Silicon Valley Bank and the Healthcare Ecosystem

In light of the Silicon Valley Bank collapse, we reached out to Alira Health Partner Deepak Sahu for his insight into the situation. Deepak says, “We should all have faith in the strong innovation pipeline, especially in those innovative technologies that will make a difference in people’s lives. Companies should be asking themselves – does my product improve patient outcomes? And what is the health economic story?”

Read on for Deepak’s thoughts.

A Strong Innovation Pipeline and a Focus on Positive Patient Outcomes

Due to the availability of cash during the pandemic, we saw a level of investment which in a normal market would have been difficult to achieve. Certain companies received funding that perhaps otherwise would have been challenged about their ability to deliver better patient outcomes. This infusion of capital pushed valuations up and disrupted the innovation cycle.

Blog
Published on:
March 14, 2023
Written by:
Deepak Sahu
We’re extremely confident about the innovation pipeline; in fact, we’ve never seen so many innovative technologies in our lives. Investment will continue, however, loose cash for any innovation without enough due diligence is going to decrease. The key is data to prove that an innovative technology will generate positive patient outcomes.”
Deepak Sahu Managing Partner, Global MedTech, Alira Health

The collapse of Silicon Valley Bank (SVB) is one of the corrections to that disruption. The impact of all that investment in unproven innovations is that confidence is now lower. So when SVB went to raise capital  to service its clients, which were concentrated in biotech, technology, and MedTech, it wasn’t able to do so. SVB has been a lifeline for innovation, contributing significant value to the healthcare ecosystem and prioritizing how companies could access needed cash. But their assets are not mature yet; majority are still in the start-up phase and are not generating cash.

Not every innovative idea is good, or well timed, or unique, and not all will produce demonstrable outcomes that can meet healthcare’s rigorous standards and gain approval.  So one key takeaway for all stakeholders in healthcare is that in order to be successful, innovative products must survive the regulatory process, and must be proven, with data, to make a meaningful difference in the lives of patients.

And, clearly, there were some unfortunate management decisions at SVB. Diversification is another key takeaway for banks, VCs, and start-ups. The latter should not have just one banking partner, while banks and VCs should not focus all their assets in one sector.

We’re happy that the government has come to the rescue. We’ve spoken to our clients who are affiliated with SVB, and they’ve been able to access their funds. And we’re hopeful that what has happened to SVB will not become a contagion. The situation is evolving, and we will learn more as the time unfolds.

Meanwhile, we’re extremely confident about the innovation pipeline; in fact, we’ve never seen so many innovative technologies in our lives. Investment will continue, however, loose cash for any innovation without enough due diligence is going to decrease. The key is data to prove that an innovative technology will generate positive patient outcomes.

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