Zocdoc

Practice Fusion, Castlight or ZocDoc will be the next digital health IPO. That’s according to a survey of over 100 innovative digital health entrepreneurs, conducted by my firm, InterWest Partners.

Nearly one third of respondents said Practice Fusion was most likely to be the next digital health IPO with approximately 20% of entrepreneurs voting for Castlight and ZocDoc, respectively.    Among the trio, all three have been impressive generating media coverage and raising money (collectively raising over $320m in the last 2 years alone with valuations ranging from $450m to upwards of three quarters of a billion dollars), in addition to having some of the most visionary leaders in the space.

Contrary to popular belief that digital health is primarily about the next iPhone app for weight loss, sleep or exercise, it was interesting to note that all of the leading “IPO” candidates in our survey have B2B models.  This is consistent with an insightful RockHealth report ( which found that nearly 80% of digital health companies have B2B models.   Future growth in this category is likely to continue as the leading healthcare accelerators such as RockHealth, BluePrint Health and Healthbox are all seeing more applications from B2B companies.

The responses to the IPO question reflect an interesting industry trend.  Though often classified as “B2B”, many of the leading digital health companies are really B2B2C – meaning that without the C there is no B2B.   Pricing transparency tools (Castlight), scheduling platforms (ZocDoc), employer based wellness programs, medication adherence solutions – they all must find a way to engage the end user or they won’t be purchased by the employer, physician, healthplan, hospital, or pharma company.    And though it’s impossible these days to sit through a day of pitches without hearing the phrase “consumer engagement” twenty times, I’m excited that people are starting to ask more of the right questions.  Why will someone want to use this?  Does it really solve a true need?  Is the product easy to use, intuitive, and fun? Continue reading “The Next Digital Health IPO?”

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I like health Web sites and tech start-ups. I think the democratization of medical information is a beautiful thing. It’s a cliche that you can find out more about a hotel than a doctor with a few Google searches. I love how that’s starting to change. I also think that electronic medical records will improve health care over the long haul.

But I am also cynical about the idea that technology is some sort of panacea all that ails the sector. I read Michael Lewis’s book The New New Thing when it came out in 1999. There’s a great anecdote in it about Netscape founder Jim Clark. He was looking for another big challenge and decided–this was 1996–that all that was missing from health care was good software. So he started Healtheon. To Clark it was just a matter of writing some really good code and all the inefficiencies and paperwork that bedeviled the industry would go away. His business plan was a flow chart showing how software cuts out paperwork. It was simple.

Flash forward and Healtheon is buried somewhere deep inside WebMD. There’s still a lot of waste and paperwork that hasn’t gone away.

Since Clark there has been a parade of other ambitious health-tech entrepreneurs. Do you remember the search engine Wondir? Or the comparison-shopping site Vimo? Or Carol.com? How about Steve Case‘s modestly named Revolution Health? What about Subimo?

Continue reading “Dial Back The Hype”

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Another year, another Health 2.0 under the belt. This being the fourth time attending it is interesting to see how this event and its participants have evolved. Like many things in life, some things at Health 2.0 have changed, some have not, most for the better, but there remain some troubling aspects to this event that cannot be ignored.

When thinking back on the demos of countless vendors of years’ past, this year’s Health 2.0 had two distinguishing characteristics:

Demos are cleaner, with better user interfaces (UI).

The companies demoing at Health 2.0 are spending a lot more time and resources on creating inviting, clean and engaging interfaces that are a welcome change from the cluttered messes of demos past.

As with Mark Twain’s famous quote: “I would have written you a shorter letter if I had the time.” reducing an application to its core elements takes time. Clearly, the majority of Health 2.0 vendors this year have spent the time and resources necessary to create a simple and engaging environment for the end user.

Business models are more sophisticated.

At the first Health 2.0 event, just about every single vendor there stated that their business model was going to be based on some mix of Freemium and advertising revenue. Needless to say, just about every Health 2.0 start-up from that conference has either gone out of business, is among the walking dead (takes a lot to completely kill a company – trust me, I’ve been there) or has changed their model to survive. This year, the business models presented are more creative and for some, likely to see success in the market.

The contributing factor to these two changes is the amount of money now flowing into the health IT sector. Investors smell opportunity and are placing some pretty big bets as represented by the investments in Castlight (~$80M), ZocDoc ($50M) and CareCloud, who announced a $20M round at the event. That’s some serious cash and with all the investors that were present at this event, quite sure there are more investments in the wings.

Continue reading “Trickle Down Health”

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Recently ZocDoc had a huge funding round demonstrating the success that they are having. There’s a number of lessons learned from ZocDoc’s experience. Unfortunately, many haven’t demonstrated Zocdoc’s wisdom leading to a large number of healthtech failures. A recent study highlights this phenomena. After interviewing 110 digital health entrepreneurs, RockHealth recently released its study Rock Report: State of Digital Health demonstrating the disconnect between the startups getting funding and what many startups are pursuing. This disconnect is the last and most important reason healthtech companies have failed that are detailed below. The following are the top reasons why healthtech companies have failed or had to do major pivots in order to survive:

Lack of Specific Focus or Adoption point
It’s well documented that a lack of focus kills startups whether they are in healthcare or not but it is particularly prevalent in healthcare. The diversity of opportunities in healthcare is so great that it’s tempting to try to solve it all. These startups are ignoring the old saying about how to eat an elephant — one bite at a time. Too many startups are trying to swallow the elephant whole.
Expected consumers to pay
With the exception of weight loss programs, there aren’t many examples of consumers paying directly for health services. Over time, this is likely to change as more of the burden of healthcare costs gets shifted to consumers as was highlighted in a Healthcare Disruption series (see links below). However, I’d be very cautious about any business expecting to have consumers pay in the near-term.
Continue reading “Lessons from the Carnage in HealthTech”
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