Risk and Reward in the Digital Health Marketplace

Here is my editor’s note from the most recent issue of Venture Weekly:

Investors and Entrepreneurs,

Monday, February 29th, marked the beginning of the weeklong conference of the Health Information and Management Systems Society, or HIMSS. The annual HIMSS conference typically brings together every corner of the health IT universe, and the 2016 installment is no exception. In anticipation of this event Stephen Kraus, partner at Bessemer Venture Partners, laid out his assessment of the digital health marketplace and extolled its relative strengths in a post featured in this week’s Venture Weekly.

Kraus makes a strong case for why investors should continue to be “bullish” on digital health companies despite the recent decline in the healthcare IT index maintained by Bessemer, and he provides several reasons to support his claim. These justifications range from how the recent “downturn seems to indicate a macro market correction rather than a fundamental risk to healthcare IT,” to the continued strength of fundamentals within the sector and the strong returns for investors, especially early stage VCs.

Kraus’ optimism comes amid recent reminders of the risks that digital health initiatives pose for consumers and the tech companies that choose to play in the space. Apple CEO Tim Cook cited the risk to stored personal health information in his refusal to comply with FBI demands that the company creates a means for unlocking customers’ smart phones, and a southern California hospital had its Electronic Health Record (EHR) held ransom by hackers until it agreed to pay $17 thousand worth of bitcoin. These are just two examples of how the digital health landscape is continuing to evolve and how technologists and consumers alike are developing a greater understanding of the unique risks posed by digitalizing personal health information in any form.

We’ve seen how digital revolutions have transformed commerce, banking, and entertainment, and, now, the beginnings of a transformation that could democratize healthcare. Maybe more so than any of those other fields, a similar revolution in healthcare will require the ongoing trust of consumers. The risks in the digital health space aren’t just financial, and innovators will have to continue to be vigilant in order to foster that bull market Stephen Kraus envisions.

-Joe Shonkwiler (@JoeShonkwiler), Contributing Editor