Digital Health Entrepreneurs Raising More Capital Than Ever (Probably)

(A version of this column was published by Forbes.)

A trio of new reports shows the fundraising landscape for new digital health ventures remains promising. New York’s Startup Health, an investor and accelerator, has released its report on the digital health venture market for the third quarter. Startup Health estimates $6.5 billion has been invested in digital health deals in the first three quarters of 2016, more than the $6.1 billion invested in all of 2015.

San Francisco’s Rock Health, also an investor, estimates $3.3 billion in new digital health funding through Q3. Startup Health’s figures are likely larger because Startup Health includes deals outside the United States (including a $500 million investment in a Chinses mobile medical service). Startup Health also includes deals as small as $52,000, while Rock Health has previously specified it only includes deals worth at least $2 million.

With respect to U.S.-based companies, both reports note the San Francisco Bay area continues to attract the most capital. According to Startup Health, the total is $1.2 billion – almost twice as much as New York or Boston. However, the pool is getting wider and deeper. Businesses in Philadelphia, Chicago, Minneapolis/St. Paul, Los Angeles, San Diego, Dallas, and Washington, DC, all saw good deal flow.

Digital Health Funding Defies Expectations

Investors have not had their fill of digital health deals, according to new fundraising reports from Rock Health and Startup Health, two outfits which have led the digital health revolution and produce complementary reports on how much capital is flowing into the sector. While other sectors have wobbled recently, digital health (which was only defined as a market five or six years ago) continues to attract venture capital.

Read the entire column at Forbes.

Cross-Over Investors Key Players in Health Deal Boom

Silicon Valley Bank has published its mid-year report on the state of financing in biotech, medical devices, and diagnostics. The key take-away is that both private financing and exits continue to be strong. One development in the structure of the market that has made deals easier to move through the pipeline is the rise of cross-over investors. These are mutual funds or hedge funds (usually investors in listed securities) which are increasingly investing in private health deals.

Read the entire column at Forbes.

Zombies Stalk The Health Care Landscape!

Accenture, the management consulting firm, has concluded that the flood of venture capital into digital health startups is not only maturing, it has created a race of zombies that will be bought up on the cheap by established players. In language not usually employed by the elite ranks of sober-minded management consultants.

Read the entire entry at NCPA's Health Policy Blog.

Goldman Sachs: $32.4 Billion Digital Health Market; Savings “Indefinitely Large”

Goldman Sachs analysts, covering medical technology, life sciences, capital goods, and healthcare supply chain and services, to produce a research report on the potential for the “Internet of Things” to disrupt health care.

The conclusion: The total addressable market is $32.4 billion, and the savings resulting from digitizing health care are “indefinitely large" (see Exhibit 2).

Rock Health: $2.1 Digital Health Funding in Q2

Rock Health has published its account of 2015 Q2 funding of digital health ventures. According to Rock Health, funding so far this year is keeping pace with 2014.

What is especially interesting about Rock Health’s report is that it compares venture funding of digital health to other areas and concludes that digital health is growing at a significantly faster rate than other areas, especially biotech and medical devices.

Digital Health Market is Maturing

StartUp Health has published its analysis of 2015 Q2 digital health funding. Covering a somewhat broader portfolio than Mercom Capital does, StartUp Health reports $1.7 billion in new funding.

By far the biggest deal discussed in the report was Zenefits’ $500 million raise. Zenefits, I get. The deal I don’t get is Oscar, which comes a distant second with $145 million raised. Oscar is the only health insurer in America that actually wants to enter Obamacare’s exchanges. What are they thinking? I can’t figure it out, but Goldman Sachs is an investor, and it’s not a good idea to bet against Goldman Sachs.

The report also notes that there have been some significant IPOs in digital health, providing liquidity and some transparency in valuations.

Financing Breakthrough Medicine: Opportunities and Obstacles

Researchers at RAND Corporation have given a clear and precise description of a new financing mechanism for medical breakthroughs. The proposal would address a problem recognized about a year and a half ago, when healthcare payers launched high-profile complaints about the price of Sovaldi®, a miracle drug that effectively cures a strain of Hepatitis C.

In a nutshell, the problem is that Sovaldi® costs up to $84,000 per course, administered over a short period of 12 to 24 weeks. However, its benefits are lifelong: Hepatitis C patients live for decades with diseased livers. Transplantation is a $300,000 procedure followed by expensive drugs to prevent rejection of the new liver. However, payers with annual budgets do not have adequate incentives to pay in one year for savings that accrue over decades.

Read the entire column at Forbes.

Top VC-Backed Health Technology Companies

PitchBook has compiled a roster of 2015’s top venture-capital financed health technology companies.

The three largest valuations are Modernizing Medicine, valued at $316 million, which provides an electronic medical assistant; WellTok, valued at $216 million, which provides personalized guidance on healthy behaviors; and Crosschx, valued at $64 million, which sans patients’ fingers to create a unique, secure identifier.

Pitchbook has also listed the three biggest deals so far this year

Read the entire entry at NCPA's Health Policy Blog.

Digital Health Funding Maturing Quickly

Startup Health has released the latest issue of its excellent quarterly digital health funding report.

Read the entire entry at NCPA's Health Policy Blog.

Is Patient Scheduling Software Valuable To Doctors?

I am a huge fan of entrepreneurs who want to make medical care more productive and consumer friendly. I wish all of them the best of success. Unfortunately, I am concerned that one of the trends attracting venture capital is chasing a shrinking market. That trend is patient-scheduling software in physicians’ offices.

Read the entire entry at NCPA's Health Policy Blog.

60 Percent of Top Ten VC IPOs Are Health Deals

PitchBook has compiled a  list of Initial Public Offerings (IPOs) from the top 25 venture capital partnerships over the last ten years. The results for health care are impressive, accounting for 46 percent of the IPOs. Sixty percent of the IPOs for the top ten VCs were healthcare businesses.

Read the entire column at NCPA's Health Policy Blog.