Tag: startups

2023 Digital Health Startup Benchmarks

Posted on by Jason Barry

Rock Health’s industry analysis is a frequent feature in our top stories, but it’s tough to stay away with reports as consistently solid as last week’s 2023 Digital Health Startup Benchmarking Survey.

The survey broke down responses from 87 early-stage digital health startups to provide performance benchmarks for customer acquisition cost, lifetime value, expenses, and more [Chart: Company Breakdown by Stage / Segment].

Series B is a tipping point for growth, but not (yet) margins.

  • [Chart: Revenue by Funding Stage] While Series A startups are generally building an MVP and testing product-market fit, no Series B respondents were still pre-revenue (vs. 25% of Series A). That revenue is going straight to growth, with just 12% of Series B startups reporting positive margins (a small increase from 9% of Series A).

CAC and LTV calculations are challenging for early-stage startups.

  • [Chart: CAC by Customer Segment][Chart: LTV by Customer Segment] Both CAC and LTV vary widely by customer type, but both charts illustrate that “you get out what you put in.” It cost respondents an average of $58k to sign a payor, but the average lifetime value was $5.1M. That compares to a CAC of $170 and an LTV of $1.7k for consumers.

Engagement metrics are the first step to robust outcomes.

  • On average, each company reported tracking two engagement outcome metrics, two clinical outcome metrics, and one economic outcome metric. “For startups balancing speed-to-outcomes and quality-of-outcomes, an ‘engagement first, clinical/economic later’ approach might help to toe the line.”

Navigating product versus marketing costs is a balancing act.

  • [Chart: Company Product vs. Marketing Costs] The amount of revenue the startups devote to product versus business development and marketing evolves alongside scale. Pre-seed respondents allocated 75% of revenue to product and 11% to marketing, while Series B respondents allocated 36% of revenue to product and 22% to marketing.

The Takeaway

We’re lucky to be in a golden age of startup transparency, and between this Rock Health survey and the latest State of CareOps report, there’s no shortage of great information out there for founders to use as guideposts in their pursuit of scale.

Awell Raises $5M to Bring CareOps to Healthcare

Posted on by Jason Barry

Nobody thinks about their patients and clinical workflows more than actual care teams, but many of these teams are still using a mix of spreadsheets and Google Docs to track their processes because they haven’t had any better tools. Awell just raised $5M in seed funding to give them those tools.

Awell is a low-code editor that lets providers design clinical workflows and patient journeys that embed into their existing tech stack. Picture drag-and-drop building blocks tied together with if-this-then-that logic that you can use to create your ideal workflow. Those blocks could be: 

  • Care Pathways – PROMs, risk scores, engagement, etc.
  • Triage – Questionnaires, calculations, messages
  • Onboarding – Eligibility checks, symptom assessments, reminders

By using a single platform for a variety of tasks, Awell prevents providers from having to combine multiple tools or stitch different solutions together with custom code.

  • Virtual-first providers use the platform to automate their workflows while retaining control of the end-user experience, with Awell’s APIs doing the heavy lifting on the back end. 
  • Traditional providers and tech-enabled services companies use the platform for a similar reason, to swap their PDFs and text-based guidelines for dynamic workflows. 

Although the self-service route has its drawbacks (providers have a lot on their plates and even no-code development might be intimidating), Awell makes a strong case that healthcare could be about to witness its own version of the DevOps transformation that redefined the software industry.

  • This shift, aptly coined as CareOps, involves introducing the same agile development framework that trades fragmented teams and lengthy deployment cycles for integrated dev/care teams and quicker software releases. (Plenty more on CareOps here).
  • The promise of that methodology goes hand-in-hand with Awell’s mission: break down the silos between clinicians and engineers so that everyone can participate in the creation of care processes that ultimately deliver better patient outcomes.

The Takeaway

It’s hard to imagine that the software industry ever managed to get itself tangled in more fragmented practices and inefficiencies than healthcare, but if improving workflows was the cure, a no-code automation platform seems like a great place to start. Awell now has $5M to help kick off the CareOps movement, and it just might make it happen if it can convince enough providers to roll up their sleeves and automate some manual work.

Redesign Health Closes $65M to Launch Startups

Posted on by Jason Barry

Launching a healthcare company is hard. Launching dozens of them is even harder, but that’s exactly what Redesign Health is setting out to do with $65M in Series C funding.

Redesign isn’t a venture capital firm, although it’s funded more digital health startups than most VCs. It’s not an accelerator, yet it’s launched more early-stage companies in its four years of existence than post pure startup studios.

Then what is it? Good question. Redesign’s team consists of roughly 300 analysts that  “accelerate the healthcare innovation cycle” by researching sectors, identifying challenges, then assembling companies to pursue solutions.

  • The “assembling companies” piece is every bit as hands-on as you might imagine. Redesign funds the initial product development, handles the branding, and even installs the leadership team.
  • By bringing everything in-house, the idea is that Redesign can eliminate many of the barriers that healthcare founders usually face, allowing them to deliver outsized value… and shareholder returns.

Redesign takes an equity stake in every company it launches, a fact well-known to its Series C investors like CVS Ventures, General Catalyst, and UPMC Enterprises.

