The heightened awareness of public health and the pandemic-induced demand for innovation enabled the health technology sector to receive a large cash injection of $ 750 million between 2019 and 2020. Traditional investors in Healthcare technologies have been joined by new entrants to the sector who rightly expect that the digitization of the healthcare sector, accelerated by the pandemic, will create a generation of high-value startups. However, the presence of new investors brings challenges as well as opportunities.
Where these investors may have already viewed healthcare tech companies as too capital intensive with too long a payback period, they quickly saw the huge opportunity in the industry. They have seen firsthand the seismic shifts and shifts in the way services are delivered through health technologies, which are already changing people’s expectations of how they want to access their health care.
Take Birdie, for example, a home care software solution that helps seniors receive care remotely from their homes. As the social care sector came under increasing pressure during the pandemic, it deployed tools to support home care agencies and partnered with the NHS to help identify symptoms.. Or Medloop, which creates “self-service” patient apps. He worked with GPs to ensure routine patient care was not missed, as access to practices was limited. Greater availability of funding is ultimately positive for proven health technology companies like these and the patients they support.
However, the influx of cash is not necessarily good news. Capital is only part of the equation for creating a healthcare start-up. While this helps keep a business vibrant, it doesn’t change the reality of the long lead times and strict regulations that the majority of businesses face before they can bring a product to market.
The founders of Healthtech may face a situation where they conflict with their supporters if they are unfamiliar with the due diligence and research required in the early stages of development, and are too eager to launch and exit the product. . This could lead to negative outcomes for all parties – investors, the healthcare technology company, and the healthcare system – because if a product is rushed it will fail in the competitive and tightly controlled environment of the healthcare system.
The second risk is that we may see funding going to less robust healthcare startups due to the lack of understanding of the sector by investors. The worst-case scenario is that in a livelier and more confusing startup market, hospitals and caregivers are picking the wrong providers and directing already stretched budgets towards solutions that don’t benefit patients. In today’s overburdened healthcare system, that’s nowhere near what the doctor ordered.
With increased market maturity and more experience, healthcare professionals have become more demanding in their procurement process, which will mitigate the risks of poor deployments. This market maturity will also inevitably lead to increased competition among digital health providers for contracts and inevitably to a consolidation of the health technology market through mergers and acquisitions.
Consolidation is not a bad thing. This is a natural consequence of competition, and in the majority of cases, mergers and acquisitions benefit both parties involved and the healthcare market in general. Logically, we can’t expect a hospital to go through a complicated purchasing process for dozens of unconnected digital solutions for different use cases, diseases, and patient groups. It is much more realistic to expect a smaller number of digital healthcare providers to provide multiple solutions.
The strongest solutions that have the potential to benefit the greatest number of healthcare providers and their patients will thrive, either by becoming market leaders or by moving out to larger healthcare companies that consider the healthcare startups as an innovation pipeline.
If 2020 was the year that investment in health technologies exploded, 2021 will be the year of post-pandemic consolidation. The founders of Healthtech should remain optimistic. The adoption of digital healthcare during the pandemic has eliminated skepticism from investors, healthcare facilities and patients who will never return. Founders will find it easier to access capital, and for those who provide products that truly benefit healthcare professionals and patients, there are plenty of opportunities in the market.