7 takeaways from StartUp Health's annual report
(More digital health companies are going public. Fitbit was among the largest IPOs in healthcare in 2015. Photo: Kārlis Dambrāns/Creative Commons)
StartUp Health last month released its annual health insights report for 2015 and if there's one overarching theme, it's that the digital health industry is maturing. What's interesting to StartUp Health co-founder and CEO Unity Stoakes is how quickly the landscape has changed over the past five years. In 2010, the digital health sector generated about $1 billion in investment. The sector is expected to bring in a total of $6 billion in funding in 2015.
Here are seven takeaways from the 2015 report:
1. The industry has hit its stride.
According to Stoakes, the “big leap” occurred in 2013 and 2014. Now, later-stage deals are becoming more prevalent. “As the companies in 2010 start to grow, they will start to build larger capital,” said Stoakes. “And we'll see winners emerge over the next 18 to 24 months.”
Similarly, fewer companies are raising larger amounts of money. “What we've seen over the previous years are a lot of small bets being made and now we're seeing more established companies raising more money,” he said.
2. More companies are going public.
Six digital health companies that market products ranging from wearables to telemedicine went public in 2015. Fitbit, which makes the popular activity tracker, was among the largest IPOs in healthcare for the year and one of the most successful technology-related IPOs overall, raising $732 million. Other notable digital health IPOs in 2015 included genetic testing company Natera, telehealth services specialist Teladoc and Evolent Health, a population health management services organization.
“To see that in the health space, I think companies are starting to mature to the point where they're able to go public,” said Stoakes.
3. The patient/consumer experience sector is the top market force.
StartUp Health put professional workflow as the number one active market in digital health in 2014. This year, workflow moved down to third place and was replaced by patient and consumer experience.
The healthcare system is changing, empowering patients to manage their own care, and this has led hundreds of companies to enter the healthcare market to market products that help these patients, Stoakes said.
See also: Effective communication requires rethinking the patient experience
4. Digital solutions will be scaled for millions.
(Specializing in digital therapeutics, Omada Health offers patients a set of smart technology to help combat chronic diseases such as diabetes. Photo: Omada Health)
Over the next year, Stoakes predicts more technologies will focus on improving outcomes and will be used by large populations.
“You have companies like Omada Health, which has an interesting business model with a risk involved in it,” said Stoakes. “There's a lot of metrics and data that prove what's working.”
5. Funding is coming from investors outside of Silicon Valley.
“It's the rise of the rest in healthcare,” said Stoakes.
Los Angeles is emerging as a hotspot for health innovation, with companies such as NantHealth, HomeHero and Soothe setting up in the city. Major investments also took place in Salt Lake City, Miami, Denver and Chicago in 2015.
“We're seeing investors and super angels emerge from all over the US as well as all over the world,” said Stoakes.
6. Fundraising is expected to be less difficult in 2016.
From StartUp Health's survey, the general view among CEOs and entrepreneurs is that it will be easier to raise money for digital healthcare investments. Only 37% of the executives said they expected it to become harder.
7. There's a global opportunity in healthcare.
(Bangalore-based startup Practo raised $30 million for its doctor search portal from Sequoia Capital and Matrix Partners in 2015.)
“The markets in India, China and throughout Africa are so significant that there's a great window for new businesses to emerge,” said Stoakes. “I think you're seeing every nation deal with the challenges of containing the cost of healthcare and thinking about how to better serve the population.”
The incidence of chronic diseases and conditions such as obesity are happening all over the world, especially in China and India, he added. More investments in these regions may help address these challenges.