€280m addition creates largest investment fund for European health tech (NL)

Amsterdam-based Life Sciences Partners LSP announced that the LSP Health Economics Fund 2 is now the largest European investment fund dedicated to healthcare innovation. An additional €280m was raised from the European Investment Fund, health insurance companies, and institutional investors.

Reportedly, the fund will look to invest in around 15 private companies with innovative products “on the market or very close to market introduction”. Rudy Dekeyser, LSP partner, said to Digital Health News that their focus areas are in drug compliance, remote monitoring, big data analytics and clinical software. Further caveats: companies must  “convince us that there is a clear path towards the integration of their innovative product in the complicated healthcare ecosystem, has to know who will pay for their product or services and should have access to the necessary partners for broad implementation of their product in the market.”

This adds to end-of-year UK and European announcements of early-stage life sciences and healthcare innovation funding. As reported in Digital Health News: the UK government’s life sciences industry partnership to advance medical technology in Britain (Digital Health News); Wayra UK (Telefónica) and Merck Sharp & Dohme’s Velocity Health £68,000 healthcare accelerator program for machine learning/AI start-ups. LSP release

Q1 digital health investment: two perspectives from StartUp Health and Rock Health

StartUp Health’s and Rock Health’s investment/M&A roundups from Q1 2017 have just hit the deck. Before we dig into them, let’s start with the differences in methodology:

  • Rock Health tracks deals only over $2 million in value; StartUp Health seems to have no minimum or maximum; the latter includes early stage deals at a lower value.
  • StartUp Health gathers in international deals at all levels, whereas Rock Health includes only US-funded ventures.
  • Rock Health omits healthcare services companies (citing Forward, Oscar), biotech/diagnostic companies (GRAIL, Theranos), and software companies not solely focused on healthcare (Zenefits)
  • StartUp Health defines ‘digital health’ differently than Rock Health, with categories of ‘patient/consumer experience’, ‘wellness’, ‘personalized health/quantified self’, and ‘research’

StartUp Health is ‘over the moon’, breathlessly (appropriately as the home of the 25-year Health Moonshot) with Q1 trending, seeing the biggest investment quarter since 2010 at $2.5 bn. Topping up this number was GRAIL, which is developing a blood test for early cancer detection, with a massive Series B at $914 million. Far behind it in the $85-110 million range were (in descending order) Alignment Healthcare (population health), PatientsLikeMe (patient/consumer experience), Nuna (big data/analytics), and PointClickCare (EHR). Population health, patient/consumer experience, and research top their investment activity. Most deals are still seed and Series A (59 percent), but that is down five points from full year 2016; Series B’s share is up three points to 25 percent. But it remains a difficult bridge to cross to C+ rounds.

Rock Health splits the difference and calls it ‘business as usual’, surprised that there hasn’t been a tailspin. Its Q1 sandwiches between 2016 and 2015, well above 2015 but trending 23 percent below Q1 2016. Their biggest deals include the aforementioned Alignment, PatientsLikeMe and Nuna, omitting GRAIL and PointClickCare. Their top three investment categories are analytics/big data, care coordination, and telemedicine (over $50 million). Rock Health tracked almost 20 M&A, noting that many transactions are now ex-California. They also uniquely track public company performance. Here in 2016 is where Readers first noted weakness in NantHealth, but Fitbit and Castlight Health also had miserable quarters. Teladoc, Evolent Health (consulting), and Care.com had a good winter as well. Let’s see what Q2 brings.

A weekend potpourri of health tech news: mergers, cyber-ransom, Obama as VC?

As we approach what we in these less-than-United States think of as the quarter-mile of the summer (our Independence Day holiday), and while vacations and picnics are top of mind, there’s a lot of news from all over which this Editor will touch on, gently (well, maybe not so gently). Grab that hot dog and soda, and read on….

Split decision probable for US insurer mergers. The Aetna-Humana and Anthem-Cigna mergers will reduce the Big 5 to the Big 3, leading to much controversy on both the Federal and state levels. While state department of insurance opposition cannot scupper the deals, smaller states such as Missouri and the recent split decision from California on Aetna-Humana (the insurance commissioner said no, the managed care department said OK) plus the no on the smaller Anthem-Cigna merger are influential. There’s an already reluctant Department of Justice anti-trust division and a US Senate antitrust subcommittee heavily influenced by a liberal think tank’s (Center for American Progress) report back in March. Divestment may not solve all their problems. Doctors don’t like it. Anthem-Cigna have also had public disagreements concerning their merged future management and governance, but the betting line indicates they will be the sacrificial lamb anyway. Healthcare Dive today,  Healthcare Dive, CT Mirror, WSJ (may be paywalled) Editor’s prediction: an even tougher reimbursement road for most of RPM and other health tech as four companies will be in Musical Chairs-ville for years.

