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The health care industry is evolving. Whether it is payors advocating for value-based payment models or providers focusing on enhanced patient engagement and communication, every aspect of the health care ecosystem is undergoing change — and health care technology is making it possible. The robust health care IT market, and investor activity in the space, were the topics of the second annual Mid-Atlantic Health Care IT Forum, hosted by Pepper Hamilton in partnership with the Philadelphia Health IT Circle.
Pepper partner Thomas P. Dwyer opened the event by welcoming returning attendees and discussing the current state of the health care IT market.
“The health care IT space is certainly accelerating,” Dwyer said. “Transaction activity has been very healthy. In the M&A space, there were 283 deals with $37 billion in transaction value. Investment activity has also been good, with 530 deals and $10 billion in investment value.”
As one example of success in the industry, Dwyer cited Proscia, a digital pathology company that presented at the 2018 Health Care IT Forum. Since its presentation, Proscia has raised more than $10 million in funding from venture capital and strategic health care investors.
Dwyer then introduced the event’s investor panel, which featured Glen Bressner, managing partner, Activate Venture Partners; Bruce Luehrs, general partner and co-founder, Rittenhouse Ventures; and Matt Rice, partner, Ballast Point Ventures. Dwyer kicked off the discussion by asking each panelist to describe what their firms look for in health care investments.
Rice noted that Ballast Point Ventures, which is based in Tampa, Florida, splits its investments between companies in the technology and business services areas and companies in health care. Its health care investments include companies in the health care services, health care IT, pharmaceutical, medical device, and pharmaceutical services spaces, with a focus on capital-efficient businesses that serve payor and provider markets.
Luehrs’s firm focuses on early-stage companies where Rittenhouse Ventures can provide the first institutional round of capital. Rittenhouse focuses exclusively on tech companies and does not invest in biologics or other companies focused on drug development. He noted that Rittenhouse invests largely in the Mid-Atlantic area.
“Philadelphia has been a great region for us,” he said.
Like Luehrs, Bressner said Activate Venture Partners focuses on the Mid-Atlantic region and invests in early-stage companies. When choosing an investment opportunity, his firm looks for deep industry knowledge.
“We’re looking for people with a lot of domain experience in the industries in which they’re trying to build their businesses,” Bressner said.
Dwyer next asked the panelists to discuss the strength of the health care IT market and to explain why their firms continued to be active in the space.
Luehrs, who has been a leading investor in the Philadelphia region for decades, noted that venture capital in the Philadelphia area was largely nonexistent 30 years ago. As the region has grown in early-stage venture capital resources, it has been important for those VCs to tap into the region’s strong health care and pharmaceutical roots.
“If you’re going to be a local VC, you better get health care right or at least be conversant in what the opportunities are,” Luehrs said.
Rice provided another perspective as a Florida-based investor who focuses on the Southeastern region but who also invests in Philadelphia-area companies. He noted that there is a deep talent pool in the greater Philadelphia region, but comparatively less available capital. This means that emerging health care businesses really need to prove themselves to successfully raise capital.
Bressner spoke about the areas where his firm has seen the greatest investment success, namely business that focus on pharma IT, medical devices, the consumerization of health care, and helping at-risk providers manage costs. He noted that more companies are developing solutions to improve the patient experience and engagement as “individuals are becoming better educated about the type of care they want.”
Before opening up the panel to audience questions, Dwyer asked the speakers whether they had seen any recent trends in health care IT investments.
Rice said that he has observed more players in the market, which has led to increased valuations.
“There is a lot of capital out there in tech-focused funds, and those funds are going to have to get into other industries, like health care. So health care IT is a natural fit,” Rice said. “Right now, it’s very easy for hot companies to attract interest across the private equity landscape, even beyond the classic health care investors. That has pushed prices up in the market.”
Following the investor panel, Pepper partner Christopher S. Miller introduced the company showcase. The showcase featured presentations from six groundbreaking companies in the health care IT space:
The Health Care IT Forum concluded with a networking reception, where attendees could meet the investors and presenting companies from the event.
Thank you to our strategic partner for the event, the Philadelphia Health IT Circle, as well as our sponsors: Activate Venture Partners, Ballast Point Ventures, Ben Franklin Technology Partners of Southeastern Pennsylvania, G-Squared Partners and Sharp Financial Group.