Funding & Investment

Funding & Investment

Who will be the VC winners? An expert’s view on where and how we should be investing in digital health



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Dr Bayju Thakar, Co-founder of Doctor Care Anywhere and CEO of Synergix Health, is a leading venture capital healthcare investor. He talks to us about what investors need to make the most of today’s burgeoning opportunities.

digital health

Digital healthcare’s investment potential remains potent. Last year saw a record global investment in the sector according to Startup Health Insights’ 2016 Year End Funding Report, with a growing cohort of private companies attracting strong investor interest and a number going public. This trend is set to continue as both stricken public health budgets and the increasing demand from consumers and corporates looking to harness digital health and telemedicine solutions drive the market forward. As the sector matures, digital health companies are refining their business models, establishing track records and vying to be the winners in a race for investment to fuel the next stage of their development and growth.

The companies that succeed will have genuinely disruptive models – and put the patient first.

Continued growth of the sector

Despite the unprecedented growth of the global digital healthcare market in the last few years, it shows no signs of slowing. The UK market for digital health was worth £23 billion in 2014 but is expected to almost double to £43 billion in 2018. This global trend is reflected in the UK market. Currently worth £2 billion, it is expected to grow to around £2.9 billion by 2018.

Investors have been swift to capitalise on the digital health sector’s strong growth. According to the US technology market intelligence company Mercom Capital Group, since 2010, VC funding in the global healthcare tech sector has surpassed $20 billion (2010 – Q1 2017) – and shows no signs of slowing. According to Mercom, health IT VC funding reached $1.6 billion in 165 deals in Q1 2017, compared to $845 million in 154 deals in Q4 2016, with Appointment Booking emerging as the top funded sector in this quarter securing $315 million. The other four sectors in the top five were Mobile Wireless, Data Analytics, Population Health Management and Telemedicine.

Last year was also a big one for mergers and acquisitions in digital health – a sign that the market is maturing. In the US, there were 45 acquisitions, six more than in 2015, and these came from a broad range of global corporates all eager to capitalise on the rise of digital health, including tech giants such as Google, relatively new entrants such as Fitbit, established healthcare companies such as Philips, and consumer tech powerhouses such as Nokia Technologies, which acquired French connected health device maker Withings in April 2016 for $191 million.

Just as the digital revolution has fundamentally and permanently changed consumer access in a range of markets, from hotels and retail to music and minicabs, the force of new technology is driving unprecedented advances in healthcare. What is powering this trend, however, is not only the innovation and flexible online, on-demand approach that digital health businesses provide, but the limitations on current services – such as primary healthcare systems – and in particular their inability to meet ever rising demand, which is causing consumers and corporates to seek alternative solutions.

Patient power again

Certainly there’s an appetite from consumers for digital health solutions. According to the recent Digital Health Consumer Report from Rock Health, a leading venture fund dedicated to digital healthcare that surveyed 4,000 individuals, digital health technology is favoured and has been adopted by as much as 80 per cent of US consumers. This rise in consumer demand is also partly fuelling a wave of interest from employers who are looking to improve employee wellness by leveraging digital health services, such as virtual GP offers, often through PMI packages.

Key aspects of the digital healthcare model of the future will be a focus on customer experience and understanding patients’ daily needs, with many customers accessing the services through their employer’s healthcare cover. For instance, we have seen strong interest for our virtual GP and related services, from insurance companies and have partnered with leading insurers, such as AXA PPP, Aon, Aetna International and Legal & General to make our virtual GP and supporting services available to their members.

Will Brexit lower medtech investment in the UK?

Despite the current pressure of Brexit on the NHS to lower its IT and medtech spending, the need for efficiency in the face of an ever-growing old and ill population will actually drive the demand for these products and services to save time, resource and money. VC and HealthTechXEurope co-founder Jamie Ritchie shares his predictions for the future of medtech investing in post-Brexit UK.

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The proliferation of health apps and telemedicine services has empowered the patient, but it has also led to the collection of unprecedented volumes of data. High quality, wide ranging data is becoming increasingly important in the prevention and cure of health problems, allowing health records to be centralised and an individuals’ symptoms to be effectively compared and analysed. This has resulted in digital health providers being able to target, attract, and retain increasingly well-informed patients at the ‘point of need’.

In a recent PwC Health Research Institute survey, 85 per cent of clinicians said they would use data from apps and wearables in future treatments. While respecting stringent privacy safeguards, corporates are also able to use this data to better gauge and understand how to look after the health of their workforce. Being able to harness data analytics successfully to gain valuable insights into real-time customer needs in order to secure early diagnosis, better treatment and improved clinical decision will be another hallmark of potential winners in the investment race.

New opportunities further afield

In developed counties, where national healthcare systems are creaking, digital health offers consumers access to alternative healthcare providers, representing a strong opportunity for growth and investment in the sector.  However, an even greater opportunity, with the potential to precipitate quicker returns, may exist in emerging economies for two key reasons.

Firstly, necessity leads to innovation – public healthcare systems in these economies are less available and therefore the demand for alternative healthcare service greater. Secondly; there are fewer existing constraints: regulations on health data are more relaxed and implementation and innovation are not hampered by legacy infrastructures, making emerging markets particularly attractive to digital healthcare companies and investors alike. China saw its two largest VC investments in digital health care in 2016.  Chinese medical-service app, Ping An Good Doctor raised $500m while video-consultations app Chunyu Yisheng raised $183m.

Dr Bayju Thakar

Dr Bayju Thakar

From the start, these economies are likely to see the development of a primary care offer towards a full-service primary healthcare ecosystem ranging from online GPs to mental wellness services, sexual health and even physiotherapy and also digital health having impact across the board of health sector. An approach that is likely to be adopted by developed economies in the future.

Despite the uncertain political, economic and investment climate, demand for healthcare is inelastic. Investors view healthcare as a traditionally robust sector in turbulent times and they see the clear opportunity digital health firms present with their ability to leverage data, cloud based services and social platforms.

Likely winners of the digital health revolution will be those who can cater for both developed and emerging economies, can capitalise on the big data opportunities presented, ceaselessly innovate, and those that invest in technology that can deliver scalable, international services enabling them to tap into global demand and spur growth. Core to all this is the challenge for providers to retain the traditional benefits of healthcare in a way that is affordable, convenient and accessible. The companies and investors who will win in the future are the ones who disrupt traditional healthcare models, while still prioritising care and compassion for patients. Essentially, medtech with a human touch.

About the author

Journalist and editor Kathryn Reilly has worked in consumer, contract and medical writing for more than 20 years.

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