Digital Health

How to Scale a Health Tech Business to $100M ARR

Bessemer VP

Bessemer Venture Partners recently put out a top-tier blog post outlining how to scale a health tech business to $100M in annual recurring revenue (ARR) and the benchmarks to look out for along the way.

We won’t dive into the full finance lesson, but here’s an overview of the key benchmarks Bessemer gave to help understand how top performers compare to similar companies. 

Every company is different, but Bessemer segments health tech businesses into two main buckets.

  • Healthcare SaaS – Cloud-based software alongside data and analytics with highly recurring revenue. Examples include Doximity, Mindbody, and Veeva.
  • Tech-Enabled Services – Care or navigation support to patients via either B2B2C or direct-to-consumer models. Revenue is mostly recurring from either an enterprise or consumer via subscriptions. Examples include Hims & Hers, Livongo, and Accolade.

It takes roughly a decade to reach $100M in ARR across most health tech businesses. However, tech-enabled services businesses scale to their first $10M ARR in an average of three years, whereas healthcare SaaS businesses take an average of six years due to longer sales and implementation cycles.

Growth slows as companies scale their ARR. Bessemer found that both business categories see revenue growth of over 200% until $10M ARR, and each grow half as fast by the time they reach $25M ARR. Tech-enabled services grow faster than SaaS at every step.

Improving margins unlocks scalability. Tech-enabled services businesses steadily improve gross margins as they scale due to several factors (pricing power follows proven outcomes, tech improvements improve care quality, provider panels get more efficient). Healthcare SaaS businesses see more stable 65-70% gross margins across all stages.

The Takeaway

Bessemer’s full analysis breaks down pretty much every metric a health tech startup could ask for to inform their scaling decisions, but the three charts above give a quick snapshot of top performers. For a full benchmark overview by company size, make sure to bookmark these cheat sheets for Healthcare SaaS and Tech-Enabled Services.

Get the top digital health stories right in your inbox

You're signed up!

It's great to have you as a reader. Check your inbox for a welcome email.

-- The Digital Health Wire team