Digital health investments: between a rock and a ‘kill zone’


At a recent healthcare conference I attended in Silicon Valley, I met an entrepreneur who introduced himself briefly thus: “I’m the CEO of [his company]. We’ve raised $50 million in VC money.” That was it. No introduction to his product, no mention of how many employees, what clients they serve, or anything else about his business.

I wondered if this is the new digital health startup landscape, where raising millions of venture capital or VC money is the goal, not necessarily a means to a goal.  

Let the facts speak for themselves. Digital health funding exploded in the first half of 2018, at $6.8 billion until the end of Q3, according to Rock Health, one of several firms that tracks these numbers. More investors, bigger average ticket sizes, more companies funded; there is no better time to be a digital health entrepreneur. Money seems to be there for the asking. Big money, early on. Series A looks like the old Series B. (The last time I saw anything like this was when people were buying second and third homes a decade ago with easy credit.)

What do the latest digital health funding numbers tell us?

Let us parse the latest numbers a bit. The most significant funding category in the report has been “on-demand healthcare services,” which includes any form of telemedicine and at-home healthcare services. This makes sense. Healthcare is shifting away from the clinic and hospital environments to home-based and virtual healthcare. Indeed, this shift is the whole premise of digital health transformation at this time (never mind that the reimbursement model for virtual care delivery is yet to evolve). Other dominant funding categories included consumer health information, fitness and wellness, and disease monitoring. All these categories of healthcare services are primarily delivered through mobile apps or with the help of remote sensors and devices from which data is harvested to personalize the service.



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