Startup CEOs and Investors: Marty Felsenthal

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The JPMorgan Healthcare Conference
By Marty Felsenthal

It’s bigger than the Super Bowl, the World Series, the World Cup, and the Winter and Summer Olympics. It’s more important than the BCS Championship game (particularly if you’re from Florida or Alabama) and maybe even the Famous Idaho Potato Bowl, the Scottish Highland Games, and the Cooper’s Hill Cheese Rolling and Wake Competition combined (unless you are from Idaho, Scotland, or, of course Gloucester, England).   

My name is Marty Felsenthal. I’m a middle-aged, workaholic healthcare venture capitalist with thinning hair and a thickening mid-section. Mr. HIStalk asked me to write a little bit about the JPMorgan Healthcare Conference taking place this week in San Francisco and to describe it for readers who have never attended. 

My life’s greatest joys and accomplishments are increasingly defined by (a) finding great post-holiday sales online; (b) the "sports" achievements of my nine-year-old, boy-girl twins, and occasionally, my seven-year-old daughter; and (c) by the nights my wife actually laughs at a joke I make rather than thinking I’m a workaholic, balding, overweight man who she periodically tries to pull a Chief Bromden on and pillow-suffocate for snoring in my sleep.

Since that is increasingly my life, the JPMorgan Healthcare Conference is actually a big deal for me. But it wasn’t always that way.

The conference has been taking place for decades. In fact, it used to be called the Hambrecht & Quist Healthcare Conference prior to H&Q being acquired by JPMorgan. But for decades, it was really dominated by drug companies, biotechnology companies, and medical device companies. On a relative basis, there was just less growth and innovation in healthcare services and healthcare information technology and, as a result, less investor interest.  

For clarity’s sake, I should point out that I’ve been a healthcare-focused venture capital investor for 18 years and work exclusively with what we hope are innovative healthcare services and healthcare information technology companies. This year, our firm will be hosting a reception during the conference for other venture capital firms who invest in healthcare services and healthcare information technology.  

This will be my twelfth consecutive year of co-hosting this reception. There were years when we had fewer than 30 venture capital investors show up. There was just nothing sexy about investing in venture-stage healthcare services and healthcare information technology. I was like the Kevin James of the JPMorgan Healthcare Conference.  

This year, however, we have over 150 venture capital investors attending and had to turn a number people away at the threat of the fire marshal. This year, I’m like the Kate Upton of the conference — actually, let’s say the David Beckham of the conference (and maybe with a lot of help from Photoshop, that could actually be the case). 

When did it change and why? That’s easy.  2009 and 2010 when the HITECH Act and Affordable Care Act were passed. They were catalysts for innovation in "my" sectors unlike anything I’ve experienced since I first got involved in healthcare in 1992.

The conference itself is held at the Westin St. Francis on Union Square. It’s a forum for hundreds of public healthcare companies and an increasing number of not-for-profit healthcare systems and health plans with public debt to present to mutual fund and hedge fund investors. These companies include drug and biotechnology companies, diagnostic companies, medical device companies, healthcare services companies, and healthcare information technology companies.  

JPMorgan is also increasingly inviting a number of still-private companies to present. My firm is fortunate to have a few of these — Teladoc, Redbrick Health, and Vet’s First Choice. I unfortunately don’t have a chance to actually go into the conference and listen to these companies present any more. I wish I did.  

The presenting companies are among the largest and most influential players in the US healthcare ecosystem. They include UnitedHealthcare, Wellpoint, Aetna, Cigna, Centene, and all the major health plans. They include large health systems such as HCA, Tenet, Geisinger, and Banner; pharmacy chains and PBMs such as Walgreens and CVS Health; and most of the country’s most influential health information technology companies, such as Cerner and Athenahealth.  

These companies are talking about much more than their financial performance. They are talking about their strategies and how they are evolving in the face of the huge changes sweeping across our health care system. They are talking about their efforts to help reduce healthcare costs in our country, to improve quality, to improve the consumer experience, and to help lay (or take advantage of) the healthcare information technology backbone so we can transition to a more value-based environment. They understand that, in the current environment, they have to adapt and innovate to survive and thrive, and this is what some of the largest players in the US healthcare ecosystem are presenting and discussing.

