Tag: Health Tech

Digital Health: There is No Exit


All of a sudden we are back in 2021.

You digital health fans remember that halcyon time. In 2019 a few digital health companies went public, and then somehow got conflated in the pandemic meme stock boom, with the harbinger event being the August 2020 sale of Livongo to Teladoc that valued it at $19bn and early in 2021 rather more, as Teladoc itself got to a market cap of $44bn in February 2021

Venture money poured into digital health as a fin de siecle for the ZIRP, that had been going for a decade, combined with the idea that Covid meant we would never leave our houses. The vaccine that became generally available at the start of the Biden Administration in 2021 put paid to the idea that telehealth was the majority of the future of care delivery.

Nonetheless between mid 2021 and early 2022 Jess DaMassa and I were reporting on VC funding in a show called Health in 2 Point 00 (later Health Tech Deals) and every week there were several deals for $100m and up going into new health tech companies.

Things don’t look so pretty now. Even while venture money was flooding into digital health, those public companies, as exemplified by Teladoc, started to see their stock price fall. While it was actually a good year for the stock market overall, in 2021 the digital health sector fell by around 60%. It kept going down. 2022 was worse and although one or two individual companies have recovered (Hi Oscar!), nearly two years later the market cap of the entire sector remains in the toilet.

Of the list that I’ve been following for years there’s only 11 broadly defined digital health companies with a market cap of more than $1 billion–that is only 11 public unicorns

What’s worse is that only one company on that list is decently profitable, and that’s Doximity. It made over $170m profit on revenue of less than $500m last year and trades at 10 x revenue. But Doximity always was profitable, going way back to 2014 (long before its IPO), and although it’s doing cool stuff with AI and telehealth, it’s basically an advertising platform for pharma.

There is no such thing as a profitable public digital health company in the mainstream of care delivery or even insurance–unless of course you count Optum. Which means there’s almost certainly no profitable VC-backed private company either.

Which leads me to this month. You remember those huge rounds that Jess & I used to report on and make fun of? They’re back.

I get it. The stock market is hot and all those pension funds are trying to put their winnings from Nvidia somewhere. VC looks a reasonable bet and there have been a few tech IPOs. If you squint really hard, as STAT’s Mario Aguilar did, you can pretend that Waystar & Tempus are health tech IPOs, although a payments/RCM company and a diagnostics company which are both losing a ton of money wouldn’t give me confidence as an investor.

But the amounts being thrown around must give anyone pause. Let’s take a few examples from the last month. Now these aren’t a knock on these companies, which I’m sure are doing great work, but let’s look at the math.

Digital front door chatbot K-Health raised at a $900m valuation. This round was a $50m top-up but it has raised nearly $400m. It says it’ll be profitable in 2025, and has Elevance as its biggest client. Harmonycares is a housecall medical group, presumably pursuing the strategy that Signify and others followed. It raised $200m, so presumably has a $500m+ valuation–Centene bought an earlier version of the company for $200m a decade ago and sold it to some investors two years back. Headway is a mental health provider network that uses tools to get providers on their system and markets them to insurers. It raised $200m at a reported $2.3bn valuation.

You can look at that list of public companies, including ones taken private like Sharecare, and see that there are lots of telehealth chatbots, medical groups and mental health companies on the list. Any of which probably have similar technology buried inside them. I’m sure if you shook Sharecare hard enough all those technologies would fall out given the number of companies it acquired over its decade plus of expansion.

But let’s take mental health.

Amwell acquired a mental health company called Silvercloud, and a chatbot called Conversa. Its market cap is bouncing around between $250m & $350m and it has more than that in cash–which means the company itself is worth nothing! The VCs who put money into K-Health and Headway could literally could have bought Amwell for about what they invested for a fraction of those companies. Is Headway is doing more than the $250m a year in revenue Amwell is putting up? Headway’s value is nearly 6 x the value of Talkspace which is bringing in about $150m a year in revenue. And if you consider BetterHelp to be 50% of Teladoc — which it roughly is — Headway is 3 x the value of BetterHelp which is doing $1bn a year in revenue. Is there any chance that Headway is doing close to those numbers? Maybe somone who saw the latest pitch deck can let me know, but I highly doubt it.

Now of course these new investments could be creating new technology or new business models which the previous generation of digital health companies couldn’t figure out. They might also have figured out how to grow profitably–although as far as I know Doximity stands alone as a profitable company that took VC funding it never needed and never used.

