In December 2019, Extra Crunch spoke to a group of investors leading the charge in health tech to discuss where they saw the most opportunity in the space leading into 2020.
At the time, respondents highlighted startups in digital therapeutics, telehealth and mental health that were improving medical practitioner efficiency or streamlining the distribution of care, amongst a variety of other digital health markets that were garnering the most attention.
In the months since, the COVID-19 crisis has debilitated national healthcare systems and the global economy. Weaknesses in healthcare systems have become clearer than ever, while startups and capital providers have struggled to operate while wide swaths of the market effectively shut down.
Given significant volatility and the rapid changes seen in the worlds of healthcare, venture and startups broadly, we wanted to understand which inefficiencies might have been brought to light, what new opportunities might exist for founders looking to reduce friction in healthcare systems, how digital health startups have been impacted and how health tech investing as a whole has changed.
We asked several of the VCs who participated in our last digital health survey to update us on how COVID-19 is impacting digital health startups and broader healthcare systems around the world:
- Annie Case, Kleiner Perkins
- Kristin Baker Spohn, CRV
- Deena Shakir, Lux Capital
- Jennifer Hartt, Ben Franklin Technology Partners
- John Prendergass, Ben Franklin Technology Partners
- Bill Liao, SOSV
Annie Case, Kleiner Perkins
Our current unprecedented global crisis has put a spotlight on digital health. In the last few weeks alone, we have seen what feels like a decade’s worth of societal and regulatory changes that require digital health companies to step up and embrace new challenges and opportunities.
As we do our part by staying home, it’s unsurprising that solutions capable of serving a large audience remotely are getting more attention. To that end, there are three areas of digital health that are experiencing particularly significant changes, both in terms of investment and adoption:
Telemedicine is the most obvious example of COVID-19 remaking business as usual. While consumers have long said they would be willing to try telehealth services, as of last year less than 10% had actually received care over video (source).
“Shelter-in-place” paired with regulatory changes allowing Medicare reimbursement for virtual visits (among others) will drive a monumental surge in first-time users of telemedicine. I am optimistic that this will be the catalyst for telemedicine to become the new normal first-line of defense for patients seeking non-emergency medical care.
Diagnostic testing has also become a global conversation in the wake of our shortage of COVID-19 tests and related supplies. While all efforts over the coming months should focus around treatment and combating the spread of the virus, I believe more attention and more funding will be put towards getting ahead of — and being able to respond more quickly to — whatever the “next” COVID-19 may turn out to be (though hopefully this won’t be necessary for a very long time!).
I expect innovation in this space to range from the tests themselves to the remote-monitoring capabilities that would enable us to detect and respond to future abnormalities before they reach epidemic levels.
Mental and physical health are top of mind as we adjust to staying home. Companies like Modern Health are seeing a surge in interest from employers looking to provide mental health support to their employees through this difficult period, and employees have been doubling their use of the platform. Modern Health offers a global network of therapists and coaches who deliver their services 100% remotely, so their model is ideally suited to the new remote-work reality many companies are now facing for the first time. They’ve even opened up a free community site to provide mental health services to anyone in need of support.
Companies like Future are providing similar services when it comes to physical health. Rather than depending on the gym visits or in-person training sessions that are now inaccessible, Future offers personal training plans designed by professional coaches, delivered remotely and with no equipment required.
These are just two examples of the growing number of digital health companies that can deliver traditionally in-person experiences digitally and are thus uniquely positioned to help people cope and stay strong through this period of stress and uncertainty.
While I can’t begin to put into words the harm that this terrible pandemic will cause, my hope is that one small silver lining will be that this period inspires many new founders to make improving healthcare their life’s work. If this sounds like you, I would love to hear from you.
Kristin Baker Spohn, CRV
How has COVID-19 impacted the digital health investing landscape?
The global pandemic we are living through is unprecedented in our lifetime and is generating significant shifts throughout everyday life, the economy and the digital health landscape. The response to COVID-19 is impacting every digital health company — creating or accelerating opportunities for some and stalling the commercial engine for others. In my discussions with provider systems, the focus of resources has rapidly shifted towards a world of COVID-19 and everything else.
