Q&A With Minnesota’s Most Active Heathtech Investor, TreeHouse Health

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Screen Shot 2017-02-10 at 10.18.55 AMTreehouse Health is Minnesota’s most active healthtech investor by deal volume.

Since 2013 inception, the incubator has funded 14 HealthIT companies, 11 based in Minnesota.

We spoke with Managing Partner Jeffrey “JD” Blank about what’s working for TreeHouse Health right now.

At a high level, how are things going at TreeHouse Health?

2016 was our busiest year yet! We’re having a lot of fun working with the entrepreneurs in our portfolio. The HealthIT space is so dynamic and we’ve seen the local ecosystem develop a lot over the years.

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What’s the biggest change you’ve seen since starting?

The quantity and the quality of companies has really improved. We’ve seen a wave of local companies that have gone on to raise larger rounds, which creates an environment of more everything as part of the cycle. When we started it was really hard to get traction with investors and customers, but now we’re seeing digital health locally really start to grow up.

Now about half of our portfolio companies have essentially graduated, moving beyond our space and regular guidance.

At what point does one graduate from TreeHouse Health?

It’s case by case, we don’t have a defined program so in helping our companies get traction, that really varies by the situation.

Some cash investment is always part of the deal between TreeHouse and the startups, correct?

Yes, it’s angel type investments starting around $25-$50k, but that may not always be the case, there is not a set amount.

What else is part of the value proposition to startups?

We bring general insights, practical advice and networking opportunities.

How have you been sourcing your deal flow?

Locally, we are plugged in with the community and regionally/nationally, we are working with partners. For example, our most recent investment in Orderly Health just last month came from Denver.

What kind of partnerships create the pathway for that?

Our corporate partners, which right now include: Blue Cross and Blue Shield of Minnesota, Hennepin County Medical Center, and Accenture.

Have you experienced any liquidity events?

Not yet.

What’s a common thread that your portfolio companies share?

Certainly at the early stage the people really matter as much as the idea/product/market/etc. It’s important for us to have a good foundation with the entrepreneurs.

Beyond that, if there’s evidence of traction on the payer/provider side that certainly helps.

Are you on par with the cadence you had in mind?

It’s a good speed for us, about 4-5 per year, which keeps us busy and hopefully not over extended.

What’s your take on the presidency and potential effect on healthcare in the United States?

There’s no shortage of uncertainty, but fundamentally the issues remain the same. People get sick and need to take care of themselves and healthcare delivery is expensive. In terms of how that’s operationalized is up in the air, but there’s always opportunity in change.

Does that change your risk/reward profile or the way you do business in the market?

We’ve always tried to look at it as a core value proposition of delivering better care at a lower cost — as opposed to opportunities that are contingent upon regulation.

How do you perceive where the FDA is at now vs. three years ago when you started?

Depending on who you talk to, the FDA can be a non-starter, but from a digital health perspective, there is more clarity now than ever before.

What’s something that you learned from the entrepreneurs you work with?

Becoming more flexible.

What occupies your time these days?

I’d say about 1/3 is with spent with existing companies & partners, 1/3 is finding new companies, and 1/3 is more management of the business.

Where do you see an opportunity for improvement in Minnesota’s healthtech segment?

There is opportunity in the Series A stage of organized or institutional capital.

How do you see Minnesota stacking up relative to other markets in the country?

There may not be the level of volume here as there, but the value and quality here is as good as it gets.

What’s next for Treehouse Health?

We have big plans and a lot of work to do this year. It’s exciting and we want to build upon the platform and model that we have right now.

What’s the best way to pitch you/ TreeHouse Health?

I think we pretty accessible? Companies can find us online; it’s nice to meet face to face since so much of what we’re doing right now is betting on the person.

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