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Minnesota’s Health-Care and Technology Expertise Nurture Health Care IT Sector

Learn how the state's strong foundation in health care research and development have led to innovation in the health care IT sector.

By Teree Caruthers on October 28, 2016

Minnesota Treehouse Health
Minnesota / Steve Woit

The health care information technology (HIT) sector in Minnesota is growing at a healthy pace, thanks in part to increased venture investments and a solid research and development infrastructure.

Minnesota’s resources, including business accelerators and a bevy of talent in both the health care and technology fields, have also helped the state land major players in the HIT industry.

Healthy Investments

One such resource, the Minneapolis-based Treehouse Health innovation center, invests in emerging health care companies while also providing entrepreneurs access to a network of experienced industry leaders – all in an effort to help its portfolio businesses and the state’s health care sector grow. LogicStream Health, a Treehouse Health portfolio company, develops web applications that allow health systems to measure clinical process to improve patient outcomes and standardize care delivery through their electronic health record. LogicStream Health has raised more than $3 million since launching in 2012. Like many emerging businesses, LogicStream also benefited from the Minnesota Angel Tax Credit, which provides a 25 percent tax incentive for capital investors in technology-based firms.

“The Minnesota Angel Tax Credit is a really strong tool and very attractive to both early investors, as well as companies like LogicStream. We have participated in this program since 2013, and it’s been very, very good for us. In fact, I don’t think we would be where we are without the tax credit,” says Patrick Yoder, CEO and founder of LogicStream Health.

“You have accelerators like Treehouse Health and others that really support early-stage companies and help them figure out where they’re headed. I routinely have venture capital firms reaching out to me who are looking at businesses in Minnesota and Minneapolis. I think they’re recognizing there are high-quality health IT companies coming out of Minnesota.”

Strong Networks

Health care IT company Zipnosis raised $17 million in its first round of venture capital. The company offers patient-centered, web-based diagnostic software for heath care systems. One factor in the company’s success is the availability of other health care companies with which to partner.

“Minnesota is the ideal spot for us to incubate and become the leader in virtual care,” says Jon Pearce, Zipnosis CEO. “Our health care savviness is exceptional and health care partners, such as Fairview and North Memorial have been pivotal early partners. A strength of this community is the network that exists, given the number of health systems, pioneering systems and health care insurers that we have here.”

Rob Robertson, president and CEO of Minnetonka-based MedNet Solutions agrees. His company provides eClinical and Electronic Data Capture solutions for clinical trial management. Robertson says the state’s strong foundation of companies, such as Medtronic and St. Jude Medical, have led to a breeding ground of innovation as talent branches out to start new companies. In addition, the state’s colleges and universites, particularly the University of Minnesota, offer access to some of the nation’s foremost medical researchers.

Intellectual Capital

Minnesota has long been an area rich in clinical research with two internationally renowned research centers in the University of Minnesota and the Mayo Clinic. “This has been the foundation for the success of many health care IT companies,” Robertson says. “There are enough medical device companies locally to provide the early successes needed to get a company started solely on Minnesota companies. Furthermore, there are enough experienced candidates to allow a company to focus solely on Minnesota talent during the early phases of company growth, which keeps employee acquisition costs, including relocation, to a minimum. The result of all of this is an extensive resource of human capital that fuels the growth of the health care IT sector.”

Pearce agrees. Talent, he says, was “the main reason why I kept Zipnosis here as opposed to moving it out to the Valley. I knew that as we grew, we were going to need the intellectual capital that only Minnesota can provide around the health IT world.”

Pearce adds that this healthy network of innovative companies and talent is another reason venture capitalists are drawn to the health care IT sector in Minnesota.

“You’re looking at the intersection of health reform and  the mobilization and digitization of medicine, and it absolutely puts health IT right in the middle of that,” he says.

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