COVID-19 is driving opportunities, notably the rapid adoption of telehealth/virtual care by clinicians and patients, clinical trials in the cloud, as well as renewed focus on rapid point-of-care diagnostics. With virtual care, we’re seeing a decade of acceleration happening in a matter of weeks.
Up until this point, there has been high-activation energy to conduct a first “eVisit” because the alternative (in-person care) was so well-established and largely available. In this environment, being able to conduct a remote visit and triage is critical when it comes to infectious disease.
While it’s important for organizations to move quickly, it’s also incredibly important to protect clinicians and patients, as we are already seeing more fraud and security breaches. It’s crucial for companies to maintain rigor while moving quickly. For example, companies like Wheel, a network of telehealth clinicians, take the quality of the network, training and regulatory compliance very seriously to protect clinicians and patients alike.
When it comes to challenges, the healthcare industry is currently being forced to separate budget and attention into “COVID” and “non-COVID” buckets. Anything not in the “COVID” bucket will be deprioritized right now, and likely for the next 12-18 months. Provider sales have been largely an in-person activity, and today, people are being blocked at the doors of healthcare facilities for safety reasons, and the industry will need to adapt and change to respond.
Looking ahead, I think we’ll also see rapid adoption of cloud and collaboration tools, which are more pervasive in other industries. Whereas collaboration in hospitals, pharma companies, R&D organizations, etc. used to take place in-person, the work will now need to be done remotely. These tools will now be needed for healthcare professionals who can’t interact with each other.
A great example is a company like a Viz.ai, which enables mobile-first workflow coordination for stroke care in a secure way. When clinicians are all on staff, they need to be able to do their work across departments. Take specialist consults, for example. Video-based specialist consults in the cloud, with a product like Sitka, will be incredibly valuable for hospitals without specialists on staff.
Finally, any elective programs, such as surgeries and treatments, will be deprioritized. Cash pay and personal discretionary spending will also lessen in an economic downturn.
How has COVID-19 impacted digital health startups operationally?
Many people are feeling helpless right now, but that’s not the case for people at many digital health companies. The ones I’ve spoken to are feeling energized and privileged to be in a position to take action and support the response.
The key thing to remember is that we have clinicians and healthcare workers on the front line, and anything we can do to support them, such as tools to improve efficiency and facilitate better triage, is important. I’ve seen that this is very motivating for digital health employees and companies.
Has COVID-19 significantly changed sentiment around healthcare and the adoption of digital health tools?
We’re still in the early days of seeing the impact of COVID-19, but where there is currently an adoption of digital tools to collaborate or deliver better care, this change will be accelerated. We’ll also see a bifurcation of digital health companies that empower clinicians and enable care, and those that are just nice-to-haves.
How can digital health companies best respond to the events around COVID-19?
I’ve been heartened to see how fast companies have moved and sharpened focus. Wheel, for example, is powering the COVID triage and training for virtual care clinicians across telehealth companies, and it has been rapidly deployed.
With a rationing of diagnostics, patients need a doctor to get tested, and those protocols are changing daily as new data and information emerges. And, when more tests and treatments are available, clinicians will be able to diagnose and prescribe treatment remotely and at scale.
Any other thoughts you want to share with TechCrunch readers?
The key thing to remember here is that clinicians and first responders are on the front line and everything we are doing from sheltering in place to donating masks and working hard to deploy solutions are in support of ensuring they can provide patient care. They are also the most at-risk for infection, and at a certain point, we’ll have quarantined clinicians, which will further reduce capacity, so enabling them to deliver patient care virtually (for those that are contagious but have mild symptoms) will be even more critical than it is today.
Deena Shakir, Lux Capital
Having spent the better part of the last decade working on/with and now investing in digital health products and companies, I can say with confidence that the COVID-19 pandemic is emerging as a watershed moment for the sector.
