Up until a few weeks ago Mikhail Rozenfeld led business development and strategy for AT&T’s ForHealth Solutions group. Perhaps most notably he launched the company’s home health management and mobile personal emergency response product Numera Libris in February. Prior to Rozenfeld’s two years at AT&T, he worked at venture capital firm SFW Capital Partners as an associate, and now that he’s made his departure from AT&T he’s returning to venture capital. As a new VP at The Channel Group he is launching a search fund that aims to acquire a few early stage ventures or technologies to create a mobile health rollup.
Think Nant Health but on a smaller scale and with a focus.
“A specific example I can give you — and this is not something I will be investing in, I’m just giving an example to illustrate the point — if you pick asthma as an example, there are companies that specialize in asthma screening and diagnostics, companies like iSonea that have Wheezometer type products,” Rozenfeld told MobiHealthNews. “There are companies specializing in pulmonary therapy and disease management for asthma. There are companies that specialize in asthma medication compliance. All of those solutions might work great within their particular niche for this condition, but there is no comprehensive solution that can deliver an interoperable solution that can manage asthma from screening, diagnosis, through therapy, through compliance.”
While he’s not yet chosen a focus — the first stage of the search fund is to help determine that — he points to asthma, sexual transmitted infections, post- and pre-natal care, Parkinson’s, and multiple sclerosis as just a few potential directions.
Rozenfeld’s search fund is seeking investors for its initial $1 million seed round, which will be used to seek out acquisition targets, evaluate hundreds of companies and technologies, interview customer groups, and create a comprehensive analysis of the market. Investors in this stage of the search fund will be given access to the research produced and will also then be in a position to invest more for the acquisition stage, which might raise around $30 million depending on the specific companies that it seeks to acquire. Rozenfeld expects the search fund would only acquire three or four companies at first and some of those may be technology acquisitions or licenses from university innovation centers.
“A lot of these early stage companies don’t have the capacity — whether it’s [too few] employees or [insufficient] capital — to have two products, even though those two products are complementary and addressing the same condition,” Rozenfeld said. “It’s just very difficult for a company at the stage to do that.”
Rozenfeld acknowledged that there are a number of larger open API platform plays in digital health already, but none of them has been very successful. AT&T attempted one and wasn’t successful, he said, because they found that people working at health startups were often very passionate about their particular focus and they often believed the data their product generated was proprietary. Perhaps more importantly, he said they typically had no financial incentive for integration.
“A dermatology company is not going to go integrate with a food tracking company,” Rozenfeld said, “even though the data is valuable, there is just so very little incentive to do that.”
When an investor steps in or an acquiring entity rolls up a group of technologies the incentives for integration change, especially if one product in the portfolio has reimbursement. Rozenfeld believes this more comprehensive offering will also help bring in new customers who are not interested in adopting a series of point solutions.
“Just to stick with the asthma example, if I am working in a company that screens for asthma at the point of care, my distribution model is to convert a lot of primary care providers or pulmonologists,” Rozenfeld said, “and that takes a lot of time. Having the product combine with another technology may open up additional distribution opportunities for them.”
Rozenfeld and his team at The Channel Group have already begun discussing their plans with a number of potential investors and investment bankers. He claims this model will present a lower-risk alternative to incubator or traditional venture capital models. The team is also honing its strategy for the types of companies it is looking for — those at the seed funding stage or perhaps a larger startup that can serve as an aggregation platform for smaller companies. The focus on an integrated approach to one specific condition continues to be the search fund’s guiding light.
“If you read Lean Startup or understand what is being advocated at the accelerators, you know the strategy is to be simple and focus in on one little thing and get to market fast,” Rozenfeld said. “Startups often do that, and there is a lot of validity for those strategies, however, if you are too narrow and you take on a very difficult market to penetrate, there is a high chance you will run out of money before you even get to a paid pilot.”