Rock Health’s ‘Another record-breaking first half’ in digital health funding is actually–flat. (With a Soapbox Extra!)

The Breathless Tone was the clue. “It’s déjà vu for digital health, with yet another record breaking half for venture funding.” It was déjà vu, but not of the good sort. This Editor hates to assume, so she checked the year-to-year numbers–and first half 2018 versus 2017 broke no records:

  • 2018:  $3.4 bn invested in 193 digital health deals 
  • 2017: $3.5 bn invested in 188 digital health companies [TTA 11 July 17]

But ‘flat’ doesn’t make for good headlines. Digging into it, there are trends we should be aware of — and Rock Health does a great job of parsing–but a certain wobbliness carried over from 2017 even though the $5.8 bn year finished 32 percent up over 2016, analyzed here [TTA 5 Apr 18]. Their projection for 2018 full year is $6.9 bn and 386 deals.

Let’s take a look at their trends:

  • “The future of healthcare startups is inextricably linked to the strategies of large, enterprise-scale healthcare players—as customers, partners, investors, and even potential acquirers.” It’s no mistake that the big news this week was Amazon acquiring tiny, chronic-conditions specializing prescription supplier PillPack after a bidding war with Walmart for an astounding $1bn, making its 32 year-0ld founder very rich indeed and gaining Amazon pharmacy licenses in 49 states. (Prediction: Walmart will be pleased it lost the war as it will find its own solutions and alliances.) 
    • Enterprise healthcare players are cautious, even by Rock Health’s admission, but the big money is going into deals that vertically integrate and complement, at least for a time–for example, Roche’s purchase of Flatiron Health. And when it doesn’t work, it tends to end in a whimper–this May’s quiet sale by Aetna of Medicity to Health Catalyst for an undisclosed sum. Back in 2011, Aetna bought it for $500 million. (Notably not included in the Rock Health analysis, even though they track Health Catalyst and the HIE/analytics sector.)
  • The market is dependent on big deals getting bigger. If you are well-developed, in the right sector, and mature (as early-stage companies go), you have a better shot at that $100 million B, D, E or Growth funding round. B rounds actually grew a bit, with seed and A rounds dipping below 50 percent for the first time since 2012. 
  • The Theranos Effect is real. Unvalidated, hyped up claims don’t get $900 million anymore. In fact, there’s real concern that there’s a reluctance to fund innovation versus integration. The wise part of this is that large fundings went to companies validating through clinical trial results, FDA clearance (or closing in on it), and CDC blessing.
  • The dabbling investor is rapidly disappearing. 62 percent of investors in first half had made prior investments in digital health including staying with companies in following rounds.
  • Digital health companies, like others, are staying private longer and avoiding public markets. Exits remain on par with 2017 at 60. Speculation is that Health Catalyst and Grand Rounds are the next IPOs, but there hasn’t been one since iRhythm in October 2016. The Digital Health public company index is showing a lot less pink these days as well, which may be an encouraging sign.
  • Behavioral health is finally getting its due. “Behavioral health startups received more funding this half than in any prior six-month period, with a cumulative $273M for 15 unique companies (nearly double the $137M closed in H1 2016, the previous record half for funding of behavioral health companies). Of these 15 companies, more than half have a virtual or on-demand component.”

Keep in mind that Rock Health tracks deals over $2 million in value from venture capital, excluding government and grant funding. They omit non-US deals, even if heavily US funded. 

Their projection for 2018 full year is $6.9 bn and 386 deals. Will their projection pan out? Only the full year will tell!

A Soapbox Extra!

Rock Health, like most Left Coast companies, believes that Vinod Khosla is a semi-deity. This Editor happens to not be convinced, based on predictions that won’t pan out, like machines replacing 80 percent of doctors; making statements such as VCs have less sexual harassment than other areas, and even banning surfers off his beach. He was at a Rock Health forum recently and made this eye-rolling (at least to this Editor) statement:

Is there one area in the last 30 years where the initial innovation was driven by an institution of any sort? I couldn’t think of a single area where innovation—large innovation—came from a big institution. Retailing wasn’t disrupted by Walmart, it was by Amazon. Media wasn’t changed by CBS or NBC, it was by YouTube and Twitter. Cars weren’t transformed by Volkswagen and GM—and people said you can’t do cars in startups—but then came Tesla.

Other than making a point that Clayton Christensen made a decade or more ago, the real nugget to be gained here is that formerly innovative companies that get big don’t grow innovation (though 3M tends to be an exception, and Motorola didn’t do too badly with the cell phone). They can buy it–and always have. 

Go back a few more decades and all of these companies were disrupters–and bought out (or bankrupted) other disrupters. CBS and NBC transformed entertainment through popularizing radio and then TV. VW created the small car market in the US and saved the German auto industry. GM innovated both horizontally (acquiring car companies, starting other brands) and integrated vertically (buying DELCO which created the first truly workable self-starting ignition system in 1912).

YouTube? Bought by innovator Google. Twitter? Waiting, wanting to be bought. Innovation? Khosla is off the beam again. Without Walmart, there would be no Amazon–and Amazon’s total lifetime profit fits nicely into one year of Walmart’s. Tesla is not innovative–it is a hyped up version of electric car technology in a styled package that occasionally blows up and remains on the borderline of financial disaster. (Model 3, where art thou?)

I’d argue that Geisinger, Mayo Clinic, and Intermountain Healthcare have been pretty innovative over the last 30 years. Mr. Khosla, read Mr. Christensen again!

Eye feels the pain of Google’s Brin and Page

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2013/02/gimlet-eye.jpg” thumb_width=”150″ /] Oh, the discomfort that Sergey and Larry must be feeling being grilled interviewed by “billionaire venture capitalist Vinod Khosla” (grudgingly respected in TTA 30 May) at one of his eponymous Summits. Here they are with Google Glass in all sorts of adaptations from Parkinson’s to gait improvement to surgery [see multiple TTA articles here], a ‘moonshot on aging and longevity’ dubbed Calico [TTA 19 Sept 13] and even a contact lens to measure blood glucose in tears [TTA 17 Jan]. All good stuff with Big Change potential. Instead they whinge on about how the health field is so regulated, and all the cool stuff you could do with the data but for that privacy thingy (those darn EU, UK regulations and in US, HIPAA). Page to Khosla: “I do worry that we regulate ourselves out of some really great possibilities that are certainly on the data-mining end.” Brin to Khosla: “Generally, health is just so heavily regulated. It’s just a painful business to be in. It’s just not necessarily how I want to spend my time.” Gee. Whiz. What is apparent here is a lack of personal respect for us ‘little folks’ privacy and our everyday, humdrum lives.

Advice straight from The Gimlet Eye: My dear boys, you’ll just have to get people’s data with that old-fashioned thing, permission. (And you’d be surprised that many would be happy to give it to you.) Or if it’s all too painful, Sergey can play with his superyacht, latest girlfriend and follow his estranged wife Anne Wojcicki’s 23andme‘s ongoing dealings with the FDA. At least she’s in the arena. Google leaders think health is ‘a painful business to be in’ (SFGate) Mobihealthnews covers their true confessions, with an interesting veer off in the final third of the article to Mr Khosla’s view of Ginger.io’s surprising pilot with Kaiser and then to WellDoc’s Bluestar diabetes therapy app–the only one that is 510(k)Class II and registered as a pharmaceutical product [TTA 10 Jan].  Also interesting re the Googlers’ mindset is a SFGate blog piece on Larry Page’s attitudes towards leisure and work in a Keynes-redux ‘vision of the future‘. < work + > people may= >leisure, but certainly<<<$£€¥ for even the well-educated and managerial!

Another Khosla pronunciamento: self-promoting but myopically correct?

[grow_thumb image=”http://telecareaware.com/wp-content/uploads/2013/02/gimlet-eye.jpg” thumb_width=”150″ /] The Gimlet Eye returns and delivers some hefty weekend reading…. Like General Douglas MacArthur, The Eye had to return from my Remote Pacific Island sometime. What better reason than to deliver to our readers Mr Vinod Khosla’s, tech investor and now Health Futurist, latest pronunciamento via VentureBeat.

It is, as they said in 1950, a beaut. It’s apparent Mr Khosla need not even speak at conferences anymore, because he can publish on his investment company’s website a ‘Draft’ entitled ’20 percent doctor included: Speculations and musings of a technology optimist’. It is being treated in certain quarters like Moses toting The Big Tablets down Mount Sinai; at the bottom the DH3 (Digital Health Hypester Horde) swoon in the usual places.

Mr Khosla reiterates some of his bomb-thrower memes from a couple of years ago: 80 percent of doctors could be replaced by machines, doctors were clinging to ‘voodoo-like practices’ and eventually we will not need doctors because we’ll be weller through technology and Big Data anyway. But the Eye’s Review of the ‘Draft’–which Eye was prepared to give the Gimlety Treatment–is that his prior attention-getting statements are not only more qualified (or stated more gently), but also backed up with real data, examples and mostly memorably, legitimately forward thinking whch largely avoids blaming doctors and shifts it onto the laggard Medical Establishment. “In fifteen years, data will transform diagnostics, to the point where automated systems may displace up to 80-percent of physicians’ standard work. Technological developments will AMPLIFY physicians’ abilities (more…)

The CES of Health: post-scripts

It’s Everywhere, Everyday, Disruptive, Not Impressive and Still ‘Bicycles for Fish’.

Neil Versel’s first major article recaps the Digital Health Summit ‘Point of Care Everywhere’ panel with Dr. Joseph Kvedar of Partners HealthCare/Center for Connected Health, Walter De Brouwer, founder and CEO of Scanadu (the tri-corder everyone’s waiting for) and Laura Mitchell, VP of business development at ‘grizzled pioneer’ in telecare and telehealth GrandCare Systems. The key is integration–for Dr. Kvedar, making it ‘about life, personal and social’; for Mr. DeBrower, bringing digital health into the home; for Ms. Mitchell, persuading long-term-care providers that technology provides useful, actionable information. Some surprises here: Scanadu will be shipping 8,800 units in March to its Indiegogo supporters and is going into a Scripps Health clinical trial; Dr. Kvedar admitted that the latest CCH startup, social wellness site Wellocracy [TTA 30 Oct] is “still searching for its audience.” The headline is “Mobile health has a lot of power, but it’s raw and new”–but is that helpful in positioning it to the Big Users–payers, pharma, providers–who are not all that daring? Mobihealthnews 

Everyday Health with the Digital Health Summit announced on Thursday their 2014 awards for innovation to five US companies for ‘achievement in technology innovation aimed at improving health outcomes.’ They include Scanadu but also four less heralded companies: (more…)

Mainly mHealth: a few predictions for 2014, and some speculation

Editor Charles on what to watch for in 2014

As we have covered previously (and here), there’s no shortage of forecasts that the mHealth market will continue to grow faster, or of penetrating comments like that that won Research2guidance a What in the Blue Blazes award that smartphone user penetration will be the main driver for the mobile health (mHealth) uptake. mHealth apps continue to proliferate – there’s even shortly to be a Pebble apps store. There are a few straws in the wind that not is all well though – for example, as we covered recently, Happtique ceased, at least temporarily, its apps approval process, citing security concerns.  Elsewhere Fierce Mobile described serious data privacy issues with the iPharmacy app, and the ICO recently produced security guidelines for app developers in the UK.  The EU is also strengthening data privacy, moving from individual country directives to a pan-EU regulation. This leads us to our first prediction (more…)