Insights with Leader Ara Chackerian - Early Stage Healthcare Companies Still Finding Their Feet as Investor Magnets

ara chackerian healthcare

Early-stage healthcare companies are Ara Chackerian’s business. Why? Because his twenty years in the health services industry ultimately led him down the path of investing in early-stage businesses.

Chackerian’s leadership capacities in the diagnostic imaging sector and teleradiology services evolved to the point of becoming an angel investor in early-stage healthcare companies—a booming industry since the passage of the Affordable Healthcare Act (ACA), especially from 2015-2017.

Like numerous other angel investors in the healthcare industry, however, Chackerian wonders about the immediate future of healthcare startup investments—as in this year, 2018.

Analysts and other investors appear to be of little help to Chackerian and his colleagues in terms of providing a better-than-foggy crystal ball. The picture fades in and out because of three evolving factors:

1) A major change in the ACA (i.e., elimination of mandatory healthcare).

2) New mega tech corporates—Amazon, Apple, and Google among them—entering the gamut of healthcare through digital therapeutics and services-wide data sharing, to cite only two inroads that change the playing field for competing investors.

3) A deficiency in startup public offerings, despite the growth in startups.


ACA (Obamacare)

Before and after the December tax bill—used by the Republican majority in Congress as the means to eliminate mandatory healthcare coverage—debate swirled around how such a move might affect the healthcare industry as well as coverage for the average American.

It is a ball still in play, partly because of the move to end mandatory healthcare (and paying a penalty for not enrolling), which actually takes effect for the year 2019, not this year.

Despite the removal of the penalty for being uninsured, early indications do not lend to the notion that ACA is widely unpopular. According to a U.S. News & World Report article early this year, nearly 9 million people signed up under the ACA during the most recent enrollment period, ending in December 2017.

The total nearly equals the previous year’s enrollment and it surpassed expectations, according to the report.


Startups Need More Validation

As for the healthcare industry in general and investments in startups, which ballooned not too long after the passage of ACA in 2010, a lag in IPOs (public offerings) bodes skepticism from venture capitalists, whereas these investors were once lining up to find the next new, innovative startup company to which to dole their money to.

Indeed, according to a report in the New York business-related news site, Crain’s, healthcare startups in New York City alone during 2017 attracted hundreds of millions of dollars in venture capital. However, the report goes on to say such a flurry of investment created an “overheated” startup market when compared to the rate of public offerings in the years following these companies’ beginnings. The inability for these startups to ensure their future—or at least investor perception of their future—via IPOs puts their longevity in doubt.

In short, not enough big players are buying out these startups or merging them into their fold to instill confidence in this sector. The ending to the healthcare startup story line is therefore still unwritten.


New Tech Competition

John Gardner, who like Chackerian promotes investments in companies related to healthcare, but specifically those involving information technology (IT), notes a fear among incumbent healthcare companies about the entry of new omnipotent tech giants stepping into this transformative world of healthcare as we know it.

In a February article, Gardner cites seamless data integration and unbroken chains of communication between players—both newcomers and the established healthcare entities—as areas ripe for the insurgence of consumer-driven giants such as Amazon, Apple, and Google.

To wit: Amazon, Berkshire Hathaway, and JPMorgan recently announced plans to start an independent enterprise offering healthcare services to these companies’ employees at a cost much reduced from under the current provider matrix.

What resulted from this announcement? Within a couple hours, index-listed pharmacy and health insurance stocks dropped by a total of $30 billion, including MetLife whose stocks dived by 9 percent on the day of the news.

As these info-tech paragons create one-stop shops for providers and other healthcare services, especially regarding pharmaceuticals, incumbent healthcare companies are playing catch-up by accelerating their digital transformations, says Gardner, a 20-year veteran in advising and working with not only healthcare startups, but also emerging businesses in the healthcare world.

Gardner adds that these long-standing companies are also honing their patient experience strategies in response to the potential competition these consumer-savvy IT companies pose.


Just a Matter of Time?

As blurry as the picture may be regarding the immediate future of healthcare startups, the result of all these impeding influences also remains unpredictable. Investors such as Chackerian hope the industry in general—prompted by competition and consumer demand—will provide the impetus for startups to turn the corner as a whole and instill more certainty among investors.



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