What excites us in consumer healthcare IT?

By Angela, June 17, 2014

Last December, we published our thoughts on the healthcare market in a VentureBeat article: “The health-tech booster shot: bringing health care into the 21st century.”

That was December 2013, and digital health funding for the year exceeded $19B with 195 venture deals (where over $2M was raised). These numbers were up 39% compared with 2012, and a staggering 119% compared with 2011. If you’re interested in more facts and figures, check out Rock Health’s annual report where statistics are segmented by stage, geography, and more.

Now that we’re halfway through 2014, we continue to see venture capital pour into the healthcare sector.  Large raises in recent months include Doximity ($54M), One Medical Group ($40M), and Omada Health ($23M).

So what has Version One been up to amidst this whirlwind of VC activity? While we have yet to invest in a second healthcare startup since Figure 1, we have actively refined our thesis to focus on two key opportunities:  1) patient-to-expert networks, and 2) patient health data.

1)  Patient-to-Expert Networks

When we get sick or feel pain, the first thing we do is Google our symptoms. After all, self-diagnosing with a few keystrokes is faster, easier, and cheaper than heading out to the doctor’s office. Traditionally, Google has returned search results from WebMD, Mayo Clinic, and other websites where the medical information is delivered from the “top-down.” The content is static, non-personalized (i.e. everyone typing in “I have a headache” will get relatively the same results), and can be inconsistent.

This traditional online “diagnosis” is being disrupted by a wave of crowdsourced communities.  More and more, we are seeing patients connect with other patients for support and information sharing (i.e. Crohnology and PatientsLikeMe). We’re also seeing platforms that connect physicians in an effort to democratize medical knowledge (i.e. the photo sharing app, Figure 1).

But what about a platform that connects patients with doctors?

To date, we have seen crowdsourced communities like CrowdMed and HealthTap gain great traction with both parties.  Patients are able to receive opinions free-of-charge and doctors are happy to share their knowledge for both altruistic and lead generation purposes.  We have also seen a rise in marketplaces from search and booking engines like ZocDoc and BetterDoctor, which help grow a doctor’s pipeline of patients, to on-demand general practice like Doctor On Demand (via video) and First Opinion (via text) as well as specialists – namely dermatology (via images) and psychology. In addition, there are concierge services like Medicast (an “Uber” for doctors) and destination healthcare marketplaces that focus on dental surgery, plastic surgery, LASIK, and joint replacements.

These examples are a few of many that validate how technology can increase affordability of care and provide more accurate diagnoses without a loss in quality.  It will be exciting to see if there will be one company that “wins it all”, or whether there will be many winners.  And how will the winner(s) look?

We feel that the leader in this category will be capable of scaling triage or diagnosis much faster with machine learning and/or the unlocking of shared medical knowledge from the network that would have to be built into this platform.

2)  Patient Health Data

When it comes to patient data, there are two trends at play. First, with the Quantified Self movement, data is being gathered for anything and everything from caloric intake to number of steps taken, oxygen levels, REM sleep, and much, much more.

At the same time, the industry is also starting to move away from the data silos that have historically locked patient data within a hospital or practice. The government and its Meaningful Use initiatives is a key driver behind this.

With all this new data, there’s an enormous opportunity for someone to become the “Mint.com” of health data. However, the key questions are how do we get data collection to cross over into the mainstream? How do we encourage people to track their health data, whether it’s self-collected or doctor-collected? To date, we have seen two “forcing functions”:

a) Hospital/Enterprise-driven: physicians, hospitals, employers, and insurers are encouraging patients to look at their lab results and share their self-collected data on their patient portals. Validic and HumanAPI sit on the backend of these portals, connecting clinical and fitness wearables, apps and in-home devices to an EMR.

b) Patient-driven: There is a growing number of web and mobile apps that give patients a secure and convenient way to collect, consolidate, analyze, and store information on medications, allergies and lab results, across and from all different EMRs.

Given that we have a better understanding of business models that sell directly to the end user, we naturally gravitate towards companies taking the second approach.  So far, we have seen that people with chronic diseases and health concerns are quick to adopt technology: having all of your medical information digitized and accessible through your smartphone or tablet is far more convenient than carrying a physical binder of lab results from one doctor’s office to another.  We look forward to seeing these users champion these apps and ultimately inspire everyone to own their health data.

