Spencer Trask Blog

President Obama recently asked lawmakers to schedule an up or down vote on healthcare legislation in the next few weeks. He reinforced in remarks at the White House, “We have debated this issue thoroughly, not just for a year, but for decades.”

At Spencer Trask, the topic of health care reform is particularly meaningful, and we’re inspired by a company we co-founded called Health Dialog, as it relates to the Health Care issue. The potential impact of this small company on the giant health care industry should not be underestimated. It began in 1997 as a vision driven by truth, knowledge and the power of informed decision-making for individuals, and achieved a sale in Q4 2007 to Global Healthcare Management provider BUPA (British United Provident Association), the biggest private health insurer in the United Kingdom, in a $775 million deal.

Health Care and Infinite Returns – Beyond the Financials

We see this story as an embodiment of our commitment to companies that aim for delivering what we call “infinite returns”. By infinite, we mean going beyond mere financials to a “higher-order” positive global impact.

Health Dialog put into practice the research of Dr. John Wennberg, a previously unknown visionary. Health Affairs magazine recently named Wennberg “the most influential health policy researcher of the past quarter-century.” Using his Comparative Effectiveness Research (CER), and data on Empowered Patient Decision-Making and Evidence-Based Medicine, Health Dialog’s game-changing health care management and delivery strategy proved to simultaneously drive-down costs while dramatically improving patient outcomes and satisfaction. In an October 2008 New York Times interview, Wennberg’s “Annals Of Internal Medicine” landmark study results were echoed:

“30 percent of care rendered today, according to some studies, is unnecessary, redundant and, in some cases, even harmful. We need to get waste out of the system. That means $700 billion in a $2.4 trillion system.”

The Blue Cross Blue Shield Association insures 102 million Americans — one in three people — and has networks that include 90 percent of the nation’s providers and 80 percent of its hospitals. Their experience is illustrative for change on a National scale.

Health Dialog has created an inspiring template for wide-scale impact on the world that could potentially make a positive impact on the life of every human being in our county. The impact Health Dialog realized for their stakeholders, customers and partners is the type of return that sets Spencer Trask apart from traditional venture firms. We are uniquely committed to the realization of a mission without typical constraints of “traditional” VC firms. Social entrepreneurism and corporate social responsibility have recently become enticing buzz-words, but the concepts are not new to Spencer Trask – they are the essence of our organizational DNA and what drives us to propel the success of ventures in our portfolio.

Following President Obama’s State of the Union address and budget proposal, the national media spotlight remains focused on national health care reform and deficit reduction.

Tuesday’s New York Times noted, “The first priority noted by the Office of Management and Budget was to support health insurance reform by strengthening policy on the use of computerized records… financing research to compare the effectiveness of different medical treatments…”

The Spencer Trask network is the original underwriter of comparative effectiveness research in the form of a company called Health Dialog, which paid royalties to the founding father of comparative effectiveness research, Dr. John Wennberg.

Wennberg documented the fact that medical treatment variation exists across providers, with no statistically relevant difference in positive outcomes for high cost, aggressive providers and more conservative, lower cost providers. He concluded that much of the variation was unwarranted by medical evidence.

His research stresses the value of informed patients in a health care delivery system that emphasizes education and autonomy of the patient as an effective counterweight to a doctor’s incentive to be paid by procedure. By leveraging the comparative effectiveness research into actionable patient information, Health Dialog improved health care outcomes, patient satisfaction rates and reduced medical costs for insurers.

At this critical juncture in our nation’s history, politicians can follow Health Dialog’s lead as a proven reference point for commercially and socially viable reform. Health Dialog is the fastest growing health care management company and its 20 million patients report distinct improvements in the quality of their health care while their insurers see dramatic reductions in the incurred costs for medical procedures.

The Spencer Trask network of investors is firmly committed to looking beyond the horizon for innovative ideas that will change the way humanity lives for the better, and we are pleased with the example of Health Dialog – a company that has delivered infinite returns in terms of net worth, network and net worthiness.

The World Economic Forum wrapped up at Davos last week with universal agreement that we need to collectively question our current problem-solving methods.

In a session at the Forum last week, Don Tapscott, author of Wikinomics observed, “Davos this year is framed around the idea that the world is busted.  We’re here to see if multi-stakeholder networks can solve problems” — singling out the growing significance of the open innovation marketplace.

His speech was close on the heels of another groundbreaking collaborative innovation challenge from our company, InnoCentive. Wired.com reported a new challenge on InnoCentive in which Harvard will use government funding to generate not only answers to medical challenges around Type 1 diabetes but questions that will spark new ways of thinking about the disease.

