Want to discuss digital health? Reach me on Twitter Tom Moon
- Digital Health is a broad term — does it need a better definition?
- Digital Health is used to describe everything from consumer facing meditation apps (Calm) to integrated biotechs (Recursion Pharmaceuticals).
- Some ‘digital health’ founders are pushing back against the label — ‘we’re an enterprise Saas company that happens to sell into healthcare’.
- Is a tighter definition needed? Fintech is similarly nebulous with companies ranging from consumer credit (Klarna) to Fixed Term Funds (Treasury Spring) to blockchain infrastructure (Copper).
- Digital Health generally refers to software-based innovation in healthcare and more specific descriptions of business models tend to be more practical e.g. tech-enabled services*.
- I think the term is unlikely to be replaced anytime soon and, in the meantime, Rock Health has a good definition.
*people even disagree on what this means: to some it’s a brick and mortar service differentiated by tech (Cityblock) and to others the tech is the service (Omada Health)
2. European digital health start-ups have yet to scale in the US
- US investors, providers and payers are understandably focused on the idiosyncrasies of US healthcare incl. reimbursement models.
- Similarly, European start-ups (e.g. Kry, Doctolib) have been very Europe focused to date and busy growing here.
- There are two reasons for this: i) digital health is nascent and there are few mature scale ups ready to expand internationally ii) value propositions and business models do not travel as easily as B2B SaaS, for example.
- European founders need a clear reason for scaling to the US and must understand how they create value in a healthcare system with different reimbursement models and regulation.
- Meanwhile, several European founders have founded very successful digital health companies in the US e.g. Calm (Lightspeed / Insight), Viz (Kleiner / GV), Hinge* (Insight / Atomico).
*Hinge re-located to the US before its Series A
3. Investors are bullish about the 2020s, despite disappointment from previous false dawns
- Investors remain bullish on the potential for start-ups to create sustainable value and the sector continues to attract significant funding with $7.4bn invested in 2019.
- A diverse range of players remain very active including tech giants (e.g. Amazon Alexa becoming HIPAA compliant and Google acquiring Fitbit), Payers (e.g. new CMS remote patient monitoring codes), Providers (Kaiser Permanente, Mayo Clinic and Providence all have active venture funds), Regulators (e.g. FDA’s proposed framework for ML based technologies) and Pharma (e.g. Eli Lilly’s partnership with Atomwise).
- 6 digital health IPOs in 2019 are cause for optimism although performance in the public markets has been mixed e.g. Livongo’s market cap halved within two months of IPO but now most analysts predict the share price will swing back within a year.
- In the private market 23andMe’s recent challenges highlight the importance of sustainable value creation.
4. Experienced Digital Health talent is rare — no healthcare ‘PayPal’ mafia yet
- Difficult for start-ups to find experienced ‘digital health’ operators because the first wave of healthcare unicorns is relatively young.
- Experienced engineering and product talent is being recruited from non-healthcare tech companies (Uber, AirBnB) while sales and partnership roles are recruited from incumbents (Medtronic, Stryker, Optum) to open doors with buyers.
- In the medium term, a cadre of ‘digital health’ talent will emerge from successful scale ups.
5. US tech VCs are investing in start-ups at the intersection of software + hardware / services / biology
- Tech VCs recognise that few solutions can be ‘software-only’ in healthcare.
- US funds have invested in tech enabled brick and mortar (Forward, Cityblock), wet-lab drug discovery (Insitro, Recursion Pharmaceuticals), computational biology (Freenome) and software+hardware (IDx).
- SynthBio is extremely nascent but beginning to attract investment.
- Despite the ‘software+’ propositions healthcare start-ups must still show a path to ‘software-like’ margins.
- At Silicon Valley VC investment committees these start-ups still need to compete for capital with high margin, high growth SaaS start-ups.
About me
I’m an Oxford & Imperial trained doctor and I began my career in the NHS where I invested approximately 10,000 hours treating sick patients. In my experience cutting edge advances in technology too infrequently penetrated the inefficient and manual world of bleeps, fax machines and paper. Today at MMC I’m excited to be investing in start-ups that will reshape the way I practised medicine. Prior to joining MMC I was a strategy consultant at the Boston Consulting Group and, in my spare time, I’m a Governor at The Royal Marsden NHS Foundation Trust.