  • Since 2018, Redesign has launched over 40 companies, including home-health startup MedArrive, cancer-care platform Jasper Health, and mental health company UpLift. 
  • The latest funding will go toward Redesign’s own platform that helps its portfolio companies tackle repeatable processes, and innovation agreements with its Series C investors will ensure that they’re able to co-build companies using the technology.

The Takeaway

Healthcare startups have high upfront capital costs, steep inflection points between business stages, and difficulty recruiting the seasoned executives needed to reach scale. Although there isn’t a magic wand that can be waved to make those problems disappear, we’re guessing that Redesign’s startups see smoother sailing than most.

It’s a unique model that’s hard to put in a box (especially one the size of a DHW top story), but Redesign’s portfolio of already-launched startups and its eye-popping $1.7B valuation seem to suggest that it’s a model that’s working.

Osmind Raises $40M for Breakthrough Mental Health Therapies

Posted on by Jason Barry

Severe mental health disorders are complicated problems to solve, and the legacy documentation systems used by most psychiatrists don’t do much to help the rate of progress. Electronic health record startup Osmind raised $40M in Series B funding to equip psychiatrists with tools to better manage complex patients, while also starting to fill the data gap in research for breakthrough therapies.

On the surface, Osmind offers an EHR tailored to clinicians serving patients with treatment-resistant mental health conditions like severe depression and PTSD.

  • The Osmind EHR supports clinical and administrative functions with features that streamline charting workflows, automate outcome tracking, and drive engagement.
  • An integrated mobile app enables patients to record their thoughts and feelings in between visits, giving providers a clearer view of their patients’ overall well-being. 

The back end of Osmind’s platform is equally as important as the EHR. A real-world evidence engine takes the granular data from the EHR and makes it available to researchers studying breakthrough mental health treatments such as ketamine and psychedelics.

  • While other companies like Flatiron Health and Verily also leverage anonymized patient data to influence therapy design, Osmind has quickly compiled a leading dataset to help translate this strategy to the mental health arena.
  • Earlier this year, Osmind partnered with Stanford University School of Medicine to publish the largest-ever real-world data study on ketamine infusion therapy as a treatment for depression.

The fresh funding will be used to expand Osmind’s team as well as the types of data its software can capture to advance a wider range of clinical trials and therapies.

The Takeaway

Mental health startups have proliferated over the past few years, but few have focused on breakthrough treatments for the millions of patients who have tried and failed multiple other options. Osmind’s new funding will allow it to better help these patients, not with direct clinical care, but by supporting the providers and researchers already serving them.

Health AI, Unicorns, and Stretched Valuations

Posted on by Jason Barry

In recent years, digital health has been a hot-bed of innovation as companies tackle healthcare inefficiencies with new technology, but the rapidly climbing valuations are causing many to wonder: how much higher can they go?

Healthcare AI raises $8.5b in 2021.

According to a report from CBInsights, private healthcare AI companies have raised $8.5b through the first three quarters of the year, surpassing 2020’s full-year total of $6.6b.

  • Q3 2021 was healthcare AI’s strongest quarter ever ($3.2b raised across 149 rounds)
  • Top areas of focus include remote patient monitoring, decentralized clinical trials, and home diagnostics.
  • AI startups account for approximately 40% of year-to-date digital health funding

Unicorns are no longer endangered.

The term “unicorn” used to indicate that a young company was a successful outlier with a $1b+ valuation, but has recently been diluted as more startups earn the designation.

  • CBInsights now counts the total number of “unicorns” at 925 globally, including 13 healthcare AI companies that received the title just last quarter.
  • When the term unicorn was coined in 2013, there were fewer unicorns than there are “decacorns” with a $10b+ valuation today (45).
  • Devoted Health currently has the highest healthcare company valuation ($12.6b).

How much higher can valuations go?

Digital health companies scaled quickly during the pandemic by taking on outside investment to keep up with the surge in demand, which sent private valuations soaring. Many of these valuations were based on the size of the total addressable market, driven more by potential than current revenue. If these companies fail to capture share, or if health-tech adoption declines as the pandemic wanes, then these expectations might be hard to meet and we could start to see some moderation.

Under the Radar Healthcare Disruptors

Posted on by Jason Barry

Digital health venture fund and advisory team Rock Health recently published an excellent blog post outlining what they call healthcare’s “middle children,” defined as large-but-not-huge companies that should be eyeing expansion into healthcare.

The authors argue that these middle children have distinct competitive advantages over the cohort of technology giants that have recently been pursuing the healthcare space, which include the likes of Amazon, Alphabet, and Apple.

  • Middle children with market capitalizations between $10b and $350b are large enough to make an impact in healthcare, but small enough to avoid the scrutiny of massive players. They are often consumer-facing, with business lines that could pivot towards a healthcare use case (picture Lululemon’s acquisition of Mirror).
  • Larger middle children have deep pockets and talents pools (Salesforce, Nike), with the capabilities to pursue large healthcare goals.
  • Smaller middle children have more specialized capabilities (Garmin, Airbnb), that could help with solving more focused problems.

