Tag Archives: #startups

The convergence of #MedTech – monitoring, diagnostics, remediation

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Earlier this year, I participated in MedTech’s Got Talent, a competition for medical technology and biotech startups, organised by STC. Now, HCF in partnership with Slingshot have announced a similar accelerator program, called Catalyst. Launched at a recent meetup event hosted by Startup Victoria*, Catalyst is the latest industry initiative to lend support to the growing #MedTech sector. It’s fair to say that the sector is not without its challenges (regulatory compliance and IP protection being foremost), but there is substantial investor interest given the potential for growth and widespread application of the resulting technologies. I also see that there is increasing convergence in respect to some of the digital products being brought to the market – through the use of wearables, mobile apps and analytics to deliver monitoring, diagnostic and remedial solutions.

Screen Shot 2015-11-22 at 8.10.47 PMAt the Catalyst launch, three #MedTech founders discussed their startup experiences and offered some insights to budding applicants. Jarrel Seah (Eyenemia), Phil Goebel (Quanticare) and Leonore Ryan (Cardihab – Cardiac Rehab Solutions) covered the product development process, being part of an accelerator program, and the specific challenges of medical technology.

There was  broad agreement that Australia (and Victoria in particular) has a strong and successful history of #MedTech development and innovation. There was also a sense that the future funding of telehealth services will be key to the sector’s development, especially the shift from “fee for service/solution” to “fee for value” models.

Aside from the regulatory and IP challenges, two of the biggest hurdles for #MedTech are the customer complexity, and procurement models, which can be summarised as follows:

Who Pays? Is it the clinician, patient or carer? Who, in effect, is the customer?

How Do They Pay? Each State has its own procurement and hospital funding models, plus there is the interplay of private health insurance and providers.

During the product development process, the founders stressed the need to manage expectations for an MVP, the use of customer discovery interviews, and the importance of making clinicians part of the solution. There is also a problem with data gaps (e.g., hospital re-admissions), and the requirement to establish patient trust: while the software, data and apps can support more meaningful consultation, there still has to be some human component to foster behaviour change. There was also a comment about marketing for tomorrow’s market, not the current state.

Having each been through some form of accelerator program, there was common agreement on the benefits:

  • Access to networks of mentors and strategic advisers
  • Help with navigating the regulatory landscape
  • Options for one-off funding to help convert trials to customers
  • Ability to focus on the project, along with peer stimulation, and a sense of urgency

Each of the three startups mentioned here deploy some combination of smart phone technology, sensors and analytics – just as Dr.Brand does, which featured at the recent Future Assembly. The notion was reinforced most recently at Swinburne University’s Design Factory Gala NIght which showcased, among others, innovative #MedTech student projects that utilise a mix of digital display/visualisation, wearable devices, mobile apps and analytics to address three key cognitive-related issues: patient falls in hospitals, dementia, and Asperger syndrome.

Previously, I have described health as one of the three pillars of the digital economy. Furthermore, the future of #MedTech (as distinct to biotech) is going to be built on the combined deployment and integration of smart sensors, personal devices, artificial intelligence and machine learning to monitor, diagnose and remediate behaviour – not necessarily to cure the patient, but to overcome physiological challenges and age-related conditions.

 

*Apologies – normally I acknowledge the Startup Victoria event sponsors – but since the team have been doing such a great job in securing new supporters, there are so many to mention!

Next week: There’s an awful lot of coffee in Japan (but not much espresso….)

A Tale of Two #FinTech Cities – Melbourne vs. Sydney….

