Watch your cash burn! Now 31 months average for startups between Series A and B. Now what do you do?

Yes, it’s an even longer way from Series A to B. Add some rockslides to that picture (left) and that’s what the road looks like. A thoughtful article in Crunchbase illustrates the changes over the past dozen years. We are certainly not in the palmy throw-money-at-great-ideas-devil-take-the-hindmost days of 2020-21. Their chart has both median and average time from Series A to B and both are at an all-time high: 31 months on average and 26 months for the median, sharply up from 2022’s 26 and 22 months respectively. The lowest quartile of startups took a stunning 38 months median to get to a Series B–that is over three years.

The question for most startups is how long they can hold out till the next successful fundraising. The pattern has been that once the Series A is completed, the founders put most of their time and energy into raising the next round. What they should be doing, according to the article, is cutting costs and extending runways till the time that things improve among funders. Startups should also keep in mind that investors now prefer lower-risk, slower growth, lower ongoing loss startups to the high flying (in 2020-21). high-cash burn/high-growth startups. 

There are exceptions of course in hot sectors, notably AI and generative AI, but formerly scorching mental health has distinctly frosted over. And if your startup is already profitable, that also attracts funding if the sector is appealing.

The CB conclusion is cautionary and to the point: 

Sooner or later, however, Series A companies will have to do one of five things: Get acquired, go public, become self-sustaining, raise more financing, or shutter. If enough years pass with none of the first four options happening, it becomes increasingly likely the startup will not make it.

This Editor will add that the latest shutterings have been in women’s health which never has received a lot of investment (5% according to Rock Health) and to funders is too niche: NYC-based Bunnii (fertility planning) and SimpleHealth (birth control), which sold its assets to Twentyeight Health. Both got trapped in the funding trough between promises and actual funding. Axios

What’s the way forward from the tough picture above? Well, digital therapeutics probably should be avoided as their track record from Happtique’s vetted app prescribing (failed by 2014) to Pear Therapeutics (failed 2023) has been a losing one. This Editor saved a January MedCityNews article to see if their thumbs up-and-down projections on startups raising capital held up six months later. 

  • Thumbs up: companies that serve multiple stakeholders by creating value for providers, pharma, payers, employers, and consumers; those that not only save clients money but also make them money after one year (!); labor/staff-saving systems; anything with clear ROI; concretely addressing issues with affordability, accessibility, and accuracy. 
  • Thumbs down: niche players that serve highly targeted markets; care navigation (and other-Ed.) services where ROI is hard to track; too crowded sectors like patient engagement and clinical documentation unless they can provably be the lowest cost, most efficient provider versus competition

This Editor would add as ‘thumbs up’ technologies that facilitate simple and less expensive deployments that address extreme pain points around Federal/state compliance and legal/safety cost issues such as staff safety, drug diversion, and patient/resident elopement. 

FTA: Companies are advised to diversify their funding as well: reduce dependence on private capital by looking for investments from alternative sources like the government for non-dilutive funding.

What’s your thoughts and experience?

Babylon Health leads a $30 million Series B for Higi health kiosks, continuing US push

Here’s an interesting investment by Babylon Health. Earlier this week, diagnostic/symptom checking app Babylon Health was reported to lead a $30 million Series B investment in Higi. Higi has about 10,000 health monitoring kiosks (Smart Health Stations) placed in various US retail locations like supermarkets (Stop & Shop, Shop Rite), pharmacies (Walgreens), workplace and community locations. A user can check their blood pressure, pulse, weight, and BMI for free, along with uploading data from one of 80 connected devices and apps. What then happens is that Higi stores that data on their platform for the user, who can log in and access it from the Higi app on their computer or smartphone.

Higi claims 62 million people have used a Higi device for a total of 372 million tests. This Editor has seen them in some local stores, usually in a corner, sitting forlornly or with an out-of-service sign. (Sanitization, of course, is a real concern.) 

So what is Babylon’s interest in Higi? The US health data, of course, which Babylon can put into their database and improve their modeling. Babylon also is gaining a foothold in the US with high-profile partners such as Mount Sinai in NYC and with health plans in Missouri, New York, and California. For Higi, the tie with Babylon increases their clinical data information base and adds access to a symptom checking app. 

In the Series B, Babylon Health was joined by Higi’s Series A investors, 7Wire Ventures, Flare Capital Partners, Jumpstart Capital, Rush University System for Health, and William Wrigley Jr. Confusingly, on Crunchbase, these investors are listed as a Series C,  not a Series A. They list a B funding round with lead partner Blue Cross Blue Shield Venture Partners, without a funding amount, with the previous round as venture, so possibly the Series B failed. Higi’s funding to date is over $61 million not including the new round. TechCrunch, Higi blog