From Patient Care to Research, Funding for Healthcare Startups Is at a Record High

September 13, 2016

10:20 am

It’s safe to say that the healthcare and healthtech markets are booming. Health reforms are disrupting the traditional business models. Higher technology penetration results into telemedicine and wearables going into medical mainstream. The aging population all around the globe is demanding better care.

Startup Health has just released a new report outlining the key trends within the healthcare domain. Here are the essential takeaways:

Funding Is Ripe and Will Continue to Remain So

According to the company’s estimation, the current midyear funding has broken the historic record and now tops $3.9 billion. VCs invest with equal generosity in Seed and Series A rounds, which means that the early-stage innovation landscape is striving, yet having a validated solution will significantly raise your chances of getting funded.

The top-5 largest deals in 2016 so far were the following:

  • Ping An Good Doctor – a Chinese patient scheduling app received $500 million from undisclosed investors.
  • Oscar – health insurance re-imagined for millennials received $400 million.
  • Human Longevity Inc. is here to address the aging-related issues and got $220 million from GE Ventures to continue their big data research.
  • Flatiron Health is on a mission to re-define oncology technology and treatment and now has $175 million from Roche to do so.
  • Clover aims to become a more affordable alternative to Medicare and promote better overall personal healthcare. They have received $160 million for that.  

Trending Healthcare Markets for Disruption

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What makes these particular niches so favorable?

Robin Yang from Aimvein explains that one’s health status is usually determined by the following components:

  • Clinical care – 10%
  • Genetics – 20%
  • Genetics – 20%
  • Lifestyle and behavioral traits – 50%

Until lately, the latter haven’t been addressed properly except for the common sense advice you have gotten from your practitioner.

This is my personal wellness gadgets and companies have received great traction both in terms of funding and acquiring users. Think how Fitbit has experienced a nearly overnight success.

Asian Markets Are Actively Joining the Bandwagon

Ping an Good Doctor is just one the Asian companies aimed at disrupting the local market. In fact, healthcare startups in China have the raised the highest cumulative funding in Asia.

Doctor discovery and appointment booking apps are among the fastest growing segments. Another one is women healthcare.

Lamabang app, which has raised a few funding rounds topping $100 million, is a premium app design for moms to chat about their pregnancy, exchange health advice and use various tracking functionality.

Practo is the Indian version of Ping an Good Doctor and one of the faster growing and most funded startups in the region.

Here’s an overview of the latest largest deals:

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Common Challenges Healthcare Startups Are Facing

Despite the abundant funding, developed ecosystems and plenty of growth opportunities, healthcare startups are still crippled by some major challenges, which include the following:

Regulatory Issues: The majority of startups in different niches usually adopt the “act first, ask questions later approach” when it comes to following the regulatory laws. For healthcare startups, this may be a bit riskier game as the majority are obliged to operate in line with strict FDA and HIPAA regulations. Also, let’s not forget that in some cases, a human life depends on the solution.

Pioneers Take it All: The first movers in healthcare usually get through the FDA process, gather outcome data to prove their solutions works and get a number of sticky customer on board, who face high switching costs once they’ve adopted a certain solution. Being the “Pepsi” in this case, may not be quite profitable.

Long Sale Cycles: You’d rarely, if ever, hear a healthcare startup growth story claiming that they’ve gone from zero to one billion dollars in less than a year. The sales cycles are rather long and regulatory hassle can take significant time as well.

If you are offering a new product designed for healthcare institutions, rather than consumers directly, think of your project as a five or ten years minimum kind of initiative. You certainly may get luck and go for IPO as a number of the biggest healthcare players have already done, but still, there’s a lot of patience required to succeed within this market.

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Dianna is a former ESL teacher and World Teach volunteer, currently living in France. She's slightly addicted to apps and viral media trends and helps different companies with product localization and content strategies. You can tweet her at @dilabrien

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