‘thedarkoverlord’ allegedly holding 9.3 million insurance records for cyber-ransom. 750 bitcoins, or about $485,000 is the reputed price in the DeepDotWeb report. Allegedly the names, DOBs and SSNs were lifted from a major insurance company in plain text. This appears to be in addition to 655,000 patient records from healthcare organizations in Georgia and the Midwest for sale for 151 – 607 bitcoins or $100,000 – $395,000. The hacker promises ‘we’re just getting started’ and recommends that these organizations ‘take the offer’. Leave the gun, take the cannoli.  HealthcareITNews  It makes the 4,300 record breach at Massachusetts General via the typical unauthorized access at a third party, once something noteworthy, look like small potatoes in comparison. HealthcareITNews  Further reading on hardening systems by focusing on removing admin rights, whitelisting and endpoint security. HealthcareDataManagement

Should VistA stay or go? It looks like this granddaddy of all EHRs used by the US Veterans Health Administration will be sunsetted around 2018, but even their undersecretary for health and their CIO seem to be ambivalent in last week’s Congressional hearings. According to POLITICO’s Morning eHealth newsletter, “The agency will be sticking with its homegrown software through 2018, at which point the VA will start creating a cloud-based platform that may include VistA elements at its core, an agency spokesman explained.” Supposedly even VA insiders are puzzled as to what that means, and some key Senators are losing patience. VistA covers 365 data centers, 130 separate VistA systems, and 834 custom installations, and is also the core of many foreign government systems and the private Medsphere OpenVista. 6/23 and 6/24

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/01/Overrun-by-Robots1-183×108.jpg” thumb_width=”150″ /]Dr Eric Topol grooves on ‘The Fourth Industrial Revolution’ of robotics and AI. (more…)

If Silicon Valley were a rose, it would be wilting

Does this signal a new ‘trough of disillusionment’? The lead in this story is one of the major practice EHRs in the US–Practice Fusion. From a high valuation in 2013 of $635 million as a healthcare darling (free to doctors, ad supported), it burned through $4 million cash per month while revenue missed targets by 10 percent, chased after rainbows such as telemedicine, overhired, overperked and overpartied in the office. Now with a quarter of their staff pink-slipped, a new CEO is trying to bail them out. Most of the other examples aren’t healthcare, but huge deals by VCs are slowing, companies are discounting the price of their shares, taking on debt to not dilute shares, laying off employees and subletting their space. Adding to this is the glut in wearables and a slowdown in demand for single-purpose devices, leading to a 20 percent loss today in value in shares of Fitbit (MarketWatch). Like the ‘oil patch’ in the upper Midwest, the San Francisco area is feeling the chill that never really left the rest of the country. And ‘unicorns’ may become an endangered species. Wall Street Journal

Now a VC concentrating on tech for older adults (US)

Don’t call it a trend yet, but Ohio’s Link-age Ventures Inc. is launching a $26.6 million venture capital fund to invest in startup to early-stage companies targeting products, services and technologies for the 55+ market. The 50 percent partner is a familiar name to those in the US non-profit senior community sector, Ziegler Companies, along with 70 non-profit senior communities (!) as limited partners. The Ziegler Link-age Longevity Fund will look to invest about $500,000 to several million dollars apiece in 10-12 companies engaged in aging in place, care coordination, disease prevention, readmission reduction and wellness strategies. An investment announcement may come in late summer. The US heartland demonstrates a different trend than the relentlessly DH3, youth-oriented West Coast and the mixed messages out of the New York-Boston corridor. Cincinnati Business Courier

