Digital Health Can’t Ignore This In 2017

Whenever there is change, there is an investment opportunity.

That was one of the key takeaways from Health 2.0 San Francisco’s December chapter meeting. Per usual, the organization convened some of the Bay Area’s brightest digital health players – providers, entrepreneurs and technologists among them. While “creating the problem” has become a catchphrase in many industries, attendees agreed the most viable digital health companies must get to the root of today’s most pressing healthcare challenges. And to attract investors, companies must do so in a way that’s technically feasible, clinically relevant and cost effective.

Lisa Suennen,managing partner of Valkyrie Ventures and managing director at GE Ventures, kicked off the meeting with a presentation about corporate venture capital and its role in healthcare funding. Lisa’s presentation was the perfect precursor to rapid fire pitches by nine emerging companies born out of Project Zygote, the chapter’s digital health pre-accelerator. Project Zygote united interdisciplinary teams, comprising healthcare providers, technologists and entrepreneurs, for a three-month pre-accelerator program. Unlike traditional accelerator programs, Project Zygote gave teams a safety net to test ideas and the viability of their products, before they graduate to a fully-fledged accelerator program. Based on Lisa’s presentation and the pitches, here are some key considerations for digital health players in 2017:

1. Survival of the Fittest
   2016 was a big year for healthcare investment. In fact, the healthcare sector surpassed the overall corporate venture capital marketplace as a driver in the financing of entrepreneurial innovation. However, despite the massive investments, Lisa doesn’t think many companies are going to make it out of initial funding rounds (aka Series A rounds). She also cautioned, to secure Series B financing - which is higher than Series A financing – companies must not lose sight of the fundamentals. All too often, she has seen companies hire and spend to meet the aggressive revenue growth they promised investors – only to realize their product isn’t ready for prime time.

2. Evidence is Everything
   It may sound obvious, but digital health companies shouldn’t expect to succeed without evidence. And not just clinical evidence – they need to show their products save money and that people are actually using them. Project Zygote participants were well aware of this fact as they completed an intensive session on evidence generation. As Lisa said: “Those who can demonstrate value to payers and providers in a risk-based financial model will prosper.”

3. Behavioral Health Can’t Be Separated from Physical Health
   With seven in 10 primary care visits related to behavioral health issues (ex: anxiety, depression), it’s becoming clear that physical and behavioral health can’t be delivered in silos. But many practices lack the resources, tools and expertise to address them. Two of the four winners of the Project Zygote “Pitch Night” were focused on much-needed solutions in this area. Lisa and the other Project Zygote judges encouraged these young companies to focus on specific populations, including toddlers and people with co-occurring diagnoses, such as depression and diabetes.

We’ll be eagerly watching how healthcare and technology converge in likely and unlikely ways in 2017. But one theme we’re confident will continue to hold true is that people want to access health information, at their convenience and on their own terms. That’s no longer just the consumer seeking prompt virtual doctor visits. Pharmaceutical companies are tapping digital health players to speed up clinical trial recruitment. Insurers are investing in tools and apps that predict health risks and promote healthy behaviors. As digital health companies vie for partnerships across the healthcare sector, they should follow the sage advice from an audience member: “Don’t fall in love with your solution until you fall in love with the problem.”