Erki Mölder: Our universities should water health industry to bloom, as rich soil is given

12 November, 2015

Erki Mölder possesses the experience from healthcare industry for more than 15 years. His investment portfolio reaches several hundred thousand, whereas one of them (Cognuse Inc) develops digital platform for cognitive rehabilitation and has recently moved its operations to the U.S.A.

For nearly 15 years, you have been working in healthcare industry. What are the biggest challenges and trends in the healthcare field? 

All economies in the world are struggling with increasing healthcare costs. Changes in modus operandi of the industry are imminent. In addition to maturing biotechnology-related solutions, IT or so-called digital health solutions shall shape the future of healthcare. Like Transferwise, Kickstarter, Kiva, bitcoin are constantly putting the pressure on banking industry. Sure, the surgical medicine and other in-patient areas shall be influenced less, but self-awareness in the health-behavior, disease prevention and treatment rehabilitation shall change drastically. Empowerment of patients shall be the key and we are just in the beginning of the long journey.

How is Estonia doing in this race? 

From the point of macroeconomics, our healthcare is doing fine as “the bang for the buck” is one of the biggest in the world. However, we have problems. Almost non-existent competition and marginal size of private healthcare is a big threat, E-tervis is actually a failure as the hospitals ignore it. And finally, the cross-border medical treatment hasn’t taken off although we have measurable cost advantage compared to Nordic countries. 

From the point of the start-up community, the situation is really bad. The international statistics of business angels show that approximately one-fifth of all investments are made in healthcare, life science and related areas. In Estonia, this number is close to zero. We lack teams, managers, ideas. Why? There is no competition in the field. 

When we look at the globalization trends, we notice that healthcare is the industry that lags behind because of its dependence on governments. The medicine is universal but the healthcare systems (legislation, payers, hospital networks, reimbursement systems) are very different. This actually gives a possibility for Estonia to enter the race. As soon as Airbnb or Uber launched its portal, there was no obstacle of coming to Estonian market. In healthcare, you need localization. And this is an opportunity for us.

You say that the situation is “great but not hopeless”? Do you personally see any way out from this situation? 

In general terms, we need to attract more and more talent and capital to the field. Given the current state of business, all we can do is to match the local talent with the local money. Unless we increase the start-up landscape tenfold, there is no point to dream about outsiders coming here to play. 

We have decent medical and life science faculties in Tartu and Tallinn universities. And who are coming out from there? Only “hardcore” doctors and “hardcore” scientists. They know very little about the world outside a surgery room or science lab. This is one of the main problems in addition to the lack of capital.

But aren’t universities declaring to be very cooperative with commercial enterprises? 

Publicly, they are. But there’s a huge gap in understanding each others’ needs and the gap even widens if we concentrate on university persons who can make the difference. The rectors can only support the chairs, principal investigators, heads of departments and doctoral fellows but they can’t order to be more entrepreneurial. The latter ones either make it happen or not. In healthcare and life science landscape we need exactly these guys to be entrepreneurial because they have the knowledge and skills needed. We can’t do much with two twenty-year-old second course youngsters that works in gaming or other online industries.

I feel your criticism towards the public sector. But what can the private sector do on his behalf to amend the current situation? 

We have just launched EstBAN Health Chapter. The latter assists us to educate investors, so that Estonian angels could have a better starting point for investing into healthcare industry. Simultaneously, we are improving our efforts to monitor and help potential teams to reach investor-readiness. And third, we have established contacts with angel groups in neighboring countries to boost cross-border syndication of deals.

I imagine, that this haven’t been an easy task. I will now ask a question, which has been most likely asked from you by the academicians – why should we prepare medical staff for commercial purposes at all? Why shouldn’t we face the fact, that there wouldn’t be enough domestic capital for product development any way? 

This is about to change now, because there are exceptionally good news about this matter. We have just signed a contract to found NordicBAN, which basically increases the capital accessibility for Estonian start-ups by over a hundred times!

You must be joking. Tell me more.  

It might sound incredible, but the total yearly investment potential of NordicBAN will be approximately €650M. For instance, EstBAN invested €4.8M seed money into start-ups last year, which illustrates the change in possibilities! Basically, if there is a strong team and an idea with great potential, then there’s no reason to directly hit Silicon Valley and collect funds from the states. Therefore, all strong fundraising applications, which ask over €200k, are straightly duplicated into our NordicBAN database as well.

I see that you are very eager to develop Estonian healthcare industry. Hereby, I would like to ask why? Although NordicBAN might provide funds, we still lack domestic staff for product development, the interest of public sector is this field is modest…  

I said it in the beginning of interview – I think that IT shall disrupt healthcare within the next ten years. Data security, personal data privacy are hot issues around the world right now. Countries are only now beginning to realize that new legislation and systems are needed to address the concern. Let us dream, that there will be 10 million eResidents in coming years. If we have legislation and services in place, we can become a safe haven for these citizens to manage their health behavior, health data, and some parts of their health insurance via our systems. It’s a whole new world when it comes to the future of medicine industry, which is just about to revolt like the financial industry has been interrupted by Transferwise.

Thus, the Estonian health economy could compete with Apple or Google based on eResidence opportunities? 

Yes. The management of this data should not be given to Apple or Google by default. Why shouldn’t the management of this data be leaded by our service providers by combining it to eResidence system, which is highly more secure? Thanks to eResidence and NordicBAN, there are endless opportunities for Estonian medical industry development and we now just need to utilize our tools. So, the industry may finally bloom… But it needs to be coined, that the prosperity of Estonian medical industry is highly dependent on our domestic universities – are they enough opened for braking their ‘inner-institutional’ silo towers? I really hope they will be, as there is finally a very rich soil for our health industry to bloom.

Erki was interviewed by Kaspar Jõgeva from JLP Communications Agency.