We’re using today’s top story to circle back on Define Venture’s report on “Health Tech’s Defining Decade,” which included too many highlights to squeeze into last week’s update.
The analysis dives into the performance of venture-backed health tech startups that went on to go public, with a sprinkle of survivorship bias given that it doesn’t include companies that have been delisted.
Although still an emerging sector, 18 health tech companies have exited for over $1 billion since 2020, including 13 via the public markets and 7 through M&A.
Here’s a look at those “Wave 1” companies and how Define Ventures segments the market.
These Wave 1 companies aren’t exactly known for their stock performance, but it was still surprising to see that only two have managed to increase their market caps since their IPO:
- Hims & Hers, which went public at a $1.6B valuation via a 2021 SPAC, and has grown its market cap to $10.1B after shrugging off recent Super Bowl ad drama.
- Doximity, which had a strong 2021 IPO at a ~$4B valuation, and is now valued at $14B after its latest financial results sent shares skyrocketing 25% on strong engagement from its new AI tools.
Define Ventures took these successes as a sign that SaaS and Hybrid models will drive future healthcare innovation, but UNC Professor Spencer Dorn shared a more sobering view of the mixed performances.
- “Like Netflix, advertising is far more lucrative for digital health companies than other business models. Doximity – ‘basically an advertising platform for pharma’ – is the only one that is decently profitable.”
What will Wave 2 look like? Define Ventures tallied up ~20 companies that are growing quickly and “could seek liquidity events” even bigger than their Wave 1 predecessors.
- While Wave 1 companies had to build each component of their offerings from scratch, Wave 2 companies had the perks of a more mature industry to weave throughout their offerings (ex. better data integration, AI, plug-and-play capabilities).
- This could result in Wave 2 companies having 2-3X the revenue at exit, and it’s hard to argue with the shortlist of IPO predictions.
The Takeaway
These reports catch a lot of flack for overweighting the successes of the firms that put them together, and while Define Ventures didn’t shy away from patting itself on the back for some good investments, it also delivered a great analysis of past (and possibly future) publicly traded health tech companies.
