Why digital health matters
Healthcare is expensive and inefficient — a golden opportunity for technology and digital innovation to turn things around.
One of the simplest rules for successfully building a company and attracting venture capital is to look for an opportunity in a market or industry. The solution that aims to capitalize on this opportunity should follow the famous “10X-rule” and be at least ten times better than existing solutions. And when an idea is that much better and does not follow a trend, then there’s a fair chance that even Andreessen Horowitz invests in it — which says quite a bit, because they are said to invest only in potential billion dollar companies.
So why does digital health fit the bill? Because the fields of traditional healthcare and medicine are like a wounded patient on her way to the emergency room. She needs immediate attention — and technology and digital innovation could be the IV she needs.
The patient is badly wounded
How bad is the apparent injury to healthcare and medicine? Let a few numbers tell the story.
In the United States alone, annual healthcare costs amount to USD 2.3 trillion. 80% of that figure is driven by preventable, chronic diseases. Yet, average human life expectancy has risen to 77 years. And currently, there’s a shortage of around 50,000 physicians. This figure is expected to grow to 100,000 by 2020. In other words: a lot of people are sick. That’s really expensive. Expensive sick people will life and cost money longer. And there are fewer physicians to take care of them. Ouch. If that doesn’t present a textbook opportunity for startups and VCs, I don’t know what does.
The treatment for healthcare
The doors for digital health are wide open and the opportunities in the field are numerous and in dollar terms huge. Estimates of the market size for digital health range anywhere from USD 100 billion to USD 200 billion. Market segments such as personalized health tools (like fitness trackers) or personalized medicine tools (like genomics) are projected to be USD 20–25 billion in size. Venture funding in 2014 according to Rock Health has doubled to USD 4.2 billion. And now even Peter Thiel is getting in on the action (although mainly in biotech). The Valley’s aforementioned VC powerhouse Andreessen Horowitz has put some chips on the digital health table as well. For example, in May 2014 they invested USD 2 million in SolveBio, a genetic data infrastructure startup, alongside Max Levchin and SV Angel.
Still not convinced? Flatiron Health, another New York-based big data medical software startup focused on oncology, was Google’s largest investment out of Google X in 2014. Google provided the majority of the USD 130 million in Series B. For comparison: in 2013 Google X’s biggest investment was Uber, which is expected to close in on USD 10 billion net revenue this year. I wouldn’t be surprised if both Flatiron Health and SolveBio turn out to be billion dollar companies in the foreseeable future.
The range of companies with astonishing innovation in digital health is simply amazing and it is hard to see how these could not improve our lives and change healthcare for the better. Ginger.io uses advanced analytics to identify people needing mental health treatments. Welldoc offers a digital diabetes management app, which is actually described by physicians. Or take German Hamburg-based Tinnitracks, which provides tinnitus treatments through filtered music to address each tinnitus frequency individually. This idea is so novel that is was just this week awarded with the first price at SXSW in Austin.
To give digital health the official “big opportunity to turn an industry upside down and make things better stamp”, Apple just recently got involved as well by introducing ResearchKit, an open source research framework.
Digital health matters — and we will all benefit from it.
