Medical Research Charities > News > Why Health Care Start-Ups Like Theranos Need Investing Expertise, NY Times

Why Health Care Start-Ups Like Theranos Need Investing Expertise, NY Times

The Silicon Valley start-ups that often grab headlines are typically in the Internet and consumer technology world. But there’s another part of start-up land that is also highly active: health-related technology, which includes biotech, health care services and medical devices.

Venture capitalists have been pouring money into health-related start-ups, with funding jumping 34 percent to $9.4 billion in 2014 from a year earlier, according to the National Venture Capital Association. What’s often left unsaid about these companies is that they behave very differently from the typical consumer start-up or business software company.

The health-related start-up sector has produced fewer unicorns, which are the private companies with $1 billion-plus valuations, largely because it takes a long time to develop new medical tests, drugs or insurance systems. Regulators often weigh in. Even if an idea behind a start-up is truly great, it’s bound to fail if the science doesn’t work out, if the regulators don’t like what they see, or if insurers and the government won’t pay for the product.

Bryan Roberts, a partner at the venture capital firm Venrock, knows the risks. He has been investing in health tech companies since 1997 and has put money into seven unicorn companies, including Illumina, Athenahealth and Intarcia Therapeutics. He also led the investment in the health care software company Castlight Health, which has seen its stock price fall by half since its initial public offering.

Mr. Roberts explained in an interview what makes the health tech space treacherous for investors, including the dangers of investing in a good story rather than in good science. Among the companies he discussed was Theranos, the blood-testing start-up valued at around $9 billion by investors, which recently made waves after a Wall Street Journal investigation raised questions about its technology.

(Click here to read the full story, written by Katie Benner, NY Times)