News
October 16, 2009
By Jenny Burns
Nashville Business Journal
Health care reform and the government cash being pumped into information technology has venture capitalists and private equity firms paying closer attention to Nashville.
"There's been a lot of activity - more now than there ever has been, even when the economy was hot," Earl Winter, CEO of nTelagent, said of the investors and venture capitalists inquiring about investing in his company. "We're getting contacted from coast to coast, Boston to California. We even had one from the (Washington) D.C./Baltimore area. They seem to be coming from everywhere."
That's because nTelagent is one of those new health care tech companies that's hoping to revolutionize the health care industry with a point-of-service, retail-type payment concept for medical providers.
Winter said he's hearing from both investors who want to expand their health care portfolios and those looking to dive into the industry. nTelagent has been funded through Burch Investment Group as well as other investors in the past.
His most recent call came last week from a large Silicon Valley firm that doesn't fund health care companies but wants to start.
"They realize health care makes up one-sixth of the economy," Winter said.
Former venture capitalist Laura Campbell, who owns a business growth advisory firm, is getting calls, too.
"The ongoing health care reform debate has increased the focus on investment opportunities in health care, even from investors that have not traditionally invested in the sector. Many are looking to increase or create portfolios in health care or health care IT," Campbell said.
She said the number of calls has increased over the past three or four months, with firms looking to pump as little as $1 million to as much as tens of millions of dollar into local health care firms.
Sante Ventures, a Texas venture capital firm with a $132 million fund, is among those talking with Nashville health care companies.
Joe Cunningham, the firm's managing director, said the timing is right for biotech investment due to many technology advances, and the firm has been looking in Nashville because it's the "health care services capital of the world." Cunningham used to work for Ascension Health as the chief medical officer of the Providence Health System.
Phil Suiter, a Nashville health care entrepreneur who's been involved with six start-up firms, said he's been "inundated with calls" from venture capitalists and private equity groups that have money to spend. He said more of them are coming from out-of-town investors than he's seen in his 25-year career in the health care sector."That to me is a signal that there is a lot of money chasing a few deals, which is generally a sign that they are trying to invest ahead of an economic recovery," Suiter said.
Investors want a piece of the stimulus-funded health care IT pie, he said. The health and wellness and disease management sectors are areas where investors have a lot of interest, Suiter said.
Venture capital investment increased 15 percent in the second quarter to $3.7 billion in 612 deals nationally compared to the first quarter's $3.2 billion in 603 deals, according to the MoneyTree Report from PricewaterhouseCoopers and the National Venture Capital Association.
But that's down significantly from the $7 billion invested last year in the same quarter.
In Tennessee, venture capital investment nearly quadrupled to $11 million in the second quarter from $2.8 million in the first quarter. Both quarters had three deals each.
That's also higher than the year-before amount of $9.7 million for the second quarter 2008. Third quarter figures will be released next week.
Sid Chambless, executive director of the Nashville Capital Network, said he's had a dozen new investment firms reach out to him in the past year, as well as groups that have traditionally shown interest in Nashville. He said that's because the leading health care entrepreneurs are here.
"A lot of those firms are looking to Nashville for solutions," he said.
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