Rock Health’s first half funding roundup adjusts the bath temperature to tepid, the bubbles to flat

July 11, 2023 | by

The ‘new normal’ continues, as the bubbles vanish and the poor duck’s feathers are getting soggy and cold. Rock Health’s roundup of digital health funding (US only) continues the chilly flat-to-downward trend to funding. What money and fewer funders are out there which persist in their dedication to healthcare are betting cautiously, minimizing their risk on the table in lower unlabeled funding rounds and pre-vetted concepts. 

  • First half 2023 (H1) funding closed at $6.1 billion across 244 deals. Average deal size was $24.8 million, the lowest since 2019.
  • Breaking down by quarter, Q2 2023 funding hit a new low– $2.5 billion in funding across 113 deals, lower than Q4 2022’s ‘hole’ of $2.7 billion. By comparison, Q1 2023 funding totaled $3.5 billion over 131 deals, adjusted from the earlier report of 132 deals [TTA 5 Apr]. The collapse of three banks, most notably Silicon Valley Bank in March, clearly affected Q2.
  • Given the trend, Rock Health projects that 2023 funding will fall well below 2022, between 2019’s $8.1 billion and 2020’s $14.3 billion

Delving into the numbers:

  • Those ‘generalists’ who jumped into the digital health pool in 2021-22 jumped out. H1’s 555 investors had a 71% repeat rate, meaning that those who knew the water saw some opportunity or put on their wet suits. The overall total dropped from 775 in H1 2022 and 832 in H1 2021.
  • Unlabeled raises were suddenly the way to go. 101 of 244 deals–41%–had no series or round attached. This unprecedented move avoids the spectre of down rounds for companies needing to raise funds–down rounds affect valuation. Interestingly, 67% of these companies’ prior raises were in 2021 and 2022. 37 of them were Series B or lower. 
  • Mega deals inhabit a different territory. H1 had 12 mega deals, 37% of total funding dollars, and was at the 2021 norm of $185 million. Half were at Series D and growth/PE. They clustered in value-based care, non-clinical workflow, and that former mouse in the pumpkin coach, in-home and senior care. This level of funding also gravitated to the pre-vetted: incubated by VCs included Paradigm (clinical trials) and Monogram Health (kidney care).  Recently funded Author Health, long in stealth, will operate in a narrow slice of mental health funded by Medicare plans.
  • Zero IPOs, but acquisitions and shutdowns/selloffs continue. Acquisitions continued on a track of about a dozen per month, down from 2022’s average of 15. On the gloomier side, quite a few companies simply ran out of runway after raising a little or a lot of funding. These hit the lights at the end resulting in hull loss: Pear Therapeutics, SimpleHealth, The Pill Club, Hurdle, and Quil Health. If they were lucky, they had intellectual property worth something to someone–Pear to four buyers including a former founder, 98point6’s AI platform business to Transcarent–or subscriber bases worth acquiring, such as Pill Club to Nurx, SimpleHealth to TwentyEight Health. This does not count Amazon shuttering Halo and leaving subscribers in the lurch. (Nor Amazon’s dodgy approach to privacy getting Federal and private scrutiny, which this Editor explores here and here.)

To this Editor, 2023 will be a ‘grind it out and survive’ year for most health tech and digital health companies. Survivors will carefully tend their spend, their customers (who will be doing their own cutbacks), and watch their banks. The signature phrase this year was written in 1950, another uncertain time, by Joseph L. Mankiewicz and uttered with flair by Bette Davis in a classic film about the theatre, ‘All About Eve‘: “Fasten your seatbelts; it’s going to be a bumpy night.”   Rock Health Insights

Short takes: Amazon dims to black Halo wearable line, eVisit acquires Bluestream Health, Moving Health Home launches to lobby Congress, government

April 27, 2023 | by

Amazon shuttering Halo health and fitness product line and services. On Wednesday, Amazon emailed Halo users that the line (View, Band, and brand new Rise sleep tracker) and services, including apps, will be switched off on 31 July. Users will be able to download or delete health and other data. Subscriptions will be refunded as well as all purchases made in the last 12 months. Remaining staff in the Halo unit will be laid off. This was not unanticipated given that Amazon cut jobs at Halo back in February as part of their mass layoff of 18,000 then and another 9,000 last month. Amazon is being quite ruthless in reacting to its 2022 loss and changing up its bets in healthcare to buying F2F care, like One Medical–as the Federal Trade Commission cleans its sights to hunt big game [TTA 23 Feb, 23 March] and the Department of Justice lurks in the wings, despite the sale closing. Engadget, Amazon notice, The Verge, Becker’s