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Inter-city rivalry between Melbourne and Sydney is nothing new. The fact that neither city is the national capital only adds to the frisson. The usual debates as to which is the better for sport, culture, beaches, food, weather, property prices, live music, public transport and coffee normally mean Melbourne edges out Sydney in most categories. (But then, I’m probably biased – however, having lived and worked in both, I think I am reasonably objective.)*

When it comes to startups, and FinTech in particular, the debate is beginning to hot up. At a recent FinTech Melbourne Meetup the topic was “is there room for both?”. The speakers, Toby Heap for Sydney, and Stuart Richardson for Melbourne, remained tactful and diplomatic, as it’s not really appropriate to talk about which is better – more a case of choosing “which is the right location for your own particular FinTech”. So, the debate avoided mere point-scoring, and tried to establish some commonalities, as well as provide some considered views on the benefits inherent within the key differences.

Both cities have a growing reputation for startup success, built on some core foundations: groups of angel investors and VC funds with an increasing FinTech focus; several accelerator programs, incubators and co-working spaces; and a community of founders and aspiring tech entrepreneurs.

From an industry perspective, two of the four Pillar Banks are headquartered in Sydney, and two in Melbourne. More insurers have their HQ’s in Sydney compared to Melbourne (apart from health insurance, where Melbourne hosts the largest market providers), while Tier 2 and regional banks (by their very nature) are more likely to be located outside either city (not including wholly owned brands of the Big 4).

As for pension funds and asset management, particularly in relation to Australia’s superannuation sector, Melbourne is clearly the bigger player, particularly for the largest industry funds (based on their historical links to the trade union movement). In addition, Melbourne is home to some substantial family offices, as well as specialist asset managers, including overseas firms. After all, Melbourne’s establishment wealth comes from the nineteenth century gold boom.

When it comes to markets, Sydney wins out by virtue of housing the main equities exchange, as well as being a hub for futures, fixed income and forex. Sydney also hosts more investment banks, including local branches of foreign players.

In some respects, the differences can be likened to the market roles and dynamics of London vs Edinburgh, New York vs Boston, Frankfurt vs Munich, or even Hong Kong vs Singapore, for example.

For me, however, the key distinction between Sydney and Melbourne can be summarised as: “Sydney trades, Melbourne invests”.

* Note: Content in Context is taking a well-deserved break. Starting this week, the next few posts will feature some brief blogs on different aspects of FinTech. Normal service will be resumed in early November

Next week: do we need a #FinTech safe harbour?

Sharing the love – tips from #startup founders

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Startup Victoria, with support from inspire9, BlueChilli, PwC and the Australian Computer Society brought together a mix of expert speakers who shared their insights, experience and advice for aspiring startups. The evening took the form of a series of lightning talks, and again demonstrated the contribution and importance of the Lean Startup Melbourne Meetup events to the local startup community.

First up, Adam Stone from Speedlancer reflected on his experience of the 500 Startups accelerator program, via 6 simple lessons:

  1. Make sure you connect, network and avoid all marketing BS in your pitch
  2. Achieve the target of three growth hacks a week
  3. Work out your Unit Economics
  4. Remember to hustle – it’s important to secure market tests and investor meetings
  5. Play ping-pong (a lot)
  6. Target angel investors rather than VCs

Next, Kristeene Phelan, who was the first regional employee at Etsy, explored the theme of communication, when working with global and remote development teams:

  • Choose your collaboration tools carefully, and have a backup for your backup
  • Know your international time zones (and daylight saving changes…)
  • Compromise the scheduling of cross-border conference calls
  • Slow it down when talking live to multicultural and multilingual teams
  • Get the team together in person whenever possible, and also make time for 1:1 dialogue – face to face time is important

Then, Thomas Banks, Creative Director at the Centre for Access made a very personal and impassioned presentation on website accessibility: about 99% of websites are inaccessible to people with disabilities, underscoring the importance of having an inclusive approach to web and app design.

Geoff Dumsday talked about the significant work CSIRO is doing in accelerated innovation. Most of us probably know about CSIRO’s role in inventing WiFi and polymer banknotes. But perhaps less well-known is the fact that CSIRO work with around 1600 clients, including 350 multi-national companies, and have over 300 commercial licenses in use for technology and inventions coming out of the work their scientists and researchers do. As Australia’s innovation catalyst, CSIRO is enhancing the entrepreneurial culture through evidence-based R&D. Such as the invention of non-animal gelatine for use in biomedicine, food and cosmetics.

