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?
In our survey, we also asked the entrepreneurs: “Besides your own, which company do you wish you had founded?” Given the IPO question responses, it was not surprising to see ZocDoc listed most often – with Airstrip and Epic tied for second. I did find it somewhat ironic to see Epic high on the list as it was also a popular answer to another question: “Which of the following is the biggest challenge to innovation in healthcare?” Perhaps respondents who wish they had founded Epic had seen the recent KLAS data showing the company continuing to dominate the market? Or they have firsthand experience seeing the difficulties in trying to integrate into a closed system? Unfortunately for many of my clinician friends, Epic seems to be one of the few B2B companies that has found a way to succeed in spite of not providing a good “C” experience to the end user.
My final word to digital health entrepreneurs? It doesn’t really matter what combination of Bs and Cs you use to characterize your business as long as what you offer meets a pressing, not just perceived, need. While B2B can be a challenging space with long sales cycles and the need for systems integration, you will find deeper pockets and a significantly higher customer lifetime value. The key will be figuring out how to survive in “pilotitis” as many of the employers, healthplans and providers want to see tangible, near term results (ROI by year 2) before large scale deployment of innovative solutions. On the other hand, my eleven plus years building the network at Epocrates taught me that if you can create a large, loyal network through offering an easy to use, intuitive product that meets a core need, I have no doubt you will be find someone to pay you.
To view the survey results, visit www.interwest.com/news.
Michelle Snyder is an Executive in Residence at InterWest Partners as well as a mentor and advisor to several healthcare incubator programs and early stage healthcare information technology companies. She led marketing efforts from launch to IPO at Epocrates and was head of the subscriber business.