Amazon has many puzzled about its plans for healthcare. Arguably, Amazon is just as puzzled, but is – in effect — running a massive Delphi process to sort out the plan. Amazon is, after all, the Breaker of Industries, Destroyer of Margins. Allow rumors to float, hire some people, have meetings, seek a few regulatory approvals, start a vaguely missioned non-profit with other business titans. Fear and greed do the rest.
Stock prices gyrate as investors bet and counter bet on who is vulnerable, incumbent CEOs promise cooperation or competitive hostility, analysts speculate, “old hands” pontificate, and consultants send megabytes of unsolicited slide decks to South Lake Union. All that information gets exposed without any material commitment.
Disrupting the roadblocks to healthcare innovation
Proper strategic planning requires consideration of a few disruptive (if less likely) scenarios. Amazon getting into hospital supply or creating yet another benefits buying group is easy to imagine but conservative in scope. And we know Bezos thinks long-term and that profits are secondary to platform building.
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…
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.