“That was a lot of money to raise for this stage of a company,” said Skip Fleshman, a partner with digital health investment firm Asset Management.
Although the proliferation of $1 billion + mega-funds has made it hard for many venture capitalists to justify smaller Series A investments, I don’t think this is the right approach for venture capitalists or for startups. The excess capital creates the wrong incentive structure for long-term success.
Since I first started investing in digital health in 2007, the sector has exploded. Digital health startups raised over $4 billion in venture capital in 2014 and will likely raise even more this year. Based on my observations, a large proportion of these startups are founded by folks who want to apply their background in tech to healthcare. Many are young, successful engineers and product managers who have a negative experience with healthcare and want to fix it. These pitches often start with a personal story. They want to disrupt the system from the inside.
Telemedicine may just be the biggest trend in digital health in 2015. As a partner focused on digital health investments at venture capital firm AMV, I spend a lot of time crisscrossing the country chatting with leading healthcare providers and insurers about their technology needs. By far the area they are most interested in is telemedicine. For hospitals, expanding telemedicine is a way to cut costs while providing consumers with the convenience they crave. But the idea has been around for a while so why now?
Much has been made of the iPhone 5S’s new A7 chip, but the new M7 co-processor is, if anything, potentially more disruptive. The M7 will have an impact on the entire development process of mobile apps, and, from my vantage point, will have a profound impact on digital health...
The healthcare industry is undergoing a meaningful transition to paperless health records that are incentivized by government programs. The goal of achieving an intelligent, more efficient, and cost-saving healthcare system has prompted an era of health information technology. Today, financial incentives and the potential for penalties are the main drivers in adoption of EHR today and will be in the future. Additionally, healthcare information technology companies are establishing beachheads in an EHR market that is dominated by key players. Companies have achieved this by building products that address the need for EHRs, or solutions that integrate with or work around systems that are routinely used today...(Contact email@example.com for full report)
Venture capitalists hate investing in hardware startups for a myriad of reasons. Design and iteration are more difficult. Margins are low. Manufacturing issues are unpredictable. Inventory is expensive to hold and manage. Shipping is costly and cumbersome.
But this paradigm is shifting and venture should think twice before dismissing hardware companies out of hand. Here are some reasons why:...
The U.S. healthcare market is ripe for technical disruption. Costs are spiraling out of control while quality of service and customer satisfaction continue to go down. The system is opaque, complex and fragmented. Regulation is required but imposes heavy costs. As in other industries before it, the healthcare sector can benefit from technology-enabled efficiency gains that use measurement tools, structured data, analytics, SaaS, faster processing, smartphones and tablets...
The healthcare industry has been waiting a long time for its “2.0″ moment. As social networks like Facebook and LinkedIn exploded in the late 2000s, so did e-commerce, enterprise SaaS, and cloud services. Business models, features and strategies have all dramatically evolved in the past decade and the valuations of many IT companies have taken off. But the Health 2.0 transformation is finally here, and it’s going to be profound—dramatically changing the way patients obtain health and wellness information, track their progress, and interact with providers and physicians. It’s going to be an exciting time in Silicon Valley as next-generation information startups address the multi-trillion dollar healthcare market...
2011 has been a big year for health sciences technology and, specifically, mobile health. Venture capital investors, looking for the next big thing, are beginning to invest in companies developing mobile applications in the health and wellness sector. Smartphones are making new health care applications feasible, and one doesn’t have to look far to see tangible examples of companies creating some buzz. Fitbit, Lark, Zeo, and Jawbone (UP) have all raised capital and developed hardware solutions often tied to Apple’s iOS or Android based phones. Hundreds of companies are targeting weight loss, wellness/ fitness and women’s health with software-only applications. Incubators like Rock Health are popping up, bloggers are beginning to write about the sector, and gamification has become a term commonly used in healthcare. As cleantech investing predictably dies, mobile health and Health 2.0 are taking its place...
(Skip) Fleshman thinks that two major pieces are still missing to convince the big players to jump in: efficacy data and revenues. Digital health companies need to convince acquirers that their products work, and the bar for that is getting higher. "They want to see clinical evidence," he said. "Is it moving the needle? And/or they want to see revenue generated. No one’s really proved that you can make a lot of money in this sector. Companies have maybe $20 million in revenue, but they’re just not ramping and scaling."
"The tech community isn’t used to dealing with studies, FDA approval, publications, and reimbursement," says Skip Fleshman, a digital health investor with Asset Management Ventures. "[But] the tech community wants things to happen fast. Obviously that doesn’t work in health care."
Fleshman observed that if they were having this panel discussion five years earlier, “we would be talking about quantified self.” But with the adoption of the Affordable Care Act and the HITECH Act, “we’re talking about companies connecting to the healthcare ecosystem.”
Devices that track specialized biometrics will still appeal to athletes or patients who are highly motivated to improve their performance or chronic diseases, said Skip Fleshman, a partner at the venture capital firm Asset Management Ventures. But people who just want to lose a few pounds are much less likely to buy and stick with a wearable.
Investors aren't giving up on treatments for heart disease, and existing drugs for common conditions such as heart failure could be improved upon, says Lou Lange, a partner with Asset Management Ventures.
But while game-like health apps may work with women, who make up the largest group of mobile gamers, and youth, Skip Fleshman, a health investor at Asset Management Ventures, warned that they may fail to reach a majority of other patients. "I doubt this would be effective for people who can't afford to take drugs or suffer from side effects," he said.
“The consumer stuff might be a wave that has passed,” said Asset Management Ventures partner Skip Fleshman, whose 50-year-old firm began looking at digital health five years ago. “There are so many wearables out there, we’re skeptical that people will actually pay [for them].”
Investor Skip Fleshman of Asset Management Ventures told his audience that biotech exits have been “white hot” in the past year and a half. He predicted the industry will see an increase in biotech firms jumping back into the market.
MedCity News, February 14, 2014
Skip Fleshman, a partner with Asset Management Ventures, expressed some surprise at the disconnect between the upwards of $2 billion valuation and the stark reality of the balance sheet. Referring to Castlight’s revenue and profitability he said, "It’s pretty anemic and pathetic." But he was reluctant to say whether the company’s performance on the day it goes public will have much of an impact on other digital health companies, though he added, "It’s probably not the best bellwether."
Skip Fleshman, a partner with Asset Management Ventures, sees the Audax acquisition as a validation of technology startups, which tend to do a better job of consumer-led products than the healthcare industry has, particularly payers...