Providence Ventures’ 2019 in Review

Authored by the Providence Ventures team.

2019 was a big year for digital health. Several companies entered the fray of public markets, others successfully closed hundreds of millions in venture funding, and nontraditional healthcare players waded deeper into the ecosystem. With the close of our second fund and several exciting new investments, we wanted to offer a reflection on big trends we saw and where we focused our attention in 2019.

More capital, more innovation

The digital health sector has grown tremendously in the last decade, and 2019 was no exception. Following the record $8.3bn invested in 2018, digital health companies secured $7.4bn in venture investment across 374 transactions in 2019, according to Rock Health. The influx of private investment has catalyzed digital innovation across the entire healthcare ecosystem, with investors and strategic partners targeting consumer - and provider-facing technologies alike.

On the consumer side, applications ranging from digital therapeutics to behavioral health saw heavy investment, as patients increasingly engaged with their health outside the four walls of the hospital. Companies such as Omada (a PV portfolio company) and Ginger received greater attention, with payers and employers turning to digital pathways to engage with individuals dealing with chronic illness earlier and more frequently. On the provider side, data has become an increasingly valuable and complex asset; accordingly, solutions tackling issues such as data interfacing and patient engagement continue to compete in an already crowded space.

Digital health startups saw another year of healthy activity with $7.4bn in venture investment.

Public exits and corporate entrants

The shift toward B2B and B2B2C business models has helped digital health ventures scale effectively. 2019 saw several notable IPOs from the likes of Phreesia, Health Catalyst, and Progyny, among others. Though some have performed well and others less so, these exits demonstrate the viability of digital-health business models, blazing a trail for future healthcare IT IPOs. Corporations outside of the traditional healthcare sector also made substantial moves; Amazon’s acquisition of telemedicine startup Health Navigator and launch of Amazon Care for its employees signaled significant investment in telehealth. Walmart also launched in-store clinics as a foray into low-acuity care, posing a threat to primary care, optometry, and dentistry. Additionally, Google continues to leverage AI/ML to make use of unstructured health data in provider settings — though its Project Nightingale was met with a critical reception from consumers.

Resounding pain points, innovative solutions

Providence Ventures has the unique privilege of being strategically situated in a position to identify the various problems facing providers today. The unique access afforded to our leadership has enabled us to build relationships with and listen to operational leaders and clinical experts across a massive 51-hospital health system with highly diverse service lines. We’re proud to share that, with this approach, all of our active portfolio companies are working within Providence to address key pain points, and several have been acknowledged as emerging and established leaders by CB Insights, Fast Company, Deloitte, and more.

Six Providence Ventures portfolio companies named to CB Insight’s Digital Health 150

Some of the key areas in which we directed our investments in 2019 include:

• Healthcare Cybersecurity: Over the last decade, the healthcare industry has been plagued by data breaches involving sensitive patient information. Protenus, a healthcare information technology company, has developed a leading health-data auditing and patient-privacy monitoring (“PPM”) platform for health systems. Protenus is among the vanguard of companies pushing the boundaries of what AI can achieve today in healthcare, as the company’s sophisticated technology is able to boil down vast swaths of data into cost-saving insights that also prevent significant harm.
• The Digitization of Care & Alternative Care Delivery Models: Patient satisfaction has declined significantly in recent years, with 51% of patients expressing dissatisfaction with their primary-care consumer experience, stemming from factors such as inconvenient locations, long waiting-room times, extended periods between booking and visits, and short times for physician interaction. One Medical is a technology-enabled care delivery provider that addresses these pain points with a patient-centric approach, improves access to care with online booking for same-or next-day in-person appointments, messaging capabilities to communicate with a primary care provider, and a medical team available to provide virtual care 24/7. By meeting patients with the care they want, when they want it, One Medical has established itself at the forefront of consumerism in healthcare.
• Minimally Invasive Surgery: Pediatric surgical devices have historically represented a market that can be seen as niche at best and neglected at worst. Children have a unique anatomy, physiology, and disease processes, and the life-saving nature of the surgeries they receive extends to the entire family unit and society as a whole. At the same time, the need for size- and anatomy-specific devices, or the ability to safely operate around critical structures in confined spaces, extends beyond the pediatric community. Providence Ventures participated in a growth equity financing of Bolder Surgical, a surgical device company that equips surgeons with right-sized instruments for minimally-invasive procedures.

While we’re excited to leverage our resources to address the problems above, we know there is plenty more to tackle in the digitization of healthcare. As with any growing space, we’ve got our work cut out for us and plenty of exploration still to do. If you are an entrepreneur or investor in these spaces and you’d like to get in touch with us, you can contact us at this link. Here’s to a bigger and even better year for digital health in 2020.