HealthTech Capital

Anne DeGheest is currently the founder and Manager Director of HealthTech Capital. She has been a mentor capitalist with expertise in investing and mentoring early-stage startups in the healthcare space. Her establishment of MedStars Ventures Partners and Health Tech Capital has created a new ecosystem between private and angel investors, venture capitalists, and industry players. She has founded many life science companies, including Pyxis, Aspect Medical, VISX, Thermage, Medpool, and Omnicell, and generated over $6 billion in revenue in market capitalization. Anne pursued her post-graduation MBA from Harvard and a Master’s in Business Engineering from the University of Brussels.

Can you share your journey so far with HealthTech Capital? Also, what is the difference between Medtech and Healthtech, and how do you get the customer’s voice within the organization?

Currently, I operate two companies, Medstar and Health Tech Capital. The former is an advisory firm, and the latter is an investor group formed by accredited investor VCs and corporate VCs. I embarked on my career by receiving a degree in engineering from Belgium. Then, I completed my MBA from Harvard Business School. Eventually, I joined forces with a healthcare company, where I launched post oximetry worldwide, a device that became prominent after the outbreak of the pandemic. In 1986, I contributed to the health tech space, where we implemented technology from the computer and telecom industry to redefine the healthcare sector. Applying technology from technical industries improves healthcare loopholes like enhancing care accessibility, cutting costs, and boosting efficiency. Health tech also works on workflow issues for effective healthcare delivery using computer technology instead of productcentric approaches, unlike traditional life science VCs.

For example, I have worked with a company, Pyxis that leveraged health tech innovation by adapting ATMs for drug inventory management in hospitals, transforming drug delivery, and ensuring proper control. Although there were numerous technological limitations during that time, like no internet and networking, we pioneered efficient drug distribution by providing benefits to nurses and patients.

The other company I was involved with, Omnicell, continued this trend by managing medical supplies and medications effectively. This helped in developing a new category in supply chain management designed to meet the needs of patients and nurses. All these companies, including VQ, acquired by Pyxis, collectively saved over 10 million lives and generated over $20 billion in revenue in market cap, regardless of the funding challenges due to varying demands from traditional VCs.

"HealthTech Capital has become the helping hand for the health tech ventures to leverage technology at low cost, aligning with the needs of multiple stakeholders and streamlining the delivery process. We are focused on unleashing the unmet needs that act as pathbreakers in the ever-evolving market of the healthcare space"

The funding limitation created havoc in the health tech ventures, driving me to found Health Tech Capital in 2010. It is a membership organization that connects accredited investors, VCs, and corporate VCs, facilitating investment in more than 60 health tech companies. Our company has been acquired by major players like Google and Apple, emphasizing the ever-evolving investment landscape in healthcare technology.

After an exceptional journey in the healthcare industry, what lessons have you learned about scalability and profitability?

Being involved with numerous companies in the health tech space, I have noticed people chase short-term goals or small improvements, so I advise people to think big and act on it. When I say to do anything big, I mean by setting the example of Uber, which reshaped how we deliver the taxi industry. Likewise, Pyxis, as I have already mentioned, has proved its potential through a remarkable contribution to the industry. Similarly, VQ was using the air traffic controller to oversee patients remotely in the intensive care unit and reduce the mortality rate by 20%. All changes that companies are bringing are not for the sake of going trendy; rather, one should understand the necessity of executing the change; this is where people fail. For instance, in Silicon Valley, employees are fascinated with technological features like AI, the internet, or any hype, but they are not unleashing the unmet need or the pain point. When it comes to healthcare, there are multiple stakeholders, including physicians and hospital CFOs with different needs. CFOs are mostly concerned about financial results and seeking cost-effective healthcare technology. Healthcare providers need validated clinical data and an efficient return on investment, so this adds more complexity. Therefore, it entails understanding the different needs of budding adopters and broader market segments for success.

Every unmet need should be focused more than chasing after a solution and neglecting the problem. Pyxis positively demonstrates this approach where initial efforts to address medication errors led to an inefficient solution. They developed a drug dispensing machine that did not work, putting the company on the verge of being shut down. Immediately, I spent time with the stakeholders, figured out the pain point, and devised an innovation. We delivered drugs and cabinets like the ATM at the nursing station and remotely tracked the system for security. This solution helped maximize productivity, reduce errors, and enhance security, making it appealing to the CFOs. So, engaging closely with stakeholders like nurses, CFOs, and pharmacists is essential.

Once the unmet need is recognized, the next challenge is determining who will pay for the products or solutions. In healthcare, the user is not always the buyer, complicating the business model. The sector has five key payers, including providers, payers, patients, pharma, and employers. All these payers have different needs and expectations that require unique business models to meet them efficiently. The stakeholders also vary in terms of different time horizons and financial aspects in healthcare. For instance, a quick return on investment is important for hospital purchasers, while Medicare Advantage plans require time to acquire value-based care initiatives due to the long horizon. Unlike other business sectors where employers expect immediate payback, pharma companies depend on solutions to improve clinical trials and reduce costs. Therefore, creating a business model that meets every stakeholder’s needs for long-term success is important.

Startups play a crucial role in tailoring flexible business models in the ever-evolving landscape. Companies like Amada Health and Livongo initially prioritized self-insured employers by offering risk-based payment approaches for specific outcomes. Their expansion of offerings and capabilities was so wellplanned and successful that they were able to penetrate other segments like medical claims and wellness insurance. This enabled the companies to build sustainable business models over time.

What would be your key piece of advice for your fellow peers or entrepreneurs and investors?

For every investor, my first advice would be to really understand the risks associated with team, products, market, finance, and compliance. It is about creating business models and knowing all the vulnerabilities for improved services. Similarly, entrepreneurs should focus only on the problem because they are responsible for providing solutions to the customers that are acute to them, which creates a sense of urgency. One who owns the voice of the customer internally is critical in the early stage to create value from the metrics of every employee. Having multiple stakeholders in healthcare should ensure that they create value. The biggest problem in healthcare that causes huge failure is when entrepreneurs sell the technology and not comprehensive solutions; they develop the product for the early adopters and the opinion leaders and overemphasize many features that may not align with the broader market’s needs. The healthcare market mostly emphasizes seeking simple solutions that streamline the delivery processes. Therefore, it is necessary to adapt and adjust roadmaps as companies evolve by modifying the initial strategies to meet the changing market’s demands.