- Excitement about digital health remains high, with 78% of respondents in a new Venrock survey saying creation of new health IT companies will increase somewhat or significantly over the next two years.
- But the days of deep-pocket investors could be waning. Of the more than 250 healthcare sector respondents, 36% said capital markets will become more difficult for early-stage health IT startups and 16% predicted fundraising will be tougher at all stages.
- Nearly half (46%) of respondents said they are somewhat or very concerned about funding, while 72% are somewhat or very concerned about being able to hire good talent to propel their ventures forward.
Investment in digital health has been in high gear, totaling nearly $9.5 billion across 698 deals globally in 2018, up 32% from $7.2 billion and 778 deals in 2017, according to Mercom Capital Group. The largest share of venture funding went to companies focused on data analytics, followed by wearables, mHealth apps and practice management products.
That momentum could continue or it could be in for a slowdown, Venrock says, noting opinions among health IT startups, large employers, payers, providers, investors and other stakeholders tilt both ways. That's in line with recent findings from Rock Health that predict the sector could be near hitting a bubble.
Despite general enthusiasm in the digital health sector, many respondents said unicorns are overvalued and few were sorry they missed out on deals. For example, 38% said they regretted not participating in early stage financing for Devoted Health last year, while 35% felt the same way about passing on Livongo's late-stage round.
Looking at the political landscape, fewer respondents feel major regulatory changes will impact health IT innovation in the next 12 months (47% this year versus 63% in 2018), but just 11% believe the 2018 midterm elections will bring about positive changes for the sector.
While expectations run high for artificial intelligence's potential in healthcare, there's skepticism that blockchain will live up to the hype. Asked if AI has made a difference in healthcare, 7% said it has had a meaningful impact already, while 39% said the effect has been marginal. More than half (53%) said they are still waiting for AI to fulfill its promise.
By contrast, three-fourths of respondents said blockchain is struggling to find its role in healthcare and 7% were unfamiliar with the technology altogether.
People are skeptical about more than just blockchain. Many have doubts about health IT in general being a major disrupter in healthcare. For example, while 45% of respondents believe the Apple Watch will be a widely used biometric and activity tracker for seniors, 48% see it as just another faddish consumer product.