But isn’t it more likely that they are in the market competing with the public companies and those private companies that got funding in 2020-22, have similar pitches, similar tech and are similarly losing money?

I am a long time proponent of digital health and really hope that technology can change the sclerotic health care sector. I want all these companies to do well and change the world. Maybe those VCs investing in those mega rounds are more sensible than they were in 2022. But given the state of the digital health sector on the current stock market–which is otherwise at all time highs–I just don’t know what the exit can be, and it pains me to say it.

Where’s Our Infrastructure Plan B?


I’ve been thinking a lot about infrastructure. In particular, what to do when it fails.

There was, of course, the tragic collapse of Baltimore’s Francis Scott Key Bridge. Watching the video – and, honestly, what were the odds there’d be video? — is like watching a disaster movie, the bridge crumbling slowly but unstoppably. The bridge had been around for almost fifty years, withstanding over 11 million vehicles crossing it each year. All it took to knock it down was one container ship.

Container ships passed under it every day of its existence; the Port of Baltimore is one of the busiest in the country. In retrospect, it seems almost inevitable that the bridge would collapse; certainly one of those ships had to hit it eventually. The thing is, it wasn’t inevitable; it was a reflection of the fact that the world the bridge was designed for is not our world.

Transportation Secretary Pete Buttigieg noted: “What we do know is a bridge like this one, completed in the 1970s, was simply not made to withstand a direct impact on a critical support pier from a vessel that weighs about 200 million pounds—orders of magnitude bigger than cargo ships that were in service in that region at the time that the bridge was first built,” 

When the bridge was designed in the early 1970’s, container ships had a capacity of around 3000 TEUs (20-foot equivalent foot units, a measure of shipping containers). The ship that hit the bridge was carrying nearly three times that amount – and there are container ships that can carry over 20,000 TEUs. The New York Times estimated that the force of the ship hitting the bridge was equivalent to a rocket launch.

“It’s at a scale of more energy than you can really get your mind around,” Ben Schafer, a professor of civil and systems engineering at Johns Hopkins, told NYT.

Nii Attoh-Okine, a professor of engineering at the University of Maryland, added: “Depending on the size of the container ship, the bridge doesn’t have any chance,” but Sherif El-Tawil, an engineering professor at the University of Michigan, disagreed, claiming: “If this bridge had been designed to current standards, it would have survived.” The key feature missing were protective systems built around the bases of the bridge, as have been installed on some other bridges.

We shouldn’t expect that this was a freak occurrence, unlikely to be repeated. An analysis by The Wall Street Journal identified at least eight similar bridges also at risk, but pointed out what is always the problem with infrastructure: “The upgrades are expensive.”

Lest anyone forget, America’s latest infrastructure report card rated our overall infrastructure a “C-,” with bridges getting a “C” (in other words, other infrastructure is even worse).

What’s the plan?


Then here’s an infrastructure story that threw me even more.

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What Scares Healthcare Like EVs Scare Detroit


I’m thinking about electric vehicles (EVs)…and healthcare.

Now, mind you, I don’t own an EV. I’m not seriously thinking about getting one (although if I’m still driving in the 2030’s I expect it will be in one). To be honest, I’m not really all that interested in EVs. But I am interested in disruption, so when Robinson Meyer warned in The New York Times “China’s Electric Vehicles Are Going to Hit Detroit Like a Wrecking Ball,” he had my attention. And when on the same day I also read that Apple was cancelling its decade-long effort to build an EV, I was definitely paying attention.

Remember when 3 years ago GM’s CEO Mary Barra announced GM was planning for an “all electric future” by 2035, completely phasing out internal combustion engines? Remember how excited we were when the Inflation Reduction Act passed in August 2022 with lots of credits and incentives for EVs? EVs sure seemed like our future.

Well, as Sam Becker wrote for the BBC: “Depending on how you look at it, the state of the US EV market is flourishing – or it’s stuck in neutral.” Ford, for example, had a great February, with huge increases in its EV and hybrid sales, but 90% of its sales remain conventional vehicles. Worse, it recently had to stop shipments of its F-150 Lightning electric pickup truck due to quality concerns. Frankly, EV is a money pit for Ford, costing it $4.7b last year – over $64,000 for every EV it sells.

GM also loses money on every EV it makes, although it hopes to make modest profits on them by 2025.  Ms. Barra is still hoping GM will be all electric by 2035, but now hedges: “We will adjust based on where customer demand is. We will be led by the customer.”

