Meet the Manager – A Different Kind of Healthcare Investor

Private Equity Central.net, November 8, 2010

When managers talk about focusing on healthcare, investors typically think of drugs and devices. That is for the typical investor; not Koleman Karleski, a managing director at Chrysalis Ventures. He focuses on IT companies in the sector that provide efficiencies.

Karleski talked with PrivateEquityCentral.net about what separates his firm from others and why Chrysalis’ sweet spot for investing is only going to get better in the near future.

PrivateEquityCentral.net: Let’s start off with you telling me a little bit about your role with the firm.

Koleman Karleski: I am a managing director at Chrysalis Ventures. I have been with the firm for 14 years.

I invest in healthcare, which is the firm’s area of focus from a sector perspective.

PEC: What is the firm’s healthcare strategy?

KK: We focus on making investments in young companies in the middle of the country. That means the Midwest and the South are our primary locations.

As it relates to healthcare, most venture firms are focused on drug development or devices. We do not; we are focused on healthcare information technology and information services businesses.

That is a different twist on what most of the other healthcare venture investing community focuses.

PEC: Why has the firm decided to focus on that?

KK: We all know that healthcare costs are rising rapidly, so there are tremendous opportunities to drive productivity enhancement into the system simply by offering lower cost information technology services.

As healthcare evolves, we are all paying much more out of our pockets through higher deductibles and co-pays, so the consumer is becoming more responsible for their healthcare. Therefore, we are also investing in a number of companies that help empower the consumer to make better decisions through better information products.

PEC: Is this a crowded area?

KK: It is not. The vast majority of healthcare-focused venture firms are looking at molecules, but at Chrysalis, we have a different angle on healthcare.

If you think about where we are here in Louisville, we are right along the Interstate 65 corridor in the middle of the country. There are a lot of big healthcare companies along the way. There are a lot of healthcare providers and payers smack-dab in the middle of the country spinning off interesting technologies.

PEC: How do you think healthcare will change as a result of the President’s overhaul?

KK: The healthcare reform bill really was about health insurance reform. That focused on getting uninsured people insured. The number of people who will be carrying an insurance card over the next five to seven years will increase by tens of millions. We already have a system that is very expensive that is now going to take on millions of new people –  it is hard to imagine how the costs per person aren’t going to increase dramatically.

From our perspective, that creates an enormous opportunity to drive the productivity in the system. Also, many people will be figuring out how to spend their own money and we will be there to help them make decisions.

The lifestyle trends of this country are big drivers as to why costs are going up. Nearly 70% of the dollars that are spent on treating health-related issues are driven by lifestyle issues. Increasing obesity, and other issues, that are under our control to some degree, are trends that are not abating.

The country is getting older and larger, and that is putting a lot of pressure on the healthcare system.

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