The October issue of Start-Up magazine includes an article on growth opportunities in the 25-year old field of sleep medicine – an enormous group of serious and chronic diseases that remain largely undiagnosed.
One of these diseases – sleep apnea – has strong links to cardiovascular conditions (atherosclerosis, myocardial infarcation, hypertension, stroke, and heart failure) and metabolic disorders (obesity and diabetes). Sean Heyniger, CEO of Watermark Medical (a portfolio company of ours) likens it to “cholesterol 30 years ago,” as it is “both a risk factor of and an agent that worsens other progressive and chronic diseases.”
The most common current diagnosis and therapy are expensive and suffer from a high failure rate – 50% of patients abandon treatment within the first year. Even those who stay with the treatment regime fail to meet very low compliance standards, through misapplication of the device or removal of same in the middle of the night.
Watermark provides a medical device and software platform which empowers primary care physicians to prescribe home sleep tests, addressing the 90% of patients with undiagnosed (and therefore untreated) Obstructive Sleep Apnea (OSA). The advantages to home-based sleep testing are simple: increased patient comfort and compliance, improved diagnostic speed and accuracy, and lower cost. Home-based, end-to-end, diagnostic-to-therapy platforms are a growing trend in health care. Sean and his team at Watermark are already experienced in providing home-based monitoring from their success at PDSHeart (a previous portfolio company in our first BPV fund), a leader in the remote cardiac monitoring space.
The New York Times covered this “broad transformation” last May in High-Tech Alternatives to High-Cost Care. The Times singles out Watermark as exemplifying the promise of these changes:
…an array of technology-enabled, consumer-based services that provide a new form or primary health care [that] emphasize early detection, prevention, and management of chronic disease.
As insurers and the government begin to reimburse at-home testing and monitoring devices, the trend promises to:
…shift a lot of the diagnosis, monitoring and treatment of disease from hospitals and specialized clinics, where treatment is expensive, to primary care physicians and patients themselves — at far less cost.
The article further concludes that additional chronic conditions such as heart disease and diabetes could also someday be monitored by Web-based personal devices similar to Watermarks’ ARES (Apnea Risk Evaluation System). It is exciting to partner with entrepreneurs like Sean who are at the forefront of efforts to use the latest technology to simultaneously increase the quality and reduce the cost of health care in this country.
Our recently-added portfolio company – WaterMark Medical – was featured in a New York Times piece on emerging trends in health care.
We’ve enjoyed a long term relationship with Sean and Charlie, and backed their previous company - PDS Heart - which successfully capitalized on the same trends in health care.
MENTION health care reform and the image that instantly comes to mind is a big government program. But there is another broad transformation in health care under way, a powerful force for decentralized innovation. It is fueled in good part by technology — low-cost computing devices, digital sensors and the Web.
The trend promises to shift a lot of the diagnosis, monitoring and treatment of disease from hospitals and specialized clinics, where treatment is expensive, to primary care physicians and patients themselves — at far less cost.
The new models emphasize early detection of health problems, prevention and management of chronic disease. The approaches have adopted a range of labels including “wellness,” “consumer-directed health care” and the “medical home.”
The potential transformation faces formidable obstacles, to be sure. Some of those hurdles include getting patients to embrace healthier lifestyles and persuading the government and insurers to reimburse at-home testing and monitoring devices.
To glimpse the business opportunity — and the challenge — at the forefront of this emerging, decentralized health care market, let’s look at a start-up in the field of sleep medicine.
Fred Schwarz, in The Uncertainty Principle, argues that an economy’s ability to generate innovative companies results not only from the availability of seed capital, but the structure of the early-stage investing ecosystem:
While scientific research in other industrialized nations is centralized, hierarchical, and bureaucratic, in America it is competitive and entrepreneurial. This is not to say that politics plays no role in deciding how American science is funded; far from it. But in America, governmental sources of funding are much more diffuse (half a dozen federal agencies and departments spend at least $1 billion a year on basic research), and private sources are much more numerous, than in most European or East Asian nations. It all adds up to strength through pluralism.
Schwarz cites a few specific American strengths:
The profusion of funding sources makes it easier for researchers with good ideas to shop around and find a willing partner.
Independent state universities compete for the best and brightest research. “Americans can consider themselves fortunate that except for the service academies, there is no system of national universities.“
All our competitive factors – within and between institutions, funding sources, states, federal agencies, and military branches – benefit from “…the absence of any federal Department of Science and Technology - despite the assumption in many quarters that if something is important, it must have its own cabinet secretary.”
Schwarz adds a counterpoint: Europe and China may have an advantage for funding big-ticket items like the Superconducting Super Collider, because they’re “good at spending lots of money with little squawking from the citizens.” However he then favorably quotes Professor William Happer of Princeton who called the SSC’s demise “a tragedy for science” but also cautioned: “I would rather accept mistakes made by the people or their elected representatives than live with mistakes made by scientific bureaucrats.”
Schwarz’s conclusion sums it up nicely:
America’s hodge-podge of scientists, institutions, and funding agencies – imperfect though it may be - is the closest thing the world has to a free market in science, and the results can be seen in Nobel Prizes, citations, and the steady influx of researchers from abroad who know that the United States is the land of scientific opportunity.
