As the pandemic continues to reshape healthcare, the economy and wall street, investors poured a record-breaking $5.4B into US Digital Health companies in the first half of 2020 according to Rock Health. Notice I said companies and not startups. Startups are included but you don’t get to this number with only Seed, “A” and “B” rounds. This has been building over the last five years. You would have thought COVID19 would have slammed the breaks on or at least slowed this trend down a bit. But not so.
So a fair question is, “are we in a bubble driven by investor irrational exuberance to cash in on, among other things, Big Tech trying to do the same in healthcare, or are there real practical and sound drivers for this enthusiasm”?
Here’s my take. Yes, there is some of that. Dumb. Money. Chasing shiny objects and unicorns.
But there is enough empirical and anecdotal evidence that indicates most Digital Health investors are interested in the fundamental issues facing the healthcare industry. These investors small, medium and large are backing innovators that align their value propositions to the present and future of health, with technology being the underlying driver of value.
So what are they interested in and where is the funding going?
Enhancing the Quality of Care
Key areas include connecting social determinants to healthcare, increasing patient engagement and driving behavioral change and enhancing the adoption of remote patient monitoring. RPM is gaining traction is numerous chronic conditions and for seniors from Ortho MSK, Liver Disease, Diabetes, Behavioral and Mental health.
Reducing Costs
Improving clinical and operational workflow, creating point solutions to areas of friction in the health systems, eliminating waste, integrating real-world evidence into solutions using technology, and enhancing clinical trial recruitment and monitoring. Acclinate Genetics is a good example of the latter.
Improving Access to Care
This was on a strong trendline for innovation and consumer adoption the last several years, but the Pandemic has obliterated the man-made barriers to widely accepted utilization by caregivers and patients. As a result, virtual care delivery is not only an alternative form of healthcare for coughs and colds, it will become a mainstream form of delivering care by ALL providers, from chronic to wellness to pre-surgery and post-surgery. The cost of brick and mortar is going to decline over time (hint: if you are invested in a healthcare REIT it might be time to short). Sure, surgeries won’t be performed in my bedroom but so many forms of care delivered in hospitals, ambulatory and medical practices will no longer be required in facilities.
Data, Platforms, AI
It’s not coming. It’s here. All of these new innovative apps and platforms are generating new types of data that can be made useful, especially if ML and AI can see patterns and make use of it for humans. Investors are convinced this is not just edge tech but it’s in the early to mid-stages of being applied for healthcare human benefit.
I keep an eye on Digital Funding from numerous sources including @CBInsights, @Rock Health, @Pitchbook, @Deloitte, @PWC and others. The numbers are certainly positive. It will indeed take a serious amount of Venture and Strategic investing over a long period of time to move the needle on a $3T+, and growing, industry. As a nation we have deemed our health is worth at least 20% of our GDP. That’s good. It’s a key factor in moving the human species forward in terms of quality of life and an accelerator to the contributions humans make to the planet.
But, let’s keep an eye out for the Dumb Money.
David Karabinos | CEO | Healthcare Technology Strategist