In more bad news for EVs, Rivian has had more layoffs due to slow sales, and Fisker announced it is stopping work on EVs for now. Tesla, on the other hand, claims a 38% increase in deliveries for 2023, but more recently its stock has been hit by a decline in sales in China. It shouldn’t be surprising.

As Mr. Meyer points out:

The biggest threat to the Big Three comes from a new crop of Chinese automakers, especially BYD, which specialize in producing plug-in hybrid and fully electric vehicles. BYD’s growth is astounding: It sold three million electrified vehicles last year, more than any other company, and it now has enough production capacity in China to manufacture four million cars a year…A deluge of electric vehicles is coming.

He’s blunt about the threat BYD poses: “BYD’s cars deliver great value at prices that beat anything coming out of the West.”

The Biden Administration is not just sitting idly.

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Altman, Ive, and AI


Earlier this year I urged that we Throw Away That Phone, arguing that the era of the smartphone should be over and that we should get on to the next big thing.  Now, I don’t have any reason to think that either Sam Altman, CEO of OpenAI, and Jony Ive, formerly and famously of Apple and now head of design firm LoveFrom, read my article but apparently they have the same idea.  

Last week The Information and then Financial Times reported that OpenAi and LoveFrom are “in advanced talks” to form a venture in order to build the “iPhone of artificial intelligence.”  Softbank may fund the venture with as much as $1b.  There have been brainstorming sessions, and discussions are said to be “serious,” but a final deal may still be months away. The new venture would draw on talent from all three firms.

Details are scare, as are comments from any of the three firms, but FT cites sources who suggest Mr. Altman sees “an opportunity to create a way of interacting with computers that is less reliant on screens.” which is a sentiment I heartily agree with.  The Verge similarly had three sources who agreed that the goal is a “more natural and intuitive user experience.”

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Health Tech’s Magic Wand: The Anti-Social Bent of Modern Medicine


In George Packer’s classic 2013 New Yorker article titled “Change the World: Silicon Valley transfers its slogans – and its money – to the realm of politics,” there is a passage worth a careful reread now a decade latter.

Packer shares an encounter with a 20-something techie critiquing his young colleagues who said, “Many see their social responsibility fulfilled by their businesses, not by social or political action. It’s remarkably convenient that they can achieve all their goals just by doing their start-up. They actually think that Facebook is going to be the panacea for many of the world’s problems. It isn’t cynicism—it’s arrogance and ignorance.”

Packer’s assessment at the time was “When financiers say that they’re doing God’s work by providing cheap credit, and oilmen claim to be patriots who are making the country energy-independent, no one takes them too seriously—it’s a given that their motivation is profit. But when technology entrepreneurs describe their lofty goals there’s no smirk or wink.”

Or, as others might say, “They believe their own bull shit.” Where many of us are currently focused on issues of values, fairness and justice, those in the shadows of Silicon Valley see the challenge to be inefficiency and incompetence, and the solution amenable to technologic engineering.

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Can AI Part The Red Sea?


A few weeks ago New York Times columnist Tom Friedman wrote, “We Are Opening The Lid On Two Giant Pandoras Boxes.” He was referring to 1) artificial Intelligence (AI) which most agree has the potential to go horribly wrong unless carefully regulated, and 2) global warming leading to water mediated flooding, drought, and vast human and planetary destruction.

Friedman argues that we must accept the risk of pursuing one (rapid fire progress in AI) to potentially uncover a solution to the other. But positioning science as savior quite misses the point that it is human behavior (a combination of greed and willful ignorance), rather than lack of scientific acumen, that has placed our planet and her inhabitants at risk.

The short and long term effects of fossil fuels and carbonization of our environment were well understood before Al Gore took “An Inconvenient Truth” on the road in 2006. So were the confounding factors including population growth, urbanization, and surface water degradation. 

When I first published “Healthy Waters,” the global population was 6.5 billion with 49% urban, mostly situated on coastal plains. It is now 8 billion with 57% urban and slated to reach 8.5 billion by 2030 with 63% urban. 552 cities around the globe now contain populations exceeding 1 million citizens.

Under ideal circumstances, this urban migration could serve our human populations with jobs, clean air and water, transportation, housing and education, health care, safety and security. Without investment however, this could be a death trap. 

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Bluesky Ahead


I’ve been thinking about writing about Bluesky ever since I heard about the Jack Dorsey-backed Twitter alternative, and decided it is finally time, for two reasons. The first is that I’ve been seeing so many other people writing about it, so I’m getting FOMO.  The second is that I checked out Nostr, another Jack Dorsey-backed Twitter alternative, and there’s no way I’m trying to write about that (case in point: Jack’s Nostr username is: npub1sg6plzptd64u62a878hep2kev88swjh3tw00gjsfl8f237lmu63q0uf63m.  Seriously).

