The time has come for a venture capital fund to provide the financial resources needed to do serious innovation in senior housing.
Every year venture capital firms bet hundreds of millions of dollars on new business ventures where around 40% of them will be total losses. They also know . . .
- Another handful will have modest success and generate at least some return.
- That a tiny percentage of them will yield fantastic amazing profits that will more than cover the loses.
Why Not Senior Living?
Here is my idea. I would like to propose that senior living companies and senior living capital providers should join forces and form a venture fund for innovation in senior living. For sure it wouldn’t be exactly like a high tech venture fund. It is impossible or at least improbable that any project or set of projects would ever have the kind of payoff a Facebook, Twitter or Google provided. On the other hand it is equally unlikely that any project would be a total loss. In truth the debt providers would only incur nominal risks and if the big national and regional players pooled a few hundred thousand dollars each, it is likely that additional money would flow from outside the industry. Own of the most critical aspects would be to have outsider, out of the box thinkers involved in the investment decision making process so that it does not devolve into just another senior living capital provider. In fact part of the operating rules would need to be that the fund would take a pass on anything that was ordinary, no matter how attractive the return.
The Big Wins
The potential wins are huge:
- It would be a way to take a serious look at providing a new housing model to meet the needs of those Boomers who haven’t saved enough to afford traditional senior living.
- We would likely discover some brand new better ways of doing senior living.
- It is likely we would see some hybrid approaches that might include home services, multigenerational and sweat equity models.
- It is entirely possible that we would end up with new amazing models of senior housing that would actually entice seniors who would otherwise stay at home into senior living communities.
- Finally, though perhaps most importantly if we created models that got more seniors out of the isolation that so often accompanies aging in place, it would be a huge huge win for seniors.
So what do you think?
The Rest of the Series:
- NIC is just like high school
- What if you had a big pot of money
- Why we are so slow to innovate – It is the fault of developers and operators . . . but even more the fault of capital providers – Part One Part Two This article
Still coming
- Are there still great market opportunities across the country or are we heading into an era where there is danger of over saturation? – Yes – No – Maybe – Are there really any experts?
Steve Moran
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Hi Steve
Excellent post as usual
I agree that we need out of box thinkers – but I disagree as to the concept of a venture capital fund and to your premise about venture capital investment returns
The problem with senior care, senior housing etc is not a lack of money. There is way too much money out there in the vc industry chasing too few quality deals. When you add in corporate vcs like Intel, GE, Qualcomm there is even more money going after a very small pool of quality startups.
Now, add to that all of the angel investors, incubators, accelerators and the like and you have even more money chasing after companies.
Most senior living products out there today are technologies chasing markets. We have such a cool technology lets find a way to get it into this huge senior living market. Build a better mousetrap and they will build a path to our door – NOT!!! Savvy investors realize this right away and will not invest in these types of companies.
As a patent attorney and entrepreneur – I like you – know there is a better way. I have created something very exciting that deals with innovations in senior living and you will be one of the first to learn about it when we are ready to launch
Thank you for posting such an important article that will raise awareness in the senior living industry
Looking forward to your next post
Michael Neuvirth
Hi Steve,
Thanks for your thoughtful blog post – I am formerly from one of the highlighted enterprise companies, and like many sandwich-generation technologists, I left my director position within one of the companies you mentioned, into the startup space 2.5 years ago. My trigger event was when my mom had a stroke, and I realized the personal pain of caregiving. It is a labor of love – worry, guilt, frustration, … I was a babe in the woods and frustrated why it couldn’t be as simple as using Open Table to find vetted caregivers? Of course, I was not along – you and your readers know the stats in the marketplace…
The point is that while we can all relate to the need, the startup funding space is not mature enough yet in the senior-living and caregiving services. VC’s and seed-investors are out there in the broad category of healthcare, but the issue is that the market is very fragmented, and all the ‘buzz’ is focused in the areas of cool-apps and health analytics (mature segments, familiar, lots of comparable valuations). Platform companies such as Care.com, Caring, and Angie’s List have captured VC investments and is starting to explore new revenue models to accelerate profitability. As Michael noted in the prior post, and after testing the market over the last 2 years, I am also a believer that a technology-only push will not drive the market.
Within LivWell Health, we are driving a ‘hybrid’ strategy for growth – Partner with the leaders in the market (revenue share, IP development) to build the network; Deploy a White-Box strategy (powered by LWH..); Seek out ‘smart-money’ (investors that can also open our markets).
From a funding path, I know of one company based in the Midwest which represents a consortium facility operators that has started their own VC-fund (will be released in 2014). In addition, I am starting to see several consortiums that have their own innovation funds, pooling resources and expertise to reduce their risks. These are the areas where we anticipate additional funding sources to accelerate the deployment of the LivWell Health platform.
My call to action for you, Steve: Partner with Scott Peifer/AgeTech West and pull together a half-dozen leading CCRC/ALF operators that have Innovation groups. Have each of them pitch in $25K – $50K — lets organize a series of startup to do their 15 min ‘pitches’, and award the funds to the most promising in the senior living space.
Alex Go
CEO and Founder
[email protected]
Alex – nice post and great call to action!!