EXCLUSIVE: Chicago Ranks 34th Nationally in VC Healthcare Funding, Yet Investment Opportunities Abound


By: Sandra Guy

Email: sandraguykolina@gmail.com

Chicago lags other parts of the United States in attracting venture capital investment in healthcare technology startups, but the sector’s growth opportunities have just begun.

That’s the conclusion of the latest report from PitchBook-NVCA Venture Monitor, which tracked $23.9 million in investments in nine healthcare technology systems companies through June 30. The data cover the six-county Chicago region, and both patient-focused and medical-device innovations.

Chicago has raised the 34th highest amount of venture capital for healthcare startups among major metro areas nationwide thus far this year, compared with its 11th place standing at this time in 2016, the data show.

“When it comes to medical data especially, the ability for it to improve patient care, whether through the in-patient process or through discovery of new treatments or genes, new healthcare technologies are going to be a big opportunity for investors,” said Kyle Stanford, an analyst at PitchBook Data, Inc.

“As long as there are new innovative ideas to fund, venture capital will be active within the space,” he said. “Healthcare isn’t getting less expensive, so increased investment is going to be needed.”

The growth outlook is underscored by a separate report that shows healthcare and pharma among the top six cash-holding sectors in the U.S. economy, behind only technology but ahead of consumer products, energy, automotive and manufacturing. Total cash grew by 9.2 percent, to $1.84 trillion, despite a $74 billion, or 1.5 percent decline in debt, according to Moody’s Investors Service’s latest update.

Chicago’s startups and money-raising efforts promise continued investment, too. One example is the city’s first-of-its kind competition, sponsored by venture philanthropy firm Three Lakes Partners, to award $1 million to developers of up to three “big ideas” to improve the lives of people living with an incurable lung disease known as Idiopathic Pulmonary Fibrosis, and their caregivers.

The Three Lakes challenge offers a case study for how a family office can impact a disease by attacking it from all angles. It's venture philanthropy in the truest sense.

The sponsor is uncovering all opportunities, bringing together experts from around the world, investing in research, awareness, entrepreneurs, new ideas and public education, potentially emerging as a new model that will gain traction elsewhere.

Yet, even with the promises of technology — after all, Swedish researchers are testing drone delivery of defibrillators to people in the first stages of a heart attack — the real key to success is serving patients with access, accommodations and affordability.

What does that look like, and what might Chicago startups consider in their own success stories?

One working model involves Emory & Henry College in the Appalachian region of southwestern Virginia. The college’s students in the new School of Health Sciences will help provide occupational and physical therapy services to patients who are uninsured or who, as the working poor, struggle to afford medical services.

The clinic is tripling its patient load over the next few years to serve the working uninsured or those who have lost employment within the past nine months and whose income is less than 200 percent of the federal poverty level. As part of the effort, the E&H students will also help with women's health care, behavioral medicine, genetic counseling and dental hygiene services.

The Mel Leaman Free Clinic operates as a private, not-for-profit medical facility and does not receive reimbursement from patients or insurers for services. All operating funds come from donations or grants.