Unfortunately, I don’t have time to go into the conference any more. I won’t even have a chance to see our portfolio companies present. As the customers of our portfolio companies (broadly speaking, health plans, hospital systems, pharmacy chains, HCIT companies, distributors, etc.) have started needing and demanding more innovation, more innovative companies have formed to address these needs. These companies need capital. They need investment bankers. They need management teams. They need executive recruiters.

All of these constituents — many of whom are old friends from my days as "Kevin James" and many new to the industry as we became cool — descend upon San Francisco during the conference to network, to catch up, to search for new jobs, to craft business partnerships, to look for capital. There is as much if not more action taking place outside the Westin St. Francis as there is taking place in the actual conference.

At Mr. HIStalk’s suggestion, I took a look at my calendar. This is my week. I start at 5 p.m. on a Sunday, and from there, I am booked solid every hour on the hour, breakfast through dinner, until Friday at 10 a.m. 

I am meeting with seven investment bankers. These investment bankers know and represent many wonderful entrepreneurs and companies who are in need of capital (capital that we can provide). They are also looking to represent companies we invest in when they need more capital and/or want to sell their businesses or go public.  

I am meeting with six other venture investors/firms. These are organizations that we co-invest with already or that we would like to co-invest with. We talk about opportunities to work together within our existing portfolios, companies we are currently evaluating where there might be an opportunity to invest together, and areas of innovation of mutual interest.  

We have more than 20 meetings with executives from some of the largest health plans, pharmacy chains, distributors, HCIT companies, and hospital systems in the country. We’ll talk about innovation. We’ll discuss our portfolio, trends we’re seeing in the marketplace, and interesting companies we’re seeing. 

I have meetings with three entrepreneurs who just want to network or who are looking for new opportunities. I’m getting together with Pete Hudson, the very talented founder of iTriage/Healthagen, with someone who was formerly a senior executive at McKesson, and with a former senior executive from HCSC. 

We also have an opportunity to meet with more than 10 innovative companies that are seeking capital. For obvious reasons, I can’t name them, but they are providing analytics for health systems and provider groups, and they are developing novel insurance exchange platforms. They are developing tools that deliver better provider quality information to consumers. They are helping health plans manage patients with certain types of high-cost chronic diseases (in one case we’re particularly excited about, a very large problem that no one has previously tried to target), and they are helping hospitals lower labor and equipment costs and are also facilitating better patient collection efforts.  

Unfortunately, the meetings during the conference are always too rushed, but there are two highlights of the week for me. The first is getting to sit down with these great entrepreneurs seeking capital and learning about their businesses. Occasionally this leads to an investment, as was the case with a digital pathology company called Aperio that we met with at the conference in 2007.  

The other highlight is getting together with the large healthcare companies and learning about where they are looking for innovation. One of the most satisfying aspects of our job is when we actually help young companies develop relationships with these large players. It’s a lot of fun to try to marry the young, nimble, aggressive (and sometimes naive) startups with the large, sophisticated, complex, highly influential (and sometimes slower-moving) titans of our industry.  

Unfortunately, there are also lots of people and companies I don’t get to meet with during the conference. People have started reaching out to schedule meetings during the conference as early as November now (for a conference that takes place in January). This leads to a lot of calls the first and third weeks of January with the people I couldn’t meet.  

So in short, it’s a hugely productive week of networking. We learn a lot. We get to help drive revenue to our portfolio companies on occasion. We reacquaint with old friends. We meet new friends who might someday work with our portfolio companies or partner with them. If we’re lucky, we find a new investment.

When the week is over, I go home feeling like the rock star that is David Beckham. I grab a drink. I crack a joke to my wife, I get ready for my Posh Spice, and then I usually fall asleep and start snoring, which often coincides with her trying to suffocate me.

Marty Felsenthal is a long-time venture capital investor who invests in and works with growing healthcare information technology and healthcare services companies and has been attending the JPMorgan Healthcare conference since the 1990s.