treatments. Physicians prescribe expensive medicine that may or may not be effective. Targeted treatments should change all that by showing if a patient will respond well to a certain treatment. This means that patients will receive medication and treatment tailor made for their needs. Already, there are a dozen instances of targeted treatment in the U.S and this is certain to grow exponentially.

Top Investment Firms

These advances in medicine are sure to attract investment with companies like Alta Partners likely to dip into their coffers to fund new and exciting treatments. Alta was formed in 1996 and has funded over 130 companies in that time. They are currently involved in eight deals with healthcare companies including Threshold Pharmaceuticals whose new drug, TH-302, showed a 33% response rate in patients who have soft tissue sarcoma when combined with doxorubicin. Canaan Partners are a venture capital firm that focuses on early stage investment. They were founded in 1987 and currently manage over $3 billion.

Successes And Failures

Even through the poor economic climate, investors are clamoring to pump money into up and coming healthcare businesses. For example, NGN Capital has set a funding target of $150 million and reached $250 million before closing the fund. Canaan had to close another healthcare fund in 2008 when it reached $650 million. Yet many venture capital firms have been hit hard during the recession with UnitedHealth forced to pay out $350 million to settle out-of-network reimbursements lawsuits and also lost $50 million on their $200 million venture capital program in early 2009. At present, new healthcare companies have a 3% chance of acquiring venture capital investment and this is unlikely to rise as the economy continues to hit hard.