Family offices make natural investors in health technology and fields such as biotech, being holders of "patient capital" and able and willing to invest for years. This article examines the details of what sort of firms and projects are being backed. A highly relevant topic in the COVID age.
(An earlier version of this guest article appeared in WealthBriefing, sister news service to this one. It is reproduced here given the obvious global nature of the topic and because of the large family offices market in North America.)
We have written several times about the close involvement of family offices, those exemplars of “patient capital," in areas such as healthcare technology. The story of the German couple who developed the vaccine for BionTech/Pfizer, and the family office connected to that success, is just one story among many. This news service has worked exclusively with Highworth Research, a database of single family offices, to track developments. And there are more stories to come.
The article below, which examines why family offices are keen on such areas, and delves into the benefits and risks, is by Thomas Balkizas, a healthcare tech global investment strategist (co-founder of Alpha Tech Capital), and EMEA principal partner for healthcare and life sciences at AWS. The editors of this news service are pleased to share this content and invite readers to jump into the conversation. The usual editorial disclaimers apply to views of outside contributors. Email email@example.com and firstname.lastname@example.org
The growing opportunity
Now that Baby Boomers are living longer, and the COVID pandemic has put healthcare center stage, healthcare and life sciences are more important than ever.
The Big Tech corporations have recently made major investments in
healthcare technology and venture capitalists and private equity
groups have given their clear backing to the sector.
Healthtech - continually innovative, always in demand and
a safe haven
The pandemic has devastated many industries but healthcare and health tech have remained a safe and growing investment sector during turbulent times. The crisis has accelerated the adoption of digital health devices, systems, diagnostics, remote communications and monitoring solutions for patient treatment and care while propelling the use of AI and machine learning to develop drugs at an unprecedented speed.
These changes in tech use and new clinical practices will continue unabated after the pandemic, improving patient outcomes, increasing efficiencies and delivering better care for many people.
Start-ups with a strong value proposition
An essential part of searching for attractive groups to invest in should be the ability to pinpoint start-ups with an obvious strong value proposition. They must solve a big, scalable, healthcare need that is causing a lot of “pain” to patients and healthcare professionals.
Start-ups that fail may often have a good solution to a recognized problem but, unfortunately, they may not be a viable investment due to their limited importance, size and scaling possibilities. If the addressable problem is urgent, there is some clear evidence that the tech will be adopted quickly, with a clinical champion attached, at which point, you should investigate it further while taking expert advice.
Why are health tech and life sciences a good fit for
family office investors?
Family offices should consider health tech investments if they value some or all of the following factors:
-- A high potential ROI from innovative products and services;
-- The continuous growing demand for tech to treat disease and support wellness;
-- The growing need to support aging populations and improve their quality of life;
--The opportunity to invest in socially impactful assets that build a legacy in philanthropy; and
-- The chance to invest in a safe sector with constant “crisis-proof” demand.
Most of the healthcare that was delivered during the pandemic had elements of digital health: access, information quality checking, post-event communication, track and trace, and booking vaccination appointments.
These additional factors should also be considered when evaluating start-ups:
-- Personalization should be part of the product or service solution: one-size fits all rarely works in healthcare;
-- How effective is a product or service at monitoring and does it produce actionable data for the healthcare professional? and
-- Tech solutions may also need to gain social or group support. This is critical in lifestyle diseases such as diabetes and heart failure.
Key categories, start-ups to watch
The three top health tech fields are precision medicine, wearables and genomics with an estimated global market value range of between $400 to $600 Billion.
SOURCE McKinsey 2020
Some of the most exciting areas to consider currently are the Internet of Medical Things, longevity and wellness treatments, and digital health apps.
Internet of Medical Things (IOMT)
These connected devices companies that improve the efficiency of patient diagnosis, monitoring and treatment while reducing costs, can allow remote treatment options. They can connect medical devices securely to services such as the AWS cloud. The Internet of Medical Things (IoMT) market should reach $142.45 billion by 2026 ($18.75 billion in 2018) (Fortune Business Insights) and is associated with treatment cost reductions and better outcomes.
Source: Deloitte (2017-2022)