5 Things We Learnt About Investments in Digital Health: New E-book

At The Medical Futurist (TMF), and especially at The Medical Futurist Institute, we don't usually deal with investment-related news and announcements. We receive many press releases coming from incubators and venture capital firms, each week but we never share them on our channels. Even though we focus on technologies and trends rather than companies of interest to investors, this doesn’t mean that we don’t keep a close eye on all these developments. 

We are in close contact with many digital health start-up founders, analyse those technologies they work on and we do share news relevant to investors in an objective way. Above all, The Medical Futurist team is a fierce advocate for proper digital health adoption; and for that, we need good investments in good digital health companies. This will help shape an optimistic healthcare landscape that can better deal with crises like COVID-19.

The rise in investments despite the pandemic made us realise that it's high time to address this topic. As such, we set out to create a brand-new e-book titled “The Medical Futurist's Guide To Investing In Digital Health." This guide is aimed to serve as an executive summary for those interested in investing in digital health. In it we discuss reasons to invest in this industry; analyse 24 technological trends we consider the most promising; take a closer look at famous and notorious examples of companies that succeeded brilliantly or failed tragically in the industry; and the lessons investors can learn from them. 

We also sought insights from incubators and digital health start-uppers to include in this guide. We invite you to grab a copy of our latest e-book on LeanPub for a more detailed look into the promising trends in digital health for investors and how we assess technologies and companies at TMF.

In this article, we further share 5 things we learnt about investments in digital health while working on the e-book. From the impact of the pandemic to companies that leave a bitter taste in investor’s mouths following unfulfilled promises, anyone interested in digital health can get additional insights by analysing investments in the field.

1. COVID-19 gave a boost in digital health investments

Before the pandemic, digital health investments were steadily increasing year by year. 2017 first set a record, with investments totalling some $5.7 billion. But 2018 exceeded that record by a whopping 42% when investors channelled some $8.1 billion. 2019 saw a dip in funding in digital health with $7.4 billion. However, 2020 saw a surge in investments. Before the year’s end, by Q3 2020, the amount of investment totalled $9.4 billion. This exceeds the aforementioned largest annual sum of $8.1 billion in 2018; or the record-breaking year until now.

Capital flowed mostly towards companies offering on-demand healthcare services and remote care; these represent solutions to real needs amidst the pandemic. “We looked at all of these headwinds and we kind of made the prediction that we were coming off a record-setting first quarter of funding, and we said, this is unlikely to last,” Rock Health Research Analyst Sean Day said in an interview. “We were surprised. The deals kept coming in.”

2. Digital health has matured enough by now

Prior to the 2010s, the digital health market was simply not mature enough. Startups were still finding their footing and solutions weren’t refined; resulting in a flawed perception and slow adoption rates. As such, it might have been too early to invest in this industry.

However, now the landscape is wildly different and we found that the opportune time to invest in digital health is now. Technologies that digital health startups work with have been fine-tuned. The cultural transformation required for digital health adoption is taking place; countries like Germany and Denmark have national digital health strategies to address the industry.

Such approaches prepare policymakers, patients and physicians to be ready for adopting digital health solutions. The global digital health market size is even expected to increase almost six-fold by 2026 to nearly $640 billion. The right time to invest is now as come 2025, everyone else will want a piece of the cake. As such, investors and venture capital firms should consider this time factor before it’s too late.

3. Notorious investment stories can ruin a field for years

Some digital health companies claim to have the best tech with mouth-watering potentials and investors are quick to jump on the hype train. But these go bust within years and serve as cautionary tales for investors to be wary of channelling funds in that particular sector. We came across several notorious examples in the industry.

The poster child of such examples is Theranos and its one-drop blood test promise. The start-up raised $400 million from investors; was later valued at $10 billion; and even won the FDA’s approval at one point by going through regulatory loopholes. However, it all turned out to be a scam on many accounts from faking demonstrations to using unreliable tech. This jeopardises investments in the blood testing sector as there are several other companies working on providing solutions with proven tech.

Another more recent example is that of Proteus. The digital pill pioneer developed the first such pill to receive FDA approval; and even had a $1.5 billion valuation in 2019. But in 2020 the company filed for bankruptcy. Even though research backed its tech to improve adherence, it was bad management that led to its eventual downfall. They couldn’t reach certain milestones within deadlines under pressure from major investors. They also had poor adoption due to the exorbitant price tag of $1,650 per month, while the generic drug costs less than $20 monthly. The fallout is that other companies like etectRx and SIGUEMED working on similar solutions face a steeper slope in attracting investors from here on.

4. There is a shift from investments in health IT to investments in digital health

As we noted in an earlier section, digital health investments in 2020 targeted companies offering on-demand healthcare services and remote care. This indicates a general trend of shifting investments from health IT and towards digital health. 

To differentiate between the two terms, the “Gary rule” helps. It refers to Gary, the IT specialist, who alone can fix health IT issues like outdated antivirus software or malfunctioning electronic health records (EHR). However, if there is an issue that Gary alone cannot fix as it requires the input from more stakeholders such as analysing patient data from wearables and addressing the related technological issues, then it’s a digital health issue.

With the democratised access to care that digital health offers, such solutions are increasingly attractive to consumers; and, in turn, investors. For instance, during the COVID-19 crisis, McKinsey reports that medical providers saw 50 to 175 times more patients via telehealth than they had done before. Following this trend are companies that provide on-demand care like AliveCor, the company behind portable ECGs. The company raised $5.78 million in new funds in 2019; and in 2020 they launched KardiaCare, a digital subscription service that allows users of their devices to have remote personalised insights by cardiologists and handy summaries.

5. Successful start-ups meet real-life patient or clinical needs

Often in tech shows like CES you’ll come across silly products like a blockchain toothbrush. At other times you’ll come across start-ups like Magic Leap that make promising partnerships; amass tons in funding; but don’t deliver on their promise. Or even those like CliniCloud that have a brilliant team and good tech but ultimately close shop. Such examples showed us that for start-ups to find success in digital health, their products must offer solutions to real clinical needs.

For a technology to be successful, it should integrate into the practical reality of healthcare. For example, mySugr helps diabetics reinterpret the condition as a “monster” that can be tamed through their app. Through motivating challenges, personalized insights and a scoring system, it encourages patients to “tame the monster” by keeping their glucose level at a desirable one. Pharma giant Roche even saw the potential in mySugr’s gamified approach and acquired the startup in 2017. It paired the mySugr app with its existing Accu-Chek Guide glucose meter to create the mySugr Bundle; thereby augmenting diabetics’ management of their condition.

To learn more about the promising technological trends in digital health, we again encourage you to get a copy of our latest e-book on LeanPub. You will find further details about our assessment methods when it comes to these technologies and the relevant companies. We hope you’ll find it useful!

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Dr. Bertalan Mesko, PhD is The Medical Futurist and Director of The Medical Futurist Institute analyzing how science fiction technologies can become reality in medicine and healthcare. As a geek physician with a PhD in genomics, he is a keynote speaker and an Amazon Top 100 author.

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