Healthcare Is A Venture Capital Bright Spot And Psilos Group Explains Why


The economy is down, the IPO market stalled, and venture capitalists are sitting on their wallets instead of opening them.

So why is an admittedly apprehensive investor like Albert Waxman spending money at roughly the same pace as last year?

“We’re very cautious,” acknowledges the CEO and senior managing member of Psilos Group. But startup pricing is down and fewer firms are willing to compete for deals, he says.

The net result is Psilos expects two and three deals this year, including an investment in Gamma Medica-Ideas that Waxman hopes to close within 45 days. Gamma Medica develops more effective and lower cost technology for breast screenings.

Waxman is clearly not alone in applying a steady approach to venture capital. Healthcare proved a bright spot in an otherwise dim VC investment horizon in the second quarter.

Spending on startups rose 62 percent from the first quarter and for the first time outpaced investments in information-technology companies. The sector sprung back to spending levels before the financial collapse last fall.

Waxman says his aim is to find companies using information technology in the health-care market. There are enormous opportunities for these firms, especially with the health-care push coming from the Obama Administration.

“I think we will see entrepreneurs respond to the healthcare crisis and the business opportunities it creates,” says Waxman.

For many VCs, healthcare is becoming the new frontier. The industry has a desperate need of technology to improve efficiencies and lower costs. Thirty years into the technology revolution, its use of technology is still crude, says Waxman, and this at a time when the world needs big changes in patient care.

Whether there is money to be made is another question. But for now, change is on the horizon and that spells opportunity for those willing to take a chance.