Health IT is seeing more private investment than ever before — venture capital funding in the health IT sector totaled over $5 billion in 2016, a new record for the industry — and the southeast is a strong regional contender for those dollars. The state of Georgia is home to more than 200 health IT companies with revenues of more than $4.5 billion. Nashville’s concentration of healthcare companies also lends itself to strength in the sector, with healthcare comprising the majority of Music City’s venture investments.
BIP Capital, one of the southeast’s most active venture firms — currently the most active in Georgia, according to their State of Startups in the Southeast report — is deepening its focus on health technology. And why not bring in a healthcare expert to lead that charge?
Sarath Degala isn’t a typical venture capitalist. Currently on the board of multiple health tech companies, Degala worked in actual healthcare systems, mostly on the operations and financial outcomes side, for the majority of his career. Now, he’s been tapped by BIP Capital as vice president and portfolio company team lead, specifically for his expertise in the health tech space.
Degala says that a good portion of his work for the last few years has been leading the pilots of new technologies within the health systems; in other words, implementing the products of the kind of startups he will now be investing in.
“I was the one that would implement, so taking companies that were similar to the ones that BIP would invest in from a pilot stage, running a pilot in one of my hospitals, to several hospitals and then throughout the entire company,” says Degala.
“That’s the advantage of having all my experience, is that I can really see pretty early on that this is a unique company,” says Degala. “This is a must-have, not just a nice-to-have, and this is a differentiator that can really be utilized by a health system. I can actually see the use case.”
Degala has worked health systems of different sizes and structures, ranging from multinational system Tenet Healthcare to Georgia-based non-profit Wellstar Health System. He met Mark Buffington, BIP Capital’s CEO, while working at Tenet, and is already an advisor to one of BIP Capital’s health IT portfolio companies, Ingenious Med.
“We’ve been collaborating with Sarath on healthcare investments for many years. He has brought us some of our best healthcare investments and has also helped accelerate many of our existing healthcare portfolio companies,” said Buffington in a statement.
While the firm already has a number of health IT companies in their portfolio — Degala says it’s about a quarter — he plans to increase that number. BIP Capital is currently raising a fourth fund, its largest to-date, and he says up to 40 percent of those investments could be health IT startups.
Specific technologies he’s interested in? Degala points to artificial intelligence, marketing automation, revenue cycle, and anything that can help solve the challenge of interoperability.
“We’re really being very disciplined on finding those companies that are a ‘must-have’. That’s the investment thesis in healthcare.”