All eyes are on healthcare technology startups, but the space is still treated with caution by angel investors and the venture capital community alike.
Most investors don’t have the specialized knowledge to understand the pain-points that doctors and healthcare providers face, and many will not see return on investment in three to five years, the period they are typically willing to wait. It takes a special kind of investor to fund a health tech company.
New York-based online trading platform SecondMarket may have a solution to the problem, as part of its broader plan to stimulate investors’ interest in verticals like healthcare and education. SecondMarket’s members are used to buying up shares in consumer-focused companies like Twitter and Foursquare.
“Our members might be interested [in a space] from a macro-perspective, but they don’t feel comfortable enough to deploy capital,” said Jeremy Smith, SecondMarket’s CSO in a phone interview.
The company has teamed up with digital health accelerator Startup Health for the month of December to offer its members’ access to white papers and webinars produced by independent parties, and curated by Startup Health.
Since its inception in 2011, Startup Health has enrolled 23 startups in its intensive three-year program. The program favors companies that have already raised a small seed round, and offers them mentorship and a professional network to maximize their chances of success.
“You can’t expect our members to put in capital and hope for the best,” said Smith.”We’ve created a program to help them get educated.”
SecondMarket’s investors are encouraged to pour thousands of dollars into promising health tech startups, as well as Startup Health’s new fund. According to a document available to SecondMarket’s network of accredited investors, Startup Health is building up a $7.5 million Innovation Fund to support up to 100 digital health and wellness startups. The new fund will take a 2 to 10 percent equity stake in each startup.
The hope is that this will provide health tech entrepreneurs with sufficient capital to test the market opportunity, and in a position to raise venture funding later down the line.
Healthcare image // lenetstan, Shutterstock