Necessity is said to be the mother of innovation, and with health systems globally stretched beyond capacity, technologies that may have otherwise taken years to achieve product market fit may now be quickly adopted as more “necessary” than “nice to have.” Rather than indulging in what has become a politicized trade-off between giving into the virus and giving up the economy, I’m hopeful at the prospect of breakthrough technologies catalyzed by an emergent need to not only help us get through this crisis, but to contribute toward a healthier world when we’re past it.
As healthcare workers are forced to engineer face masks out of disposable shoe covers and protective gowns out of garbage bags, so too are hospital administrators desperately seeking technological solutions to mitigate very real and immediate challenges — from scarcity of staff to contagion containment to remote monitoring of chronically ill patients.
At Lux, we’re seeing our portfolio companies rise to the challenge in myriad ways — democratizing access to virtual clinical trials, increasing systemic capacity across healthcare facilities, applying sophisticated AI to discover treatments against the virus and more.
Science 37, already the industry leader in decentralized clinical trials, is making the promise of virtual trials a reality today. Elektra Labs, which is building a platform to review and dispense connected technologies remotely, is ensuring that speed does not come at the expense of security, ethics and trust.
Shapeways, the largest 3D-printing platform in the world, is printing masks and medical supplies to quickly support demand from health systems around the country. Recursion Pharmaceuticals is using their unbiased, morphological, AI-enabled platform to screen thousands of compounds and discover signals of efficacy against coronavirus. Avail is minimizing the number of people who have to be physically present in hospital operating rooms, enabling the necessary experts to collaborate virtually in real time.
Digital health companies are by no means immune to the very real and very painful operational and economic challenges that come with company building in the midst of a pandemic and financial crisis. But despite the headwinds, a number of early-stage companies in our pipeline have also seen much quicker adoption, a smoother regulatory path (decades of reform compressed into weeks) and more inbound interest than they can scale.
We’re seeing breakthrough technologies taking on everything from telehealth to remote-monitoring platforms to triage and intake tools to documentation and productivity software to wearable and sensor solutions. I am optimistic that these iconoclastic innovators can take on the challenge of this pandemic to not only enable healthcare workers to save more lives now, but also to help shape a perhaps forever-changed healthcare industry in years to come.
Jennifer Hartt & John Prendergass, Ben Franklin Technology Partners
How has COVID-19 impacted the digital health investing landscape?
Investors are monitoring rapid changes in priorities to assess how best to support their portfolios. Many will still look at pipeline for new investment, but through the new lens of pandemic response and containment.
We expect both public and private funds to flow into the most acute need areas. Investors are asking their portfolios to communicate risk and opportunity analyses and to buckle down and pivot, wherever applicable. The analogy to a war-time like response is appropriate.
Has COVID-19 significantly changed sentiment around healthcare and the adoption of digital health tools?
COVID-19 will rapidly push for increased information sharing and resource sharing across both hospital systems and across state lines. Digital health and telemedicine tools will be more rapidly adopted under pressing need. Those adoptions will benefit us permanently, even once we get past the peak crisis of the pandemic at hand.
How can digital health companies best respond to the events around COVID-19?
Digital health companies need to create road maps to implementation that rely on far fewer in-hospital meetings and demos and integration testing. They can position themselves for rapid response and remote monitoring wherever applicable.
Many companies have tools that will be deprioritized. Those companies will need to buckle down and plan for a hit to revenue. Tools relevant to more elective surgeries, well-visits and preventive care will likely take a hit.
Bill Liao, SOSV
So right now in the health space I have several companies whose funding rounds have been disrupted.
The general advice from other board members who remember the last financial crisis is for companies to conserve cash.
Others suggest that companies focus on social and influencer online marketing campaigns that are cheaper than traditional marketing and more suitable for remote work.
Several companies are going with three-day work weeks and arranging things to be delivered to their people at home, such as healthcare products and groceries.
Lots of payments are being deferred. This is definitely not business as usual.
We are supporting our portfolio companies any way we can in these trying times.
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