Ka-ching! Mid-year digital health funding hits $2.3 B: Rock Health

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2014/07/stick_figure_push_up_arrow_400_clr.png” thumb_width=”120″ /]It’s geometric! Rock Health’s total of $2.3 billion in digital health funding as of June 2014 just rocketed through the $1.97 billion 2013 full year total. Year over year to date, it’s up over 16 percent. And there’s stardust on every sub-sector: software, digital health, biotech and even medical device, the laggard (negative growth) in previous reports. Funding rounds must have taken vitamins, because they are 50 percent larger on average at $15 million versus last year’s $10 million. But there’s the same concentration on big deals like NantHealth, Flatiron Health, Alignment Healthcare and Proteus, heavily skewed towards payer administration, digital health devices, data analytics and healthcare consumer engagement. But the clouds on the horizon are there. Last year’s disproportion in seed/Series A accelerates, and the ‘down the line’ weakness continues with proportionally fewer companies reaching B, C and D rounds. Crowdfunding has also lost its luster–50 percent off with Indiegogo dominating–but its blowout with Healbe GoBe [TTA 26 June, CEWeek] accounted for 41 percent of total crowdfunding dollars; MedStartr stayed in the game at a distant second. IPOs haven’t been great, the ‘digital health index’ is an underperform yet funders are still itchy to cash out multi-round companies like Practice Fusion (EHR/billing), Proteus and ZocDoc via IPO. VentureBeat. Rock Health report on Slideshare.

Health IT funding bubble seen by veteran investor

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2012/12/crystal-ball.jpg” thumb_width=”120″ /] How is health tech like the 1990s ‘dot-com’-ers? Veteran Silicon Valley investor (HealthTech Capital) and former entrepreneur Anne DeGheest projects a ‘Series B crunch‘ in funding health tech and IT in an interview with The Wall Street Journal’s Venture Capital Dispatch. The key factors: angels and ‘unsophisticated investors’ are pouring money into all sorts of devices, apps and related services in seed and Series A stages just to get on board in a hot sector. When the founders of these companies get to Series B and present to more demanding investors, the lack of a true value proposition and a detailed business plan that answers basic questions leave them standing on, as aptly put, ‘a pier to nowhere’ or as Joe Hage termed it last month, ‘insolvent with a great idea.’

Ms. DeGheest’s view that we are reprising the elements of the ‘dot-com’ bubble is confirmed by the numbers in Rock Health‘s and PwC‘s funding reports throughout 2013:   (more…)

Evaluating your company’s potential investors

While this Xconomy article focuses on biotech, the pointers for health tech companies starting to engage with investors are equally applicable to developers and partners in any country. It’s also helpfully divided into ‘red’ and ‘green flags’–red flags being signs that the investor is not ‘aligned’ with the company’s interests. And disrespectful or an overly short-term focus also tells you to walk away, even if bags of money are in the balance. You ideally want engaged, respectful, successful and informed investors. The writer has been there, done that. Red (and Green) Flags To Look for With Biotech’s Buyside Investors

Is ‘disruption’ the dog that didn’t bark?

Is the disruption in healthcare that we think is going on, have been told is going on, make assumptions on, not really on? This is the contrarian argument posited by Dan Munro:

  • Training of doctors, supply and demand is as it was. Training of US doctors is expensive, and doctors tend to go to the better paid specialties in order to pay down education debt faster. And patient demand for acute procedures will always outstrip doctor supply.
  • Squeezing down the small stuff doesn’t radically impact demand. In the US we have been pounding down insurers (6 percent) and low-acuity/primary care, but ignoring the heavy spend on hospitals (31 percent) and clinical services (20 percent).  Are the big slices of the pie resistant or too controversial to cut?
  • Startups aren’t a good source of disruption.  (more…)

Health tech funding reshapes, diversifies

In thinking how funding for health tech startups has changed since this Editor’s early days (2006) when VCs had a lock on the Letter Series (A, B, C) and your real goal was to ‘please, Lord, won’t you find me a strategic investor?’ (are there any of those left?), some more pointers to the future, both in EU and US:

Withings, known for its pioneering Bluetooth scale circa 2009, and more recently other Bluetooth monitors, nimbly moves to wearables with a fitness tracker about the size of a USB drive and priced at an affordable $99. It also has raised $30 million led by Bpifrance with $15 million, with participation from Idinvest Partners, 360 Capital Partners, and Ventech. (Most of us have forgotten that Withings is a French company.) A French challenge to Fitbit, Nike, Jawbone and a whole raft of smartwatches coming 2013-2014 including Sony, Pebble and Apple? VentureBeat

Angel funding diversifies geographically. No longer do the coasts have a lock on the action. Silicon Valley has had some problems [TTA 18 July], Silicon Alley (NY) is still finding its way and Boston/Cambridge is, well, Boston/Cambridge. We recently covered angel groups in Ohio (LaunchHouse), Texas (Wildcatters) and Arizona (SeedSpot). Now Delaware joins the list with FP Angels. And where are most of the companies? According to the Halo Report, in the US Southwest. Angel investing groups show love for the Southwest and healthcare in Q1 (MedCityNews)

