CHICAGO — Have a great tech idea to improve gastroenterology? Start-up companies have the potential to transform the practice of medicine, and to make founders a nice pot of money, but it is a difficult road. At the 2024 AGA Tech Summit, held at the Chicago headquarters of MATTER, a global healthcare startup incubator, investors and gastroenterologists discussed some of the key challenges and opportunities for GI startups.
The road is daunting, and founders must be dedicated to their companies but also maintain life balance. “It is very easy, following your passion, for your life to get out of check. I don’t know what the divorce rate is for entrepreneurs, but I personally was a victim of that. The culture that we built was addictive and it became all encompassing, and at the same time [I neglected] my home life,” Scott Fraser, managing director of the consulting company Fraser Healthcare, said during a “Scars and Stripes” panel at the summit.
Barry M. Hertzberg
Scott Fraser
For those willing to navigate those waters, there is help. Investors are prepared to provide seed money for companies with good ideas and a strong market. AGA itself has stepped into the investment field with its GI Opportunity Fund, which it launched in 2022 through a partnership with Varia Ventures. The fund’s capital comes from AGA members, with a minimum investment of $25,000. To date, AGA has made investments in six companies, at around $100,000 per company. “It’s not a large amount that we’re investing. We’re a lead investor that signals to other venture capital companies that this is a viable company,” Tom Serena, CEO of AGA, said in an interview.
The fund grew out of AGA’s commitment to boosting early-stage companies in the gastroenterology space. AGA has always supported GI device and tech companies through its Center for GI Innovation and Technology, which sponsored the AGA Tech Summit. The center now provides resources and advice for GI innovators and startups. The AGA Tech Summit has created a gathering place for entrepreneurs and innovators to share their experiences and learn from one another. “But what we were missing was the last mile, which is getting funding to the companies,” said Mr. Serena. The summit itself has been modified to increase the venture capital presence. “That’s the networking we’re trying to [create] here. Venture capitalists are well acquainted with these companies, but we feel that AGA can bring clinical due diligence, and the startups want to be exposed to venture capital,” said Mr. Serena.
During the “Learn from VC Strategists” panel, investors shared advice for entrepreneurs. The emphasis throughout was on marketable ideas that can fundamentally change healthcare practice, though inventions may not have the whiz-bang appeal of some new technologies of years past.
“We’re particularly focused on clinical models that actually work. There were a lot of companies for many years that were doing things that had minimal impact, or very incremental impact. Maybe they were helping identify certain patients, but they weren’t actually engaging those patients. We’re now looking very end-to-end and trying to make sure that it’s not just a good idea, but one that you can actually roll out, engage patients, and see the [return on investment] in that patient data,” said Kelsey Maguire, managing director of the Blue Venture Fund, which is a collaborative effort across Blue Cross Blue Shield companies.
Blue Venture Fund
Kelsey Maguire
Part of the reason for that shift is that healthcare has evolved in a way that has put more pressure on physicians, according to Barbara H. Jung, MD, AGAF, past president of AGA, who was present for the session. “I think that there’s huge burnout among gastroenterologists, [partly because] some of the systems have been optimized to get the most out of each specialist. I think we just have to get back to making work more enjoyable. [It could be less] fighting with the insurance companies, it could be that you spend less time typing after hours. It could be that it helps the team work more seamlessly, or it could be something that helps the patient prepare, so they have everything ready when they see the doctors. It’s thinking about how healthcare is delivered, and really in a patient and physician-centric way,” Dr. Jung said in an interview.
AGA
Dr. Barbara H. Jung
Anna Haghgooie, managing director of Valtruis, noted that, historically, new technology has been rewarded by the healthcare system. “It’s part of why we find ourselves where we are as an industry: There was nobody in the marketplace that was incented to roll out a cost-reducing technology, and those weren’t necessarily considered grand slams. But [I think] we’re at a tipping point on cost, and as a country will start purchasing in pretty meaningfully different ways, which opens up a lot of opportunities for those practical solutions to be grand slams. Everything that we look at has a component of virtual care, leveraging technology, whether it’s AI or just better workflow tools, better data and intelligence to make business decisions,” said Ms. Haghgooie. She did note that Valtruis does not work much with medical devices.
Karen L. Richard Photography
Anna Haghgooie
Specifically in the GI space, one panelist called for a shift away from novel colonoscopy technology. “I don’t know how many more bells and whistles we can ask for colonoscopy, which we’re very dependent on. Not that it’s not important, but I don’t think that’s where the real innovation is going to come. When you think about the cognitive side of the GI business: New diagnostics, things that are predictive of disease states, things that monitor disease, things that help you to know what people’s disease courses will be. I think as more and more interventions are done by endoscopists, you need more tools,” said Thomas Shehab, MD, managing partner at Arboretum Ventures.
Arboretum Ventures
Dr. Thomas Shehab
Finally, AI has become a central component to investment decisions. Ms. Haghgooie said that Valtruis is focused on the infrastructure surrounding AI, such as the data that it requires to make or help guide decisions. That data can vary widely in quality, is difficult to index, exists in various silos, and is subject to a number of regulatory constraints on how to move or aggregate it. “So, a lot of what we’re focused on are the systems and tools that can enable the next gen application of AI. That’s one piece of the puzzle. The other is, I’d say that every company that we’ve either invested in or are looking at investing in, we ask the question: How are you planning to incorporate and leverage this next gen technology to drive your marginal cost-to-deliver down? In many cases you have to do that through business model redesign, because there is no fee-for-service code to get paid for leveraging AI to reduce your costs. You’ve got to have different payment structures in order to get the benefit of leveraging those types of technologies. When we’re sourcing and looking at deals, we’re looking at both of those angles,” she said.
