| I attended the new Venture Fair at the Himss | | | | success. This new model invites the big HIT players in |
| Conference and applaud the organizers for launching | | | | as venture investors. |
| this new event. In spite of its maiden voyage, it was | | | | They would acquire a minority equity interest in |
| very well organized, well attended and very | | | | promising companies with a call option exercisable at |
| effective. In fact, the biggest difficulty was the | | | | some future date at a predetermined, contractually |
| weather not co-operating and the morning session | | | | negotiated valuation metric. Now for the hard part. |
| had a majority of entrepreneurial presenters | | | | They then take the role as a supporter of their |
| compared with qualified investors. By Mid Afternoon, | | | | investment and tell the entrepreneur to press on as |
| with late arrivals, however, the ratio of investor to | | | | an entrepreneur. The spirit, passion, and energy of |
| presenter was approximately one-to-one. | | | | the entrepreneur remain in tact. More importantly, the |
| I am looking forward to attending this event at next | | | | efficiency of the start-up remains in tact. Translation |
| year's conference and anticipate that the word will | | | | - very low overhead compared to a comparable |
| get out and attendance will triple. | | | | product launch with a large company's infrastructure. |
| If there were a disappointment, it was that only | | | | The advantages to the large company are that they |
| Eclipsys had a representative attending and all of the | | | | create a very low cost and efficient R&D |
| other major HIT vendors were absent. Part of that | | | | platform. They dramatically reduce their financial risk |
| may have been because this was a brand new | | | | of major product development failures. They also |
| event. At the very least, the big guys should want to | | | | spread their risk over a portfolio of promising |
| keep their finger on the pulse of the up and coming | | | | technologies. If they do exercise their call option, |
| technologies. Some useful platforms were presented | | | | they have actually helped the seller make his/her |
| including a patient smart card, biometric security and | | | | company more expensive. However, it is likely that |
| a voluntary patient reported health record. | | | | their pre-negotiated valuation metric will allow them |
| In spite of the passion and creativity of this group of | | | | to complete the acquisition at below current market |
| entrepreneurs, half of them will not be around in two | | | | value. |
| years. The major hospitals are not early adapters. | | | | The entrepreneur is able to secure much needed |
| The implementation of new technology can often be | | | | funding to help develop his/her vision. More |
| way more costly and difficult than originally | | | | importantly, however, is the backing of the major |
| anticipated and results are not guaranteed. Combine | | | | HIT vendor largely removes the "small company risk" |
| that technology risk with the "small company risk" | | | | component for the risk adverse hospital decision |
| and the sales environment is not very welcoming. | | | | makers. This alone will accelerate the adoption of |
| Like the entrepreneurs in the room, I too want to | | | | new technologies so they can reach the scale |
| have a positive impact on the healthcare system, but | | | | necessary for commercial success. |
| our firm is a little investment-banking firm. So I am | | | | Some very smart and successful companies like Cisco |
| going to apply my passion and creativity to propose | | | | Systems have deployed similar models with great |
| a new financial paradigm that is designed to | | | | success. They recognize they do not have a |
| accelerate the introduction of game changing | | | | monopoly on all the great new developments in their |
| technologies. I call this our Hybrid M&A Model. It | | | | industry so they cast their net over a broad territory |
| is designed to provide the entrepreneur the capital to | | | | through this type of creative equity investment. |
| develop his or her technology toward commercial | | | | |