Squinting Through Bubbles and Busts: Norwest’s Way To Navigate

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tech investors and entrepreneurs are wont to do. He also names another tactic.

“You’re always trying to seek out the inefficiency,” Howard says.

Norwest is backing health IT companies such as Health Catalyst and Omada Health because Obamacare and changes in health care reimbursement are moving medicine from a fee-for-service model to fee-for-outcome payouts, he says. For example, hospitals may receive no additional fees if they have to correct complications from surgery. “It’s going to force a lot of efficiencies into the market,” Howard says.

In its search for inefficiencies, Norwest doesn’t confine itself to information technology and the life sciences. The firm invested in two long-established consumer sectors “where you’d think there’s no inefficiencies left,” Howard says.

Norwest backed San Francisco-based Madison Reed, an online seller of its own home hair coloring products. The company says its dyes contain fewer harsh chemicals than traditional hair colors. Norwest also invested in a New York company, Casper, which makes mattresses out of latex and memory foam and sells them online with free returns. In addition to touting the mattresses as very comfortable, Casper changed the distribution model for mattresses, Howard says, making them cheaper to ship by folding and compressing them into a box.

“The mattress sort of explodes in your bedroom,” he says.

Norwest is sometimes a contrarian investor, bucking current trends. Howard cites the firm’s bet on Israel’s Solar Edge Technologies at a time when Wall Street was highly skeptical of solar power.

“Everybody was running out of the house, and we ran into the house,” Howard says. Solar Edge (NASDAQ: SEDG) completed its IPO early last year.

To guide its investment choices, Norwest builds market maps. But the firm also trusts in creative thinking, vision, and gut instincts.

“How we squint our eyes is something we really pride ourselves on,” Howard says.

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