Tag Archives: venture capital

Health Alerts

Digital Health Entrepreneurs Raising More Capital Than Ever (Probably)

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electronic-medical-record(A Version of this Health Alert was published by Forbes.)

A trio of new reports shows the fundraising landscape for new digital health ventures remains promising. New York’s Startup Health, an investor and accelerator, has released its report on the digital health venture market for the third quarter. Startup Health estimates $6.5 billion has been invested in digital health deals in the first three quarters of 2016, more than the $6.1 billion invested in all of 2015.

San Francisco’s Rock Health, also an investor, estimates $3.3 billion in new digital health funding through Q3. Startup Health’s figures are likely larger because Startup Health includes deals outside the United States (including a $500 million investment in a Chinses mobile medical service). Startup Health also includes deals as small as $52,000, while Rock Health has previously specified it only includes deals worth at least $2 million.

With respect to U.S.-based companies, both reports note the San Francisco Bay area continues to attract the most capital. According to Startup Health, the total is $1.2 billion – almost twice as much as New York or Boston. However, the pool is getting wider and deeper. Businesses in Philadelphia, Chicago, Minneapolis/St. Paul, Los Angeles, San Diego, Dallas, and Washington, DC, all saw good deal flow. Continue reading Digital Health Entrepreneurs Raising More Capital Than Ever (Probably) →

Health Alerts

Will You Ever Understand Your Medical Bill?

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stress(A version of this Health Alert was published by Forbes.)

It is hard to exaggerate how painful the medical billing process is for patients. Steven Brill, an entrepreneurial lawyer turned journalist, became one of the most famous critics of American health care when Time magazine published a long article by him in 2013. It was a wide ranging criticism of pretty much everything in U.S. health care, which grabs and keeps our attention because it uses the absurd hospital bill as the fulcrum for his case:

The first of the 344 lines printed out across eight pages of his hospital bill — filled with indecipherable numerical codes and acronyms — seemed innocuous. But it set the tone for all that followed. It read, “1 ACETAMINOPHE TABS 325 MG.” The charge was only $1.50, but it was for a generic version of a Tylenol pill. You can buy 100 of them on Amazon for $1.49 even without a hospital’s purchasing power. Dozens of midpriced items were embedded with similarly aggressive markups, like $283.00 for a “CHEST, PA AND LAT 71020.” That’s a simple chest X-ray, for which MD Anderson is routinely paid $20.44 when it treats a patient on Medicare, the government health care program for the elderly.

(Steve Brill, “Bitter Pill: Why Medical Bills Are Killing Us,” Time, February 20, 2013)

It is hard not to get carried away on a wave of outrage when reading stories of patients faced with ridiculous bills, which (even if they can understand them) they might never be prepared to pay. A new crop of entrepreneurs is hoping to solve this problem. Continue reading Will You Ever Understand Your Medical Bill? →

Health Alerts

Digital Health Funding Defies Expectations

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Oscar(A version of this Health Alert was published by Forbes.)

Investors have not had their fill of digital health deals, according to new fundraising reports from Rock Health and Startup Health, two outfits which have led the digital health revolution and produce complementary reports on how much capital is flowing into the sector. While other sectors have wobbled recently, digital health (which was only defined as a market five or six years ago) continues to attract venture capital.

Digital health refers to businesses that apply new information technology, especially the cloud, to health care. That being said, there is no agreement about where the boundary is. San Francisco’s Rock Health and New York’s Startup Health do not quite agree on which deals are digital health deals. Continue reading Digital Health Funding Defies Expectations →

Health Alerts

Oscar and The Changing Health Insurance Landscape

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Oscar(A version of this Health Alert was published by Forbes.)

Yesterday, the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on “Examining Consolidation in the Health Insurance Industry and Its Impact on Consumers,” at which the CEOs of Anthem and Aetna testified.  Both of these health insurers have announced friendly take-overs of two other insurers, Cigna and Humana.

One indicator regulators use to determine whether a business combination will reduce competition is whether there are significant barriers to entry in the industry. If there are, new competitors will not exploit openings created by incumbents’ consolidation. During the hearing, the CEOs of Anthem and Aetna each (independently) pointed to Oscar, a new health insurer with highly pedigreed investors, as evidence that health insurance is an easy business to enter.