The economic future just happened. This study from the Kauffman Foundation finds that well over half of the companies on the 2009 Fortune 500 list, and just under half of the 2008 Inc. list, began during a recession or bear market.
The patents for the Television, Jukebox, and Nylon were granted during The Great Depression. Although we can’t confirm any patent information on the chocolate chip cookie, it too was invented at the same time (1930 to be precise).
Joseph Schmupeter argued that this was an essential strength of the American economy: economic destruction breeds creative success. From The Library of Economics and Liberty:
Schumpeter was among the first to lay out a clear concept of entrepreneurship. He distinguished inventions from the entrepreneur’s innovations. Schumpeter pointed out that entrepreneurs innovate not just by figuring out how to use inventions, but also by introducing new means of production, new products, and new forms of organization. These innovations, he argued, take just as much skill and daring as does the process of invention.
Innovation by the entrepreneur, argued Schumpeter, leads to gales of “creative destruction” as innovations cause old inventories, ideas, technologies, skills, and equipment to become obsolete. The question is not “how capitalism administers existing structures, … [but] how it creates and destroys them.” This creative destruction, he believed, causes continuous progress and improves the standards of living for everyone.
The Daily Business Review credits Scripps Florida for its impact on biotech innovation. (Subscription required)
Scripps Florida – the first and sole satellite of the Scripps Research Institute, is one of only three national translational research high-throughput screening centers approved by the NIH and received the first NIH drug development grant.
Its presence has helped South Florida attract other impressive research organizations: the Max Planck Institute (Jupiter), Torrey Pines Institute for Molecular Studies and the Vaccine and Gene Therapy Instititute (Port St. Lucie), Sandford-Burnham Medical Research Institute (Orlando), and The University of Miami’s Life Science Park.
While biotech research is becoming more and more the province of research centers, the resulting technology spin-offs do tend to cluster around those research centers. Mark Mirkin of Carlton Fields writes:
“For better or worse, biotech innovation has largely been abandoned as a primary pursuit by pharmaceutical companies, becoming the pursuit of universities and research institutes, leaving pharma to focus on applied research. (Although) it is difficult to calculate with precision a rate of return on an investment in basic research because of the lenghty time period between discovery and application, it is hard not to notice that hundreds of biotech companies have arisen in the San Diego area, home of Scripps, and hundreds of others have arisen in Germany’s Bavaria region, home of Max Planck.”
Some excellent advice on new technologies: even when there is no immediately apparent benefit to your business, having employees dabble a bit with “the technology of the era” helps them imagine what might be technologically possible.
Dreaming big, innovating in processes/systems unrelated to the technology, spotting early trends for customers and vendors (or portfolio companies, present and future!) – these are the positive side effects from playing with not-yet-ready-for-our-business technologies.
Tom Glocer, CEO of Thomson Reuters, shares the story of giving his staff first-generation mp3 players (9 years ago) for Christmas and challenging them with a “Christmas assignment.”
Texting, emailing, or taking cell phone calls during meetings is a pet peeve of many professionals… and yet many professionals are themselves guilty of the same impolite behavior. Some new research offers an explanation, of sorts, in the form of “the group-preserving functions of dissociating.” It turns out that our electronic devices are (over-) feeding a human need to, at times, “disconnect,” and in the process undermining both teamwork and good manners.
Christine Pearson, professor of international business at the Thunderbird School of Global Management in Phoenix and a co-author of “The Cost of Bad Behavior,” writes on the subject in the May 16 New York Times:
Still, the illusion that multitasking can aid productivity is powerful. And it’s abetted by the fact that splitting our attention between real and virtual worlds can produce a kind of neural intoxication, research shows.
Through our devices, we find a way to disappear without leaving the room. By splitting ourselves off and reaching out electronically, we fill empty interpersonal space and ignite our senses. We can find relief and a fleeting sense of freedom.
Decades ago, the sociologist Barry Schwartz commended the group-preserving functions of dissociating. Everyone, he said, reaches a threshold beyond which working with others is irritating, even unendurable.
Finding a mental escape can help us deal with the problem. But electronic devices have led to a serious overuse of this strategy — to the detriment of everyone.
We tend not to argue with sociologists, so maybe there’s something to this explanation. But in our experience the “texting/emailing during meetings” is at its core about trying to multi-task in a world where everyone is busy and being bombarded with messages throughout the day. The problem is that, while there is no rudeness intended, it is often perceived that way and understandably so. It’s just hard to claim you value relationships and then not have the courtesy to really focus on what the other person is saying. Moreover, the preponderance of research shows true multi-tasking is a myth – you really can’t concentrate on more than one thing at the same time. So we try to turn off the devices during meetings, both internally and with entrepreneurs, and give our full attention to the matters being discussed. And though we don’t often complain when others do it to us, it does bother us. So we’ll do our part to hold the emails and calls for after the meeting and hope that others will do the same.
Predicting technological trends – let alone profit-making opportunities within those trends – is not for the weak at heart. Here are a few brave & bold predictions from the past:
How did Detroit miss this?
Thomas J. Watson with one of the (only) 5 computers the world would ever need?
BPV sees its capital as a “growth accelerator” for established, rapidly growing businesses with strong management teams. We prefer to focus our efforts on assessing competitive and execution risk rather than product or business model risk, and we want to see tangible evidence of the unique value offered by a company’s product or service.
