Investment firm Carrick Capital Partners anticipates a busy 2015, with healthcare opportunities clearly in its sights. It has secured the advisory services of former Tennessee Sen. Bill Frist, a physician, and plans to start a new fund that will include many healthcare investments, according to company co-founder Jim Madden.
Carrick, which typically invests in mid-stage companies with around $20 million to $100 million in revenue, already has one $180 million fund and will likely be announcing a second not before January. Madden did not disclose details, but said that the second fund will be larger than the first, and already has secured commitments from prospective investors.
Carrick's healthcare investments will straddle services and software, Madden indicated, two of the potentially fastest-growing subsectors in healthcare investment.
Frist is expected to provide additional high-level healthcare expertise, and may serve on the boards of some of the firms in which Carrick invests. Frist already sits on the board of one Carrick investment, Accolade, which touts a “health assistant” service to help connect consumers to appropriate care.
Healthcare technology and services are a compelling opportunity for three reasons, Madden said. The firm typically looks for “changes in demographics, changes in technology and changes in regulatory. Healthcare's the trifecta there,” he said.
More specifically, Madden sees opportunities in private exchanges and home healthcare. Current offerings in both sectors do not provide seamless customer experiences and are therefore lacking, he said.
“Regardless of what happens on the public exchange side, the technology is there [for private exchanges],” Madden said. Their current shortcomings lie in their service gaps, he added.
“[There's] an inability to fully understand what [customers'] options are,” he said. Current solutions don't adequately support customer decisions, don't allow for ready comparisons, and sometimes struggle with multiple jurisdictions—a major problem for a large, Fortune 500 company with a far-flung workforce.
Carrick has not typically been interested in investing in clinical areas, but Madden says the infrastructure for home healthcare isn't perfected yet either, and he predicts the healthcare setting is going to increasingly shift to the patient's home. The software and services to fully support a home-health environment “with not only billing and scheduling, but delivery of services, appointments, you name it, that's a big gap still,” he said. “The scheduling algorithms, the billing algorithms that are behind that, the things that make it work, the factory behind it all,” don't currently exist, he concluded.
Carrick's enthusiasm folds into the context of an interesting year. Healthcare venture investments had a mixed 2014. Funding for digital-health startups has been aggressive, and by the third quarter of this year, total investment dollars broke a record by touching $3 billion, according to one source.
Venture capital funding in all sectors is up, at $33.2 billion through the first three quarters of 2014, which is the highest annual haul since 2001, according to the National Venture Capital Association. Healthcare investments as a whole, however, have seen slower growth so far, with the biotechnology and medical-device sectors lagging behind 2013's pace. Healthcare services as a whole exceeded 2013's pace, but from a low base.
Follow Darius Tahir on Twitter: @dariustahir
