Partner at Earlybird Health

Featuring Thom Rasche

Earlybird Health is part of the independently managed family of funds at Earlybird, a well-established and active venture capital firm investing in European technology companies.

At the time the Earlybird Health I Fund announced its first closing in August 2016, BARMER, Germany's second-largest public health insurer, joined as an investor. This was the first time a public health insurer invested in this asset class. 

Since then, the Health I Fund has invested in 12 European companies across digital health, medical devices, diagnostics, and biopharma.

With more public health insurers committing to the Health II Fund, Thom Rasche, Partner at Earlybird Health, shares with us why this "unusual" model can bring mutual benefit to both public health insurers and healthcare VCs in the long term.

Why is this model important for Earlybird Health?

We are living in a time when nearly all European countries provide universal healthcare. This means, according to the World Health Organization, that all people have access to the health services they need, when and where they need them, without financial hardship.

In most European countries, socialised medicine models are in place. 

 Some use a single-payer system providing medical and hospital care regulated by the government and subsidies from taxation. Every citizen is enrolled in the national healthcare system, for instance, the National Health Service (NHS) in the United Kingdom, the Instituto Nacional de la Salud in Spain, and the Servizio Sanitario Nazionale (SSN) in Italy. In other countries, a regulated health insurance system is implemented. Germany is an example of this approach, offering a wide range of options by both private and public health insurance companies.

As a Venture Capital (VC) Fund focused on health, investing mainly in Europe, we are convinced to involve payers in the innovation process. This drives the selection of new therapies to address pressing medical needs and the adoption of new technologies jointly with the payers. This point is particularly important to us at Earlybird Health as we invest in opportunities with a strong focus on patient outcomes.

How did this model influence Earlybird Health's role in Europe?

I believe this model pushed Earlybird Health to be in the unique position of driving change instead of being a spectator.

From a legislative standpoint, we have helped develop the Digital Healthcare Act (Digitales–Versorgung–Gesetz or DVG) in Germany. Before BARMER invested in Fund I, there were no frameworks regulating the investments of (public) health insurers in Venture Capital Funds. Earlybird is still currently the only VC fund with public insurers as limited partners, as enabled by the Digital Care Act in Germany.

The Digital Healthcare Act also promoted a fast-track procedure for the approval and reimbursement of Digital Health Applications (DiGA) in Germany. DiGA is proving to be tremendously valuable for many digital health startups pursuing business opportunities in Germany and cooperating closely with health insurers. Nevertheless, to ensure adoption in the German market, these startups need to foster cooperation with two additional key stakeholders: physicians and patients. Once the reimbursement pathway is approved, a physician has to prescribe the treatment to patients.

From a broader perspective, VCs are in a unique position, witnessing incredible, ground-breaking technologies. We believe understanding and addressing key patient needs by supporting innovative technologies is a fundamental pillar for success.

How do Earlybird's portfolio companies benefit from this model?

Our downstream engagement approach with health insurers has proven favourable for our portfolio companies. While these startups gain insight into the key drivers for their commercialisation strategy and reimbursement roadmap, many have so far received direct endorsement through contracts and collaborations.

From our Health I Fund portfolio, Wellabe is benefitting from a collaboration with the BARMER, Noscendo has an elective contract with the BARMER and TKK, and both Atlantic Therapeutics and iSTAR Medical have been promoted at a national level by the BARMER.

Overall, our Fund I investor base has proven that it is not only a matter of VC financing but has both a direct and indirect impact on the growth of companies in the European ecosystem. With this clear positive impact, we have expanded our health insurer investor base in the Health II Fund, offering more support to our portfolios. 

How do public health insurances benefit from this model?

Health insurers have been historically exposed to new technologies only after their regulatory approval, more so when exploring reimbursement options.

By being involved in a Healthcare VC fund, health insurers become exposed to companies from the early stages of inception with the potential to support their decision-making processes. For instance, by advising the design of clinical trials, a company would have a good understanding of the requirements for approval, e.g., planning patient cohorts which are extensive enough for potential approval by insurers in the future.

Secondly, health insurers usually have an overview of healthcare technologies on more of a national ecosystem level. By partnering up with a VC Fund such as Earlybird, they gain access to a European-wide overview.