A problem exists in healthcare startup world. It used to be that to do a good startup you had to be on the coasts. That’s where the energy was. Now, people like Steve Blank have taught the entrepreneurial community how build a good startup, regardless of location. Which is great from an innovation standpoint, maybe not from a money standpoint. Because the money is still on the coasts, even as great startups and ideas have filled into the rest of the country.
In a digital world where geography should be less of a constraint, a lack of technology within the investment community has created a rift between great innovation and the money needed to make it succeed. This according to Vic Gatto, Founder & CEO of Jumpstart Foundry, and Eller Mallchok, Platform Manager at JSF.
Traditional VC, which is on the coasts, is built more on a human network than on technology. Eller points out that the human network has great strengths, especially when finding qualified leads. But trying to invest in 40 cities is impossible with this model. The personal networks aren’t in the physical locations, plus there are too many companies to filter through.
What about technology, then? Eller says that it takes the process of human networks and word-of-mouth deal flow, and makes it far more efficient. “When you boil it down, at Jumpstart we believe that most good early stage healthcare companies have a set of similar characteristics that define them.” So the team at Jumpstart, led by Eller, built a process that can score and rank thousands of applicants to cut out a lot of noise and find the candidates the firm needs to be looking at. From there, “we take a much more qualitative look, which does take time. [We do use] a personal touch.”
Other VC firms are recognizing the need to scale, so interest in the Jumpstart system is growing. Evaluating 15 prospects a year and doing one deal doesn’t cut it anymore, and firms on the coasts are looking at Middle America for opportunities. Eller notes that deals look different away from Boston and the Valley, the aren’t your typical “costal deals,”so it’s taking some getting used to on the part of the firms starting to expand their search. But they’re doing it.
On the other side, entrepreneurs in Middle America will look towards the coasts, but can struggle to get introduced to those Boston or Silicon Valley networks.
In short, there’s not a great path to introduce costal VCs with Mid-America startups. Investors want to put money into good companies, startups are eager for investors’ money. Now all the community needs is a good mechanism to facilitate those deals.
That’s the goal of the Investor Forum taking place on August 25th, the final day of the 2017 Health:Further Festival. Get investors from across the country and from all stages of investment together to talk about systems that work. The key, Vic and Eller note, is that it’s investor only, so the conversations can be candid. Vic points out that the Jumpstart system, though effective, isn’t the only answer and won’t be right for every firm. So people at the Forum will talk about whether and how they want to be introduced to companies in Middle America, what that process should look like.
It will be a microcosm of what Vic and Eller hope the investment community can be overall: collaborative in a $3 trillion market where the pie is big enough for everyone to make money. A technologically functional industry that still takes full advantage of the human relationships that have anchored it since its inception. Like so much of what we talk about at Health:Further, it’s finding the best ways to blend technology and the human touch to build a successful product and a healthier society.