What Venture Capital Considers Before Investing in Healthcare AI

Ryan Black
JANUARY 19, 2018


Artificial intelligence (AI) investments are booming, and the healthcare sector is one of the driving forces behind the eye-popping funding rounds that tech companies have been putting up in recent years.

But what are investors looking for when deciding what companies to throw their faith and funds behind? At a meeting in Boston, Massachusetts today, 2 investors from very different firms told attendees what motivates the money to move.

Jessica Alderman Zeaske plays with the big bills. She’s director of healthcare investments for GE Ventures, a billion-dollar fund. Jonathan Gooden, on the other hand, manages a more modest suite of investments as director of NYP Ventures for NewYork-Presbyterian Hospital. They have different priorities: For Zeaske, it’s about making money for the fund and supporting GE’s other technologies and investments in the space.
 
“I’m looking for [return on investment]. I’d invest in monkeys on a typewriter. I don’t invest in things because they’re AI, I look at if they’re solving some sort of pain,” she said.

For Gooden, it’s about investing in technologies that will eventually help the hospital system perform better and save money.

“Given the nature of healthcare providers today, with margins tight and uncertainty in Washington, we don’t have an unlimited budget for stuff,” he said. “Whatever you come in to try to sell us, that’s going to displace something else.”

When it comes to AI, both acknowledged its growing ubiquity in healthcare. Gooden even said that the name of the conference—AI in Healthcare Summit—would seem silly in a few years, because the 2 will be so thoroughly intertwined.

But it’s a complicated field to invest in. FDA regulation is evolving, so investors have to pay close attention to what capabilities a technology will even be allowed to bring into hospitals. The stakes are much higher than other AI applications, too.

“This is not your Netflix queue, if you’re not 100% right there’s real consequences,” Gooden said. Like self-driving cars, being right 95% of the time is dangerously insufficient. He pointed to the man who died in a self-driving Tesla: It’s human nature to take that 5% for granted.

Zeaske expressed confidence that the blurring of retail and healthcare, like CVS’s purchase of Aetna, would grease the wheels of AI integration in the industry. Retail has become frighteningly good at predicting consumer behaviors, and it also specializes in something she says is largely absent in healthcare: customer service.

For both, in a sense, practicality plays a part: for NYP Ventures that practicality is operational, and for GE Ventures it’s scalability. The most high-tech, “pristine” tech solutions for healthcare aren’t always the easiest or most logical for hospitals to adopt, Zeaske said, and that hinders their growth potential.

Plus, she added, “There’s no easier way to lose money in venture capital than telling doctors what to do.”
 

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