Virtual care platform eVisit acquires virtual care platform Bluestream Health. Bluestream adds ‘white labeled’ telehealth as a customized “front door” for health systems along with virtual care workflow and LanguageLine translation to eVisit’s capabilities in automating patient care management for large health systems. eVisit picks up Bluestream’s 50,000 providers and 500 health systems to add to its 100 healthcare delivery organizations, 2,000 sites of care, and access by over 275,000 clinicians.  Acquisition cost and leadership/workforce transition are not disclosed. eVisit is based in Phoenix while Bluestream is HQ’d in NYC. This Editor first met with founder Brian Yarnell about 2015 or possibly earlier, when the company was operating out of two offices in shared workspace. Release, eVisit Bluestream acquisition page. FierceHealthcare

A new industry organization launches to lobby Congress and government for home health. Moving Health Home announced in March that it was forming to unify healthcare organizations to advocate for home health and to make the home a reimbursable site of care from insurers and Medicare. This spans prevention such as fall risk assessment and nutrition as well as direct care in the home including hospital at home. Members include Amazon, Hackensack Meridian Health, DaVita, Signify Health, Dispatch Health, and many others from the clinical, vendor, and provider areas. It’s headed by Krista Drobac, who has been for some time an activist in the connected health and health policy areas. Earlier this month, they announced that there will be a House bill, Expanding Care in the Home Act (ECHA) which is similar to prior bills both in the House and Senate.

Amazon gets all tangled up on their $3.9B One Medical buy as FTC widens antitrust scrutiny

February 7, 2023 | by

Amazon’s ride towards being the #1 threat to healthcare hits an oncoming train. A report in stock analysis newsletter Seeking Alpha, picked up from other sources (the subscription Dealreporter), states that the Federal Trade Commission (FTC) hired outside economists to scrutinize Amazon’s $3.9 billion purchase of provider network One Medical (1 Life Healthcare). In a little-noticed action in early December, FTC also sent out subpoenas to current and former One Medical current and former customers as part of its investigation.

Both the Wall Street Journal and Bloomberg (paywalled) are reporting that this appears to be part of a larger FTC action in developing a wide-ranging antitrust lawsuit against Amazon on multiple anticompetitive business practices. In a recent example, FTC held up Amazon’s acquisition of iRobot (Roomba) during the summer, and in September, requested information from 1 Life and Amazon above and beyond the usual required Hart-Scott-Rodino Act (HSR) reports reviewed by the FTC and DOJ [TTA 15 Sept 2022]. This examination has been going on for some years, across two administrations, but may come to fruition as early as this spring. The main investigation is around Amazon favoring its own products, how it treats outside sellers on its platform, and copycatting the products of outside sellers. It may also cover Amazon Prime bundling practices. Prime also plays into its healthcare strategy. FierceHealthcare

Another factor: the highly profitable growth of Amazon Web Services (AWS) has taken a nosedive along with the cloud market, killing Amazon’s growth and value, according to Seeking Alpha’s analysis (may be paywalled). Amazon is also closing or pausing already built-out food stores–Fresh supermarkets and Go convenience shops–ending a long-term commitment to developing them.

When all of these factors are combined with Amazon’s 18,000 layoffs and huge 2022 net loss of $2.7 billion, it’s hard to believe that Amazon now has enough blue sky fisc to make the huge investment and long-term commitment that a largely new and cash-intensive business, delivering healthcare through real live providers in offices, will require. Amazon’s current health business is either transactional virtual retail (Pharmacy and the new non-face-to-face Amazon Clinic for virtual medical referrals) or hardware+subscription (Halo)–areas that Amazon knows well. But managing an entirely new and complex area that provides expensive and regulated provider services?

This Editor will go out on a wintry limb and predict that Amazon, facing FTC and state anticompetitive actions plus plenty of shareholder profit pressure , will cancel the deal with One Medical–leaving One Medical on another limb.