“We want questions as well as answers, and we need to get them from a broader community because the same old people asking the same old questions in the same old way with slightly newer technology is not moving things fast enough or broadly enough for us to cope with these incredibly complicated diseases,” said Dr. Eva Guinan, director of Harvard Catalyst Linkages and co-leader of this InnoCentive project.

“When the United States government funds a crowdsourced social network at the oldest university in the country to make medical research more effective, it’s hard to deny that the Obama administration is making good on at least part of its pledge to bring the government and the institutions in line with the latest technology,” reported Eliot van Buskirk on Wired.com.

We couldn’t say it better ourselves. Spencer Trask is focused on bringing together great minds and great talent to build the big ideas of tomorrow.  We’re excited by InnoCentive’s progress in this space and look forward to accelerated results in worth and worthiness as more sectors and geographies embrace the power of crowd-based innovation.

With the election in Massachussetts of Scott Brown, aka “GOP 41”, it has been an eventful week for the Healthcare reform bill that has been spotlighted for months as the marquee accomplishment of Team Obama.   With Mr. Brown in place in the Senate, we at Spencer Trask are watching for a resurgence of interest in the economic benefits of the proposed healthcare legislation.

In 1999 about 200 Spencer Trask investors contributed 10 million dollars to fund the  start-up Health Dialog.  That company was formed specifically to profit from an exclusive license to Wennberg’s then obscure “unwarranted variation” research at Dartmouth.  Its clients are insurance companies and large employers, and its profits are driven by cost-savings generated by informed patient decision taking.  Health Dialog

• became the fastest growing healthcare management company of the decade,
• cut Blue Cross expenses by 30% and improved patient satisfaction rates
• built  the world’s most robust data set showing that patient outcomes can be de-linked from patient expenditures.

Health Dialog is a fascinating story of vision, investors, and capitalism.  It is also a little-known story of influence: Peter Orszag, the President’s right hand for Health Care Cost Reform  is obsessed with Wennberg’s economics of health care delivery, link to May 4 issue of The New Yorker.

The economics of evidence-based care is one of the few points of agreement for both parties, and Spencer Trask Investors made it possible for Health Dialog to prove in the free market that patient-centric health care delivery models are profitable and empowering.

The astounding pace of innovation propelled by collaboration, competition, and incentives inspires us every day at Spencer Trask.
In this industry, incentives that motivate an entrepreneur, engineer, scientist or investor are often monetary. But time and again we see the best in human potential brought forth by a desire to break new ground, do what has never been done before, and blaze a new trail to make the world a better place. Continue Reading »

This morning’s NPR Marketplace Morning Report featured Edison Nation, a site for inventors and retailers, powered by open innovation. Edison Nation has a few things in common with VenCorps, our community of startup entrepreneurs, experts and investors.

Edison Nation comes from the creators of Everyday Edisons, the invention television series that airs on PBS stations nationwide. The site was developed to collect pitches from inventors. However, companies took notice. Now major retailers such as Home Depot, Bed Bath & Beyond, and PetSmart use the site to find “the next big thing.” This is similar to VenCorps’ partnerships with corporate sponsors.

Retailers and manufacturers use Edison Nation to sponsor “Idea hunts.” Inventors pitches ideas through the site. Winning inventors split royalties with Edison Nation 50/50. Continue Reading »

Don Tapscott, best-selling author (Wikinomics, Growing Up Digital, and more) and authority on the strategic impact of IT and innovation, posted his “Personal Card to the Internet” on the Huffington Post yesterday. He also announced he’ll give an anniversary gift to the Internet, by making a donation to TakingITGlobal, a collaborative learning community which provides youth with access to global opportunities, cross-cultural connections and meaningful participation in decision-making. Don, who is a member of the Spencer Trask network, wrote, “I’m hopeful others will send similar presents as well.”

We liked Don’s idea so we are encouraging you to make a financial gift to the charity of your choice in recognition of the impact the Internet has had on our global awareness and collaborative action. To make anniversary gift-giving easier, we teamed up with Inlieuofagift.com. Inlieuofagift.com offers electronic invitations with a “donate now” button associated with the charity of the party host’s choice. Guests are asked to make a donation in lieu of bringing a gift. There are no fees and all donations are 100% tax deductible. Inlieuofagift.com partners with GuideStar and JustGive.org to offer access to 1.8 million charities, and has been featured on the Today Show and Oprah.