Oscar is indeed an interesting enterprise, which has attracted fawning coverage in the business press both for its innovation and the quality of its investors. Nevertheless, Oscar is a curious start up, because it focuses exclusively on a market – Obamacare exchanges – in which insurers are taking on a lot of pain. Continue reading Oscar and The Changing Health Insurance Landscape →

Health Alerts

Cross-Over Investors Key Players in Health Deal Boom

SVB

(A version of this Health Alert was published by Forbes.)

Silicon Valley Bank has published its mid-year report on the state of financing in biotech, medical devices, and diagnostics. The key take-away is that both private financing and exits continue to be strong. One development in the structure of the market that has made deals easier to move through the pipeline is the rise of cross-over investors. These are mutual funds or hedge funds (usually investors in listed securities) which are increasingly investing in private health deals. Continue reading Cross-Over Investors Key Players in Health Deal Boom →

Science and Other News

Zombies Stalk the Health Care Landscape!

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Accenture, the management consulting firm, has concluded that the flood of venture capital into digital health startups is not only maturing, it has created a race of zombies that will be bought up on the cheap by established players. In language not usually employed by the elite ranks of sober-minded management consultants:Zombies

Accenture predicts that more than half of digital health start-ups funded between 2008 and 2013 are not likely to survive longer than 20 months. Some healthcare companies will look to buy these “zombie start-ups” to drive growth by infusing top talent, fueling innovation and bolstering existing solutions.

While digital health and healthcare IT start-up funding is accelerating, the reality is that few start-ups will stand out. Even fewer will survive. Of the nearly 900 digital health start-ups that Accenture studied, 51 percent are zombie start-ups, at risk to die. These are companies that each received less than $50 million in total funding between 2008 and 2013 and have not received funding in 20 months or more.

Science and Other News

Rock Health: $2.1 Billion in Digital Health Funding Q2

Rock LogoRock Health has published its account of 2015 Q2 funding of digital health ventures. According to Rock Health, funding so far this year is keeping pace with 2014.

What is especially interesting about Rock Health’s report is that it compares venture funding of digital health to other areas and concludes that digital health is growing at a significantly faster rate than other areas, especially biotech and medical devices.Rock

Science and Other News

Digital Health Market is Maturing

StartUp LogoStartUp Health has published its analysis of 2015 Q2 digital health funding. Covering a somewhat broader portfolio than Mercom Capital does, StartUp Health reports $1.7 billion in new funding.

By far the biggest deal discussed in the report was Zenefits’ $500 million raise. Zenefits, I get. The deal I don’t get is Oscar, which comes a distant second with $145 million raised. Oscar is the only health insurer in America that actually wants to enter Obamacare’s exchanges. What are they thinking? I can’t figure it out, but Goldman Sachs is an investor, and it’s not a good idea to bet against Goldman Sachs.StartUp IPO

The report also notes that there have been some significant IPO’s in digital health, providing liquidity and some transparency in valuations.

Science and Other News

Telehealth Has Best Funding Quarter Ever

MercomVenture funding of health IT deals in 2015 Q2 amounted to $1.2 billion in 138 global deals, according to Mercom Capital Group. This was smaller than 2014 Q2, which saw $1.7 billion raised in 159 deals.

However, telehealth and mobile health continue to blow the doors off. Two of the top four deals were $50 million each for Doctor on Demand and MDLIVE. (Mercom Capital also reports public equity financings, but I do not believe this Q2 report includes the successful IPO of Teladoc, which went public on July 1.)

Although I cannot claim to have studied every deal, it appears that the ones which raised the most money are focused on the employer-based market. If the technologies they deploy really do engage employees to lower health costs, that is good news. What would also be beneficial is these tools being deployed in the individual market. Perhaps that will come as the space becomes more competitive.

Science and Other News

Zenefits Raises $500 Million More To Reinvent Small-Biz Health Benefits

Most of us buy small-business health benefits the way our grandparents did when they ran the hardware store. It’s a business in dire need of reinventing. Zenefits looks like the company to do it. The company that was one of the top venture deals in health care last year is looking to repeat, raising $500 million at a $4.5 billion valuation:

This is Zenefits’ third funding round in less than a year and a half. The company raised $15 million in its Series A last January, then added $66 million in an June Series B round that valued it at more than $500 million.

Zenefits offers a cloud-based software-as-a-service human resources platform for small businesses that tries to be an all-in-one solution for compliance, onboarding, payroll, health insurance, and other employee benefits. The key is that the software is free to businesses; Zenefits makes its money as a broker of services, for example earning a fee from health insurers who register new businesses through Zenefits. (Brian Solomon, Forbes)