LIFX co-founder Daniel May pitched the need to make products that add value or make a difference to the world. As examples, he referred to his new project, AgreeTree, which is trying to take the pain out of drafting commercial contracts; and also to the work of the Asylum Seeker Resource Centre and how it is engaging entrepreneurs via an accelerator program.

Finally, Layla Foord from Envato covered the topic of building successful teams, especially when hiring early-stage employees. Using the theme of “pitch in, not mark territory”, she emphasised leveraging attitude and mindset over job titles.

This smorgasbord of ideas and content was a useful reminder to aspiring founders and entrepreneurs that while a great idea (backed by a solid business plan, market traction and protectable IP) will help get you motivated, the human touch is vital to gaining momentum for your project.

Next week: #FinTech – A Tale of Two Cities: Melbourne vs Sydney

Assessing Counterparty Risk post-GFC – some lessons for #FinTech

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At the height of the GFC, banks, governments, regulators, investors and corporations were all struggling to assess the amount of credit risk that Lehman Brothers represented to global capital markets and financial systems. One of the key lessons learnt from the Lehman collapse was the need to take a very different approach to identifying, understanding and managing counterparty risk – a lesson which fintech startups would be well-advised to heed, but one which should also present new opportunities.

In Lehman’s case, the credit risk was not confined to the investment bank’s ability to meet its immediate and direct financial obligations. It extended to transactions, deals and businesses where Lehman and its myriad of subsidiaries in multiple jurisdictions provided a range of financial services – from liquidity support to asset management; from brokerage to clearing and settlement; from commodities trading to securities lending. The contagion risk represented by Lehman was therefore not just the value of debt and other obligations it issued in its own name, but also the exposures represented by the extensive network of transactions where Lehman was a counterparty – such as acting as guarantor, underwriter, credit insurer, collateral provider or reference entity.

Before the GFC

Counterparty risk was seen purely as a form of bilateral risk. It related to single transactions or exposures. It was mainly limited to hedging and derivative positions. It was confined to banks, brokers and OTC market participants. In particular, the use of credit default swaps (CDS) to insure against the risk of an obiligor (borrower or bond issuer) failing to meet its obligations in full and on time.

The problem is that there is no limit to the amount of credit “protection” policies that can be written against a single default, much like the value of stock futures and options contracts being written in the derivatives markets can outstrip the value of the underlying equities. This results in what is euphemistically called market “overhang”, where the total face value of derivative instruments trading in the market far exceeds the value of the underlying securities.

As a consequence of the GFC, global markets and regulators undertook a delicate process of “compression”, to unwind the outstanding CDS positions back to their core underlying obligations, thereby averting a further credit squeeze as liquidity is released back into the market.

Post-GFC

Counterparty risk is now multi-dimensional. Exposures are complex and inter-related. It can apply to any credit-related obligation (loans, stored value cards, trade finance, supply chains etc.). It is not just a problem for banks, brokers and intermediaries. Corporate treasurers and CFOs are having to develop counterparty risk policies and procedures (e.g., managing individual bank lines of credit or reconciling supplier/customer trading terms).

It has also drawn attention to other factors for determining counterparty credit risk, beyond the nature and amount of the financial exposure, including:

  • Bank counterparty risk – borrowers and depositors both need to be reassured that their banks can continue to operate if there is any sort of credit event or market disruption. (During the GFC, some customers distributed their deposits among several banks – to diversify their bank risk, and to bring individual deposits within the scope of government-backed deposit guarantees)
  • Shareholder risk – companies like to diversify their share registry, by having a broad investor base; but, if stock markets are volatile, some shareholders are more likely to sell off their shares (e.g., overseas investors and retail investors) which impacts the market cap value when share prices fall
  • Concentration risk – in the past, concentration risk was mostly viewed from a portfolio perspective, and with reference to single name or sector exposures. Now, concentration risk has to be managed across a combination of attributes (geographic, industry, supply chain etc.)

