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.

Electricity is not the only connection shared by Thomas Edison and Spencer Trask. Although it pales besides the light bulb and first electric grid, Trask invested in another renowned and lasting inventions of Edison.

On February 19, 1878 — 132 years ago tomorrow — Thomas Edison received a patent for the phonograph, the device that first made hearing music, sounds, and the human voice across history possible.

In November of 1877, Edison gave mechanic John Kruesi a sketch of a cylinder wrapped in tinfoil with two diaphragms, each with a stylus. His best hope was that it might record just one word, but what occurred was that now monumental recording of ‘Mary Had a Little Lamb’ in Edison’s own voice. While Edison set out to use the phonograph to keep a record of certain cultural milestones, such as his recording of Alfred Lord Tennyson reciting ‘Charge of the Light Brigade’, he envisioned a wide set of uses for the devise: dictation in letter writing, audiobooks, educational instruction, music reproduction, family record and remembrances, audioclocks, preservation of important speeches and speakers, and voicemail.

“Of all the writers’ inventions, none has commanded such profound and earnest attention throughout the civilized world as has the phonograph.”

Thomas Edison, North American Review, June 1878

Thomas Edison and his early phonograph

“In December, 1877, a young man came into the office of the SCIENTIFIC AMERICAN, and placed before the editors a small, simple machine about which very few preliminary remarks were offered. The visitor without any ceremony whatever turned the crank, and to the astonishment of all present the machine said : ‘Good morning. How do you do? How do you like the phonograph?’ The machine thus spoke for itself, and made known the fact that it was the phonograph…”

- SCIENTIFIC AMERICAN, July 25, 1896

Listen to the First Recorded Advertisement

Letter from Trask to Edison, 1898

Spencer Trask & Co. floated a $6.6 million stock offering for Edison’s North American Phonograph Company, and made a public offering of the stock in 1890. Upon receiving one of Edison’s phonographs as a Christmas present, Trask playfully wrote to Edison, “I beg to assure you of my appreciation for your thoughtfulness in this matter…This will be when received, the only substantial thing, except losses, that I have received from my firm’s connection with the Phonograph Company. I shall take great pride in showing it.” But this playful teasing was in the early days – by 1907 the company had sold at least 20 million records and the music businesses was in full swing.

]]> http://spencertrask.com/2010/02/18/echoesaroundtheworld/feed/ 0 http://spencertrask.com/2010/02/04/president-reiterates-importance-of-comparative-effectiveness-research/ http://spencertrask.com/2010/02/04/president-reiterates-importance-of-comparative-effectiveness-research/#comments Thu, 04 Feb 2010 17:50:02 +0000 Mary Thigpen http://spencertrask.com/?p=423 Tuesday’s New York Times noted, “The first priority noted by the Office of Management and Budget was to support health insurance…]]> 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.

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.

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.

Platforms we’re shaping, like InnoCentive, inno360, and VenCorps create dynamic communities where members can identify, vet and contribute to the success of innovative solutions.

Thanks to the Internet, real-time, global collaboration is a reality that helps us to solve some of the most challenging problems facing mankind today.

On Oct 29, 2009 at the 40th Anniversary of the Internet celebration at UCLA where the Internet began, Kevin Kimberlin spoke about co-founding Ciena – the company that opened up the fiber-optic backbone of the Internet, making broad-based access and capacity possible to the masses.

At the event, we also had the pleasure of connecting with Regina Dugan, director of the Defense Advanced Research Projects Agency (DARPA). We found her to be a like-minded proponent of collaborative innovation.

At the event, she announced the DARPA Network Challenge, a competition that will kick-off this week. It explores roles of the Internet and social networking in timely communication, wide-area team-building, and urgent mobilization required to solve broad-scope, time-critical problems.

The challenge itself, and the insight it will produce certainly promise to expand the potential of distributed collaborative innovation.

For a $40,000 prize – the challenge is to be first to submit the exact locations (latitude and longitude) of 10 moored, 8-foot, red, weather balloons placed at 10 fixed locations in the continental United States. The balloons will be in readily accessible locations and visible from nearby roads for 6 hours during the day of Saturday Dec. 5, 2009.

All details can be found at http://networkchallenge.darpa.mil

May the best team win!

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.

Here’s how Edison Nation’s Live Product Search works:

1. A retailer/manufacturer identifies a market segment that needs innovation and Edison Nation creates the search, including any specific requirements.
2. Would-be inventors submit ideas online through our confidential Live Product Search database.
3. If an inventor’s idea is selected for commercialization by the retailer, the winning inventor will receive an annuity.

Listen to Marketplace Morning Report featuring Edison Nation.

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.

Watch the live event online from 8:15 am PST. The keynote, featuring Nicholas Negroponte, begins at 9 am PST; followed by Arianna Huffington at 9:40 am PST. And, don’t miss our own Kevin Kimberlin, who will take the stage at 4:15 pm PST.

Webcam chat at Ustream

Note: the InnoCentive segment begins around minute 16:00 in the episode but I recommend watching the first 30 minutes of the show, if you have time.