It’s not that I’ve come to hate Twitter, although Elon Musk is making it harder to like it, as it is that our general dissatisfaction with existing social media platforms makes it a good time to look at alternatives.  I’ve written about Mastodon and BeReal, for example, but Bluesky has some features that may make sense in the Web3 world that we may be moving into. 

And, of course, I’m looking for any lessons for healthcare.

Bluesky describes itself as a “social internet.”  It started as a Twitter project in December 2019, with the aim “to develop an open and decentralized standard for social media.”   At the time, the ostensible goal was that Twitter would be a client of the standard, but events happened, Jack Dorsey left Twitter, Elon Musk bought it, and Bluesky became an independent LLC.  It rolled out an invite-only, “private beta” for iOS (Apple) users in March 2023, followed by an Android version in mid-April (again, invite-only).  People can sign up to be on the waitlist.  There are supposedly over 40,000 current users, with some million people reportedly on the waitlist.

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Has “Disruption” Reached Its Sell-by Date? 


If you read the business press, as I do every day, It is impossible to escape the “disruption” meme. Clayton Christiansen’s 1997 Innovator’s Dilemma explored how established businesses are blindsided by lower cost competitors that undermine their core products, and eventually destroy their businesses. Classic examples were the displacement of film-based cameras by digital cameras and then cell phones, the destruction of retail shopping by Amazon and of video rental by streaming video services.

A Civic Religion

Perhaps because Christiansen’s analysis arrived at the peak of the first Internet boom, it generated a high level of anxiety in the corporate world. It did not seem to matter that Christiansen’s analysis was riddled with flaws, meticulously detailed in Harvard colleague Jill Lepore’s takedown in the New Yorker in 2014.

By then, the disruption thesis had become a cornerstone of a kind of civic religion, an article of faith and an indispensable staple of fundraising pitches in the venture and private equity worlds.   No one seemed to be asking how great a trade for the society was, say, tiny Craigslist taking down the newspaper business by drying up its classified ad revenues.   

Disrupting a $4 Trillion Health System

I believe that, twenty five years on, the notion of disruptive innovation has reached its “sell-by” date. At least in healthcare, the field of commerce I follow most closely, it is now doing more harm than good. The healthcare version of the disruption thesis was found in Christiansen’s “Innovator’s Prescription”, written with health industry maverick Dr. Jerome Grossman in 2009. Christiansen and Grossman forecast that innovations such as point-of-care testing, retail clinics, and special purpose surgical hospitals threatened to take down healthcare incumbents. 

A swarm of breathless (and reckless) healthcare disruption forecasts shortly followed. 

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Stop Talking About the Bubble and Start Telling Your Story


Unless you have been off the grid for the past few months (which frankly sounds kind of nice right now), you know that the digital health market has changed dramatically.   While not surprising to those of us who have been through the boom-and-bust cycles of the past two decades, it nevertheless has been an awakening for many investors and entrepreneurs.  

As an entrepreneur, there are some things you cannot control – the macro-economic climate, supply chain disruptions and narcissist led wars halfway around the world.  But what is entirely within your control is how you tell your company’s story and your ability to make investors want to join you on the journey.  

As a longtime storyteller for several digital health companies and a current story listener (aka investor), I’ve been thinking about this topic a lot lately.  Though the word “storyteller” can have negative connotations for some people, I value and appreciate great storytellers who engage me right off the bat, get me excited about the “why” and clearly articulate why it’s in my best interest to invest in their company.

The art of storytelling has always been important, but in the current digital health funding environment, it is quickly becoming essential for success.  Are you telling your company’s story in the most effective way?  Read on to find out.

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Will Boeglin demos TimeDoc Health

Will Boeglin is CEO of TimeDoc Health. It’s one of a new breed of companies supplying the capability for physician groups and health systems (including FQHCs) to deliver CCM (chronic care management) and RPM (remote patient monitoring). Both of those services are now reimbursed by Medicare, and some private plans, but rolling them out and tracking all that activity–not to mention accounting and billing for it–is non-trivial for practices. That is where TimeDoc comes in. Will started the company as part of a med-school project and just raised $48m to really get it going. He showed me how it worked, and gave an extensive and interesting demo–Matthew Holt