Implications for Counterparty Risk Management

Since the GFC, market participants need to have better access to more appropriate data, and the ability to interrogate and interpret the data, for “hidden” or indirect exposures. For example, if your company is exporting to, say Greece, and you are relying on your customers’ local banks to provide credit guarantees, how confidant are you that the overseas bank will be able to step in if your client defaults on the payment?

Counterparty data is not always configured to easily uncover potential or actual risks, because the data is held in silos (by transactions, products, clients etc.) and not organized holistically (e.g., a single view of a customer by accounts, products and transactions, and their related parties such as subsidiaries, parent companies or even their banks).

Business transformation projects designed to improve processes and reduce risk tend to be led by IT or Change Management teams, where data is often an afterthought. Even where there is a focus on data management, the data governance is not rigorous and lacks structure, standards, stewardship and QA.

Typical vendor solutions for managing counterparty risk tend to be disproportionately expensive or take an “all or nothing” approach (i.e., enterprise solutions that favour a one-size-fits-all solution). Opportunities to secure incremental improvements are overlooked in favour of “big bang” outcomes.

Finally, solutions may already exist in-house, but it requires better deployment of available data and systems to realize the benefits (e.g., by getting the CRM to “talk to” the loan portfolio).

Opportunities for Fintech

The key lesson for fintech in managing counterparty risk is that more data, and more transparent data, should make it easier to identify potential problems. Since many fintech startups are taking advantage of better access to, and improved availability of, customer and transactional data to develop their risk-calculation algorithms, this should help them flag issues such as possible credit events before they arise.

Fintech startups are less hamstrung by legacy systems (e.g., some banks still run COBOL on their core systems), and can develop more flexible solutions that are better suited to the way customers interact with their banks. As an example, the proportion of customers who only transact via mobile banking is rapidly growing, which places different demands on banking infrastructure. More customers are expected to conduct all their other financial business (insurance, investing, financial planning, wealth management, superannuation) via mobile solutions that give them a consolidated view of their finances within a single point of access.

However, while all the additional “big data” coming from e-commerce, mobile banking, payment apps and digital wallets represents a valuable resource, if not used wisely, it’s just another data lake that is hard to fathom. The transactional and customer data still needs to be structured, tagged and identified so that it can be interpreted and analysed effectively.

The role of Legal Entity Identifiers in Counterparty Risk

In the case of Lehman Brothers, the challenge in working out which subsidiary was responsible for a specific debt in a particular jurisdiction was mainly due to the lack of formal identification of each legal entity that was party to a transaction. Simply knowing the counterparty was “Lehman” was not precise or accurate enough.

As a result of the GFC, financial markets and regulators agreed on the need for a standard system of unique identifiers for each and every market participant, regardless of their market roles. Hence the assignment of Legal Entity Identifiers (LEI) to all entities that engage in financial transactions, especially cross-border.

To date, nearly 400,000 LEIs have been issued globally by the national and regional Local Operating Units (LOU – for Australia, this is APIR). There is still a long way to go to assign LEIs to every legal entity that conducts any sort of financial transaction, because the use of LEIs has not yet been universally mandated, and is only a requirement for certain financial reporting purposes (for example, in Australia, in theory the identifier would be extended to all self-managed superannuation funds because they buy and sell securities, and they are subject to regulation and reporting requirements by the ATO).

The irony is that while LEIs are not yet universal, financial institutions are having to conduct more intensive and more frequent KYC, AML and CTF checks – something that would no doubt be a lot easier and a lot cheaper by reference to a standard counterparty identifier such as the LEI. Hopefully, an enterprising fintech startup is on the case.

Next week: Sharing the love – tips from #startup founders