And the rise of crowdfunding. As mentioned previously, angels and ‘FFF’ funding has been supplemented and market tested by crowdfunders such as Kickstarter, IndieGogo, MedStartr and Health Tech Hatch. Two kitchen-table entrepreneurs can market test their idea almost immediately. The problem is failure to deliver on time, on budget and as promised, as witnessed by the overwhelmingly successful Misfit Shine. The math of Hardware+Crowdfunding=Success has more than a few caveats in the formula. The hardware revolution will be crowdfunded (VentureBeat)

And a little-noticed change in Securities & Exchange Commission (SEC) regulations lifted the ban on ‘General Solicitation’ which according to this Forbes article will allow entrepreneurs seeking funding to cast a net beyond their network of ‘pre-existing relationships’–but they have to be accredited investors. It makes the reach to non-accredited investor interest just a little bit closer–for good or ill. The SEC’s Removal of General Solicitation Changes Everything

For our readers, health tech appears ‘siloed’ by region and country. What does it take to move beyond borders?:

  • If your startup is based in the UK or EU, have you thought about reaching out to US funding through a US base?
  • If you’ve considered and rejected it, why? (Health tech
  • Why are we not seeing more activity by UK/EU companies in the US (or Americas) markets?
  • What do you perceive as the differences between developing health tech ex US–and translating it to the US market?
  • Has anyone had experience extending in non-US/UK/EU markets?

Funding: the concentration continues

The funding concentration trend apparent in RockHealth’s latest survey [TTA 9 July] is not contradicted by latest bits of news:

  • PracticeFusion, a free physician, web-based and ad supported EMR, is rumored to be raising $60 million from what Venture Beat last week termed “a New York-based investment firm, not one of the usual (local) Silicon Valley suspects.” Now we can suppose that sources would be silent unless the deal was signed, sealed and delivered. The leaks can also be strategic ones. (PracticeFusion has also introduced PatientFusion, a PHR with added functions of booking appointments and leaving doctor feedback–which puts it squarely in ZocDoc’s increasingly challenged, but extremely well-funded territory. (We advise them to put aside a few dollars for the inevitable MMRGlobal challenge as well.) Having raised $34 million less than one year ago, the funding is clearly going to updating ‘Meaningful Use’ requirements, the patient portal and to be determined growth.
  • Chicago-based Caremerge just raised $2.1 million for its mobile apps for coordination of long term care (LTC) between providers, doctors and families. (MedCityNews)  It claims to be the first-ever integrated mobile and web solutions provider for this market. It does answer a crying, not-terribly-glamourous need in senior care, and it’s also interesting that two of the key investors are from Poland and Switzerland. But Caremerge has deep roots in GE-land: one of its founders came from GE Healthcare IT Solutions and it’s currently part of the StartUp Health/GE Healthymagination program–which accepts only companies further along in their development for their $250 million fund, and takes a generous slice of equity for advisory services rendered. [TTA 10 Jan7 March, 4 April]
  • Health tech accelerator Blueprint Health announced its latest class–and they are increasingly not in the earlier pattern of true startups in need of guidance to appeal to angels and VCs. Five of the ten companies already have customers, versus two in the previous class. Is this mission creep? According to an article in Gigaom, their co-founder has said that they are not deliberately looking for more ‘mature’ companies, but are nonetheless accepting them. Of course, early stage companies that have already gotten into the market have a greater chance of success and look better on the record of any accelerator program. Another trend is B2B rules. Only one of the picks is consumer focused (health coaching) and another is engaged in employee wellness rewards adopted by companies.

Are these pointers to the future, at least in the US?

  1. Nascent maturity and realism in business plans–the horizon narrowing
  2. The continued collapse of practice EHRs into a few trusted providers [Doctor backlash brewing, TTA 22 Feb]
  3. With less funding to go around, and with few companies moving from A to B to C rounds, will future investment and development go to those who have already gained traction in customers and previous investment–and somehow got to that stage with the help of angels and crowdfunding?
  4. Is it the end of the Quantified Self consumer device buzz? These investments, and the past quarter’s, are largely in the surer, more VC-acceptable water of B2B tech.

Contra-wobbly: Aberdare Ventures bets on digital health

While the PwC tracking survey of VC investment in life sciences (including medical devices) shows definite global cooling [TTA 26 April], a $130 million venture funder is just warming up. Aberdare Ventures is one of the top three, after Qualcomm and Merck, making investments in four or more digital health companies, according to RockHealth, and moving away from other parts of life science. Funding for their present suite of seven firms is between $3 and $5 million each. The firm’s latest acquisition is partner Mohit “Mo” Kaushal from West Health. Forbes

[Unrelated editorial note: This is the 5,000th news item on this site.]