Chicago is a hotbed of innovation in the healthcare industry, yet many healthcare startups lack access to investment capital at the seed stage. This intersection of healthcare and impact investing was the focus of the Investing in Better Health Panel & Showcase on Thursday, October 6th. Impact Engine co-hosted the discussion with MATTER and Furthur Fund, bringing together members of the healthcare and impact investing communities for an afternoon of discussion and demonstration.

The event began with remarks from Steve Collens, CEO of MATTER, and a panel over lunch with Jessica Droste Yagan (CEO, Impact Engine), Tasha Seitz (CIO, Impact Engine), Jordan Dolin (Co-Founder, Emmi Solutions), and David Cohn (CEO, Regroup Therapy). The panel focused on trends in healthcare and impact investing, and strategies for making a great return on investment while improving the healthcare system. Below are key takeaways from the panel.

Macro Trends in Healthcare

Jordan began by giving an overview of the macro-level trends seen in today’s healthcare industry. Money is a big motivator and a growing trend has been the transition from fee-for-service models to fee-for-value service models. The US healthcare system is globally ranked as one of the most expensive service models, spending nearly $10,000/person each year. And yet the system still suffers from the “Innovation Gap”, which means there is a growing need for fast, quality care and a large market, yet an increasing number of barriers to innovation. The system struggles to balance making money and creating a product that fixes modern issues at a reasonable cost.

Macro Trends in Impact Investing

Impact investing is a fast-growing practice in Chicago and beyond. Investors want to align their investment and impact interests, but usually not at the expense of return in investment. Some investors now consider impact metrics and financial metrics with equal weight. Tasha explained that in the Impact Engine sweet spot, demonstrating efficacy/positive outcomes in business should in turn drive sales, creating a cycle of return on both financial and impact investments.

Impact Investing in Healthcare

There is an increasing number of impact investors expressing interest in the healthcare industry. However, Jordan explained that traditional rules for venture investing are much different for the healthcare industry because, “there is higher risk and zero room for mistakes.” This is largely because most health businesses sell their products to corporations and large health systems instead of directly to consumers. Tasha spoke about the growing interest in investing in health startups that are technology-based, people-first, and focused on targeting behavioral health.

What Makes a Good Investor

David Cohn of Regroup Therapy shared his thoughts about what to look for in a good investor. Recruit different stakeholders with different knowledge levels in healthcare to add diverse perspectives. “Pressure is healthy, and focused criticism of your business model can be helpful,” he added. Be aware of where and how you can add value to the companies you invest in

Getting Started in the Health Entrepreneurship Space

If you’re an impact investor new to health, get a better understanding of the field by talking with those who already know and invest in health startups. For those that aren’t experienced investors, be comfortable with risk and balance your impact investments with other investments in your portfolio. Treat early stage investing as a team sport- be sure to leverage investors and immerse yourself in the investment committee. Jordan reminded entrepreneurs, “not all investors will buy into your startup for impact reasons, but those investors are filling a great need for your startup”.

The event concluded with presentations from eight healthcare startups, including six MATTER companies (ScaleDown, CareTree, MondoPoint, Supply Clinic, rMark Bio and Markit Medical) and two Impact Engine portfolio companies, Luna Lights and Habitnu (Prana Diabetes).

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