Raising money in the Badger State for the growing number of local health-tech startups has become considerably easier in the past few years, several entrepreneurs said at a Wisconsin Innovation Network luncheon.
And that’s a good thing, because medical delivery systems remain “stupidly over-expensive,” ripe for innovations and major changes, said Michael Barbouche, founder & CEO of the Forward Health Group Inc. During the Tuesday event, he was joined on a three-person panel by Mark Gehring, co-founder of HealthMyne and Propeller Health; and Michael Eaton, president of Elli Health.
“Our delivery systems are really predicated on old models,” said Barbouche, a mathematician who is married to a primary care physician. Using the principles of set theory, he has invented new data models for the health care industry that maximize the harvest and yield of clinical results, regardless of health IT infrastructure.
Though Madison is a leader in health-tech innovation and far ahead of other regions of the country, he warned that more needs to be done to improve medical care delivery and save money for consumers.
“We have wasted the opportunities to maximize the alignment here because there is so much money to be made that they can’t print it fast enough. I think we’re in for some interesting times,” he said.
On the financing front, Gehring said he that in 2012, he was complaining mightily about the difficulty he was having drumming up money for Propeller Health, which created a remote asthma monitoring and management system. The company eventually raised $23 million, but none of it came from Wisconsin. Rather, he said, it came from the coasts.
“My complaint was that local firms a few years ago were not competitive,” he said. “Things have gotten dramatically better. HealthMyne (which provides clinicians with real-time imaging insights and solutions) has raised $6 million and it’s all from Wisconsin, with a few small exceptions.”
He said backing came from Venture Investors, 4490 (a new tech-focused venture capital fund based in Madison) and Wisconsin Investment Partners, which he described as one of the most active angel investment groups in the country.
“The scene here is great,” he said. “In particular for health care IT, which is very hot area nationally and locally for the investment community.”
Barbouche said he and his partners “bootstrapped” Forward Health Group for the first five-plus years, but eventually got funding from WIP.
“I wasn’t very sophisticated, so I built a team and they didn’t get paid for that entire time. As we earned revenue, we poured it into the company,” he said.
At a J.P. Morgan investment conference last year, he turned down offers from East Coast backers, some of whom wanted to oust him as CEO. Instead, he chose to seek financing from the Badger State.
“We determined very quickly that it was important for us to have Wisconsin-based investment because this place has an important role in fixing health care.”
Eaton, head of Elli Health – which bills itself as the “digital front door to primary care” – said he believes Madison will continue to lead the changing healthcare scene because it has a “combustible mix” that includes a provider community that “gets it, understands that the status quo won’t hold and has the smarts to lead that.
“We also have funders in the community who are willing to take the risks and place the bets in the emerging things that may not be of scale today … but may be clinically disruptive. And the third thing you have to have is a community around that of entrepreneurs who are willing to pitch in and push things forward.”
He said other places where interesting things are happening include Austin, Texas; the Denver/Boulder area; Dallas and Phoenix, which has a large number of what he called “unmet needs.” In the other cities, smart people have “peeked over the horizon and said ‘there’s something going on there.”
But he said the things that Madison has the trump all the other areas of the country are the University of Wisconsin research engine, “and the depth of knowledge here of people who have been building here going all the way back to the 1990s. They understand what’s worked and what has not worked and how to put the technology pieces together. There is something unique here that is not in a lot of those other markets.”
— By Brian E. Clark For WisBusiness.com
