ARE DIGITAL HEALTH STARTUPS RECESSION PROOF?

A healthcare editor at LinkedIn recently asked me this question. After much thinking my response is, it depends on the segment the digital health startup is focused.

Now before you jump to any conclusion on the vagueness of my response, let me walk you through how I arrived at my answer.

The key was to first answer some simple questions. Is money being invested in digital health? Is their growing demand for digital health services? What value do these services bring? What would organizations value in a recession?

1) Is money being invested?

Yes, yes and yes! Lots of it and growing.

2) Is there a growing demand for such services?

Yes, interest from users is growing, and there is increasing maturity in the investor landscape.

Overall, ~ two-thirds of patients and physicians are interested in one or more aspects of digital medicine. However, mutual interest at present is dominated at lower touchpoint areas in the patient treatment value chain.

In 2017, 607 distinct investors participated in funding rounds of digital health firms, out of which 266 or 44% of investors are new entrants in the space.

3) What value do these services bring?

Digital investment landscape is evolving but can be summarized in 3 investment categories -- clinical (the practice of medicine), operational (the process of how medicine is delivered) and lifestyle health (discretionary consumer health services).

Looking at how the investor sentiment is evolving, I feel that investors will invest more heavily in clinical followed by operational and then lifestyle health, moving forward. 

4) What would businesses value in a recession?

This question is important because knowing what is fundamental for businesses in a recession is also key to knowing what will happen to the myriad of health startups. Given the former are major investment sources, distribution partners or acquirer of these start-ups.

The focus areas are balance sheet, operating and product offering flexibility.

To further expand on the answer at the beginning of this article and based on the four key data points. I would say operational digital health startups would be in the best position to survive a recession followed by clinical digital health startups.

This is because in a recession businesses will be looking to boost operational efficiency and effectiveness and offer products/services to their customers that drive loyalty and improve margins.

#digitalhealth

What do you think?

Cheers Karan,

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