Why are so many investors shifting funds towards enterprising companies focused on new health solutions and services? Because inventive ways to support wellness and address illness are surfacing from every corner of the health ecosystem! Through new science, new business models and new parameters around what we define as health potential, come new opportunities to grow wealth through investing in health.
Much of what we know about staying healthy and treating health conditions is continuously – and rapidly – evolving. Health intelligence is becoming more intelligent, more pervasive and increasingly leveraged for health potential. Digital solutions are translating, deploying, integrating and interpreting health intelligence and reorienting how we identify, prevent and treat disease.
People’s care needs are changing dramatically – the U.S. population is sicker and more particular about the way health is managed. There is an appetite for more personalized products and services. Patients have varying priorities and find unique value in different combinations of treatment, wellness and quality.
Investors in health are pursuing entrepreneurs solving the problems, reimagining the solutions and looking to latch onto some portion of the health ecosystem. According to Rock Health, investing in health startups is on the rise:
- 2011: Digital health launches as investors start betting on technological innovations in health solutions
- 2013: Greatest growth in number of unique digital health investors
- 2014: Highest growth in venture funding – more than double the previous year, with a jump from $2.1B to $4.3B
- 2015: Most digital health exits in a year, with 187 M&A and six IPOs ($4.6B)
- 2017: Biggest funding year to date, with $5.8B invested. In the first half of 2017, $3.5B was invested in 188 digital health companies, setting a record for number of companies funded and total amount invested; halfway through 2017, there were more digital health deals (188) and dollars invested ($3.5B) than ever before in a half-year period
What health solutions and services are investors betting on and what investment trends can we anticipate in the coming year?
What are investors in health putting their money into?
Investors are recognizing opportunities to profit from solutions that improve health, while improving the infrastructure that supports health. Because of the potential for tech-insurance startups to control costs and utilize digital technologies – an area where incumbents struggle – new payer models are receiving significant investor attention. Tech- and data-driven payer models that excel at improving the patient experience, such as Oscar and Clover Health, have gained traction and significant funding, raising $725 million and $425 million, respectively. In 2017 alone, insurance startups raised more than $700 million. To build on their whiteboard success, these companies must demonstrate that they can care for members and manage the associated costs more effectively than traditional insurers.
Below are the top six most well-funded value propositions:
- Diagnosis of Disease, The diagnosis of a specific clinical condition
- Five deals at $279M in Q1 2018, including HeartFlow
- Monitoring of Disease, The monitoring of a specific clinical condition
- 13 deals at $270M in Q1 2018, including Bigfoot Biomedical
- Consumer Health Information, Empowering consumers to better understand their own health, general health concepts and the health system
- Research & Development Catalyst, Enabling the administration and execution of R&D processes like drug discovery and clinical trial management
- 12 deals at $216M in Q1 2018, including DNAnexus
- On-Demand Health Services, The delivery of immediate, real-time, health services
- Health Benefits Administration, Optimizing selection and/or delivery of health benefits by employers and enabling employers to track the value of benefits
- Six deals at $166M in Q1 2018, including Collective Health
What will be the health investing trends for 2018 and beyond?
Based on past trends and the current health landscape, there are a number of investing trends predicted for 2018.
- Deals are getting bigger.
- According to PitchBook, greater value in the health sector can be partially attributed to increased series funding. Over a quarter of VC deals in health tech in 2017 were above $5 million in value, compared with just over 15 percent in 2016. The number of deals over $5 million has also been steadily increasing since 2012, and that trend is on pace to continue throughout 2018.
- The US is still on top, but other countries are breaking in.
- While the United States still accounts for the majority of health tech deals, other geographies have been interrupting the near-monopoly. Since 2012, US-based activity has gradually fallen from 77 percent of global deals, while activity in Asia and the rest of the world has ticked up. There was a slight rebound in 2017, however, with 80 percent of the largest deals occurring in the US.
- Diagnosis space will dominate.
- As companies develop AI-assisted technologies, there is anticipation for more investment in the diagnosis analytics space. These companies will likely receive backing by tech-focused investors.
Health investors and startups are coming together like never before to vet innovative solutions and take on new challenges facing the industry. These investors play a key role in identifying truly remarkable and health-changing opportunities. Investors in health can find the latest innovations, meet the most well-known and respected disruptors, and hear perspectives from established health industry leaders at HLTH 2018. Startups and investors are welcome to participate in Funding Founders, a networking program where we match investors with startups at the right stage, and from the right sector. Investors participating in the Funding Founders program at HLTH include:
- .406 Ventures
- 7wire Ventures
- Ascension Ventures
- BainCapital Ventures
- Cambia Health Solutions
- Cedars-Sinai Accelerator, Powered by Techstars
- Comcast Ventures
- Flare Capital Partners
- Oak HC/FT
- Optum Ventures
- TripleTree Capital Partners
To learn more about opportunities for health investors, including the Startup Pitch Competition, attend HLTH taking place on May 6-9, 2018 at the Aria in Las Vegas. For more information, visit the HLTH website.
Be sure to check out our other healthcare blogs leading up to HLTH 2018 on May 6-9th at the Aria Resort and Casino in Las Vegas. Latest blogs include: