‘VC tourism’ in Health Tech Land is over (updated)

The ‘silly money’ is packing its bags and taking the next flight from the Coast. An exceedingly tart take out of Fast Company confirms what your Editors have noticed in Rock Health and other year-end reports. Funding for digital health may have surpassed $4.2 billion in 2015, but it barely eked over 2014’s total of $2.3 billion despite rising geometrically since 2011 [TTA 16 Dec 15, revised by Rock Health since then]. Since then, we’ve had the Trouble Every Day of ‘unicorns’ (overreaching) Theranos and (ludicrously) Zenefits [TTA 17 Feb]; EHR Practice Fusion stalled out and cutting 25 percent of its staff, hoping to be acquired by athenahealth–or anyone (Healthcare Dive); shaky Fitbit shares [TTA 20 Feb]. Perhaps the high point was last year’s ‘Corvette Summer’ with yet another big round to a company yet to fulfill its promise, ZocDoc [TTA 15 Aug 15]. Even Castlight Health with decent revenue (still at a loss) has been dubbed an ‘absolute horror show’ when it comes to its share prices, if you were foolish enough to buy it at or near its IPO.

Fortunately a large dose of sanity may prevail among VCs with a sobering realization–no different than five or ten years ago–that investment has to be strategic and far longer than the usual 18 month-and-out time frame. Too many companies have systems which work the same niche–you don’t need 50 companies doing these things: data analytics for care management, patient engagement platforms, med reminders or diabetes management. [We’ve already noted the ‘sameness’ in companies getting funded in 2015, almost as if investors were seeking reassurance in similarity, a sure sign of a coming fail–TTA 30 Dec 15.]

Developers must fill a need–uniquely. And have a superb business plan, squeeze the nickels till they squeak and forget about the party culture. Investors: Dumb Money For Digital Health Will Vanish As Quickly As It Came In

 

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