Final thoughts

As the population ages and healthcare costs continue to grow, there will be a greater emphasis on technology’s role in managing health and wellness. While patient-to-expert networks and patient data are the two areas we are currently focused on, our thesis is ever evolving. Are there any other areas or companies that should be on our radar? What do you think the go-to health app will be?

  • Sean Kerklaan

    When it comes to the quantified self, I believe the future successes will be with companies that can contextually absorb ‘yesterday’s biometric data’ and share healthy recommendations personalized to your lifestyle to improve today and tomorrows outcomes. We see this everyday with our professional athlete clients asking for personalized recommendations based on the datasets we collect from them. No one cares (for long) about how many steps or hours of sleep they got yesterday – but, if you can learn from yesterday’s data to improve tomorrow’s outcomes clients will love you.

  • bwertz

    Agreed – data capture needs to be automatic and value is in personalized recommendations.

  • http://about.me/samzeb Sam Zebarjadi

    Love the ‘updated’ investment thesis on the healthcare space. Definitely lots of opportunities in a market that is ripe for disruption–especially as people become more aware of their healthcare choices, their financial liabilities when it comes to care, and ownership issues over health data. Honored that a shoutout to Medicast made the list! Look forward to seeing what great things come out of V1 in the next few months.

  • Ari Tulla

    Great analysis Angela! We just released Medicare claims data on doctor level at https://betterdoctor.com/patricia-wong-md and have gotten into various interesting discussion on the greater need of price transparency. Today it’s almost impossible to get visibility on prices prior to doctor’s visit not to even talk about more complex procedural prices. My bet is that the growth of high deductible plans will drive the market to transparent pricing in next couple of years.

  • http://stayinyourprime.com/ Tyler Hayes

    Agreed about the coming of transparent pricing. There’s a Show HN weekly it seems like at this point with people building price mapping tools. The key to this happening, as with most things in healthcare, is unlocking those private data sets.

  • ASG

    thanks for the update, angela.

    however, i might suggest a better analogy than “mint.com of health data.” while mint does a nice job of displaying your personal financial data in one place, it’s not quite as actionable and useful as it could be. as one of your other commenters suggested, i think the more interesting startups will provide easy-to-adopt guidance on improving your health, with quick feedback on your progress.

  • atkingyens

    Thanks, Ari. And appreciate you sharing the insight on price transparency – definitely a frustrating pain point that needs to be solved.

  • atkingyens

    This is why we’re excited about Prime! ;)

  • atkingyens

    Good point. I should clarify that the analogy to mint.com is about collecting, normalizing and aggregating data from different sources. Just as mint.com scrapes data from different financial accounts, we have seen the same approach being taken to gather data from different EMRs via hospital portals. I also agree that patient data may not quite as actionable as it can be which is probably why user adoption is the biggest challenge. Why should patients care about their own medical data if the changes that we make in our behaviour (exercise, diet) will not immediately be seen because it has to be “measured” at a doctor’s office? I think patient “engagement” will have to take on a different meaning (not a traditional DAU or MAU – still yet to be defined but would love to hear what others think). I feel there is also an element of patient education involved – perhaps explaining that being “one’s own silo” will reduce redundancy in taking tests (which reduces costs) and will improve the efficiency of communication between doctor and patient.

  • atkingyens

    Thanks, Sam! We’re excited to see Medicast deliver better care :)

  • Kevin Nakao

    Great summary of the sector and work being done by some very innovative companies.. The potential is enormous and brings its own share of hurdles. The first is the EMR platform, mostly controlled by one company, Epic. They have done a great job getting dominant market share. However, will they really provide an API (they announced one but I haven’t seen a lot of 3rd party implementation). Lot’s of value can be created through the multi-directional flow of data and information between health care provider and patient. The second is the HIPPA compliance impact on the customer experience. Protecting customer health data is essential, but the exact implementation can create some friction. Third, FDA approval. The more an app helps, the greater opportunity for risk and FDA approval. That said, this is important work for both our health and economy, so damn the torpedoes and full speed ahead!