Investors won’t look at a health IT startup if it can’t answer …

9:15 am by | 2 Comments

MedCity News is providing in-depth coverage of HIMSS2012 as part of a special series sponsored by Hyland Software.

“What is the actual economic ROI of what you do?”

That’s the key question emerging health IT startups will need to answer if they’re going to go in front of Lisa Suennen and Psilos Group, a healthcare venture capital fund that invests in medical devices, health IT and healthcare services. Its portfolio includes the electronic medical records software company Click4Care, as well as mobile health developer PatientSafe Solutions and cardiac medical device company BioVentrix.

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Psilos reportedly closed on $50 million in fresh capital in December and is in the midst of raising another $400 million for its fourth fund. They invest in about three companies a year.

Suennen, who attended the HIMSS2012 conference in Las Vegas this week, said that cost savings is the only question that matters because no health IT company can make any progress without such a benefit. Yet, few health IT companies are ready for it.

“They usually come in and say it saves money and does all these fabulous things,” Suennen said. “We say, ‘Give me a concrete example with numbers of how much it costs to buy your system, implement it and then what is the return to the buyer in dollar terms and how long does it take to get that.’ They have a very difficult time answering that.”

Suennen said there were plenty of startups at HIMSS, but most of them were working on similar innovations. There’s still a need for entrepreneurs who will focus on leveraging technology to make dramatic improvements around healthcare delivery, such as improve healthcare coordination after a patient is discharged from the hospital or prevent chronic illnesses.

“You really have to find technologies that engage the consumer and the provider and the payer altogether in a system in order to make a difference,” she said.


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Chris Seper

By Chris Seper MedCity News

Chris Seper is the CEO at MedCity Media, which publishes MedCityNews.com. He is also a senior writer at MedCity News. Reach him at [email protected]
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2 comments
Gregg Masters (@2healthguru)
Gregg Masters (@2healthguru)

Lisa is spot on as usual. The ROI benefit determination desperately needs a reframe as to the value proposition. Too many one off (me too) niche plays passed as 'innovation' with early exits that don't add value to the healthcare eco-system. If it's not about a sustainable community benefit with tangible returns towards implementing the 'triple aim', it aint worth a looksie let alone funding round. Nice interview with a talented voice in the valley.

Chip Parmele
Chip Parmele

Lisa, As usual, you articulated the Psilos investment criteria very clearly. This should help entrepreneurs ahead of time so that they don't waste your time or theirs.