More than $4 billion has been invested in digital health startups in the past three years, Qualcomm Life Fund's director Jack Young told attendees at HIMSS' Venture+ event at the mHealth Summit this week, and that means those investors are expecting a total return of about $15 billion in the next five to seven years. Young said the excitement in digital health is still on the upswing and almost 200 investors now have at least one digital health company in their portfolio.
"Some investors and some entrepreneurs are going to be disappointed," Young said. "Unless you are a committed investor and know what you are doing. The 'one-off' investors are going to be disappointed."
Young pointed to a survey of 100 digital health entrepreneurs and investors from another venture capital firm, InterWest, that quantified the industry's expectations for success. Most of those surveyed believed that at least one of the most funded companies in the market today would IPO and many believed a handful of companies were already worth billions of dollars.
The number one company those surveyed pointed to was Practice Fusion, which just announced an additional $15 million in funding from Young's team at Qualcomm Life Fund today. Young and others throughout the day at the Venture+ forum noted that corporate strategic investors had increasingly ramped up their support and investments in digital health startups over the course of the past few years.
StartUp Health Co-Founder Unity Stoakes said that corporate strategics like Qualcomm, GE, and Google have been "incredibly active" in digital health. GE teamed up with StartUp Health earlier this year to help shepherd a special class at the three-year long startup academy. A founder of one of the startup's in that class, 1EQ, pitched their company to investors at the forum and during the Q&A noted that GE's participation in that program doesn't necessarily translate into an actual monetary investment in the startup. It's contribution is more access to resources and mentorship.
Serving as a traditional investor or as a sponsor of an accelerator class isn't the only way big corporations are attempting to get a foothold in digital health. A number of big companies have begun launching innovation-focused divisions to create a more startup-like group in-house.
"Here are these big Fortune 50 companies creating these innovation centers, then as soon as any innovation spills out, they kill it," Zaarly Co-Founder Eric Koester said at the event on-stage during his discussion with Stoakes.
Koester said that the rise of the Chief Innovation Officer is a promising trend, however, and that big companies with this new kind of CIO should be sure they have the CEO and the board's ear.
Chris Wasden, a managing director in PricewaterhouseCoopers healthcare strategy practice who often works directly with big medical company CEOs, noted that oftentimes the CEO and that innovation officer or division will have trouble working together.
"The people responsible for the relationship [a StartUp Health, for example] are working at the speed of sound or light or whatever," Wasden said. "And other people can't keep up with them. They can't even communicate to their CEO because he's still back thinking about things via the old business model. How do you get his thinking to catch up to the thinking of the [person in the innovation group]?"