Boston VCs See Madison Healthtech Play Following Nashville’s Path

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the Healthcare Information and Management Systems Society conference in Orlando, FL, last month, 100health co-founder Luke Bonney got the sense that investors and healthcare professionals don’t know much about Madison, but they’re starting to hear about it.

“We look at Madison, and we see a certain amount of potential,” Bonney said during the panel discussion. “We’re at the very beginning of companies moving in that direction [toward healthtech]. That talent is starting to realize we can do something that typically has happened on the coasts.”

About 80 percent of HLM Venture Partners’ $400 million in total investments has gone to coastal-based companies, said partner Yumin Choi. But since HLM invested in Nordic in 2012, the VC firm has looked at several companies in Madison and Milwaukee, Choi said. (So far Nordic is HLM’s sole Wisconsin investment, but the state is “definitely on our interest list,” Grua told Xconomy.)

The event targeted Wisconsin early-stage investors, giving them an opportunity to hear what Boston VCs view as the hot trends in healthtech, what the sector’s drawbacks are, and how they source deals. A few takeaways:

—HLM is most interested in healthtech startups that optimize electronic health records software, help provide healthcare price transparency, perform healthcare data analytics, help coordinate the various activities and players along the continuum of healthcare, or provide transaction processing.

—It’s increasingly difficult for VCs to get in on investments in mid-sized healthtech companies, said Darren Black, managing director of Boston-based VC and private equity firm Summit Partners. That’s because many of those companies are either going public or being snatched up by larger healthcare firms, he said.

—The challenges for healthtech investors include convincing hospitals and other healthcare providers of the return on investment. “It’s not an industry that historically has spent a lot on IT,” Grua said. It’s also tough for investors to understand when and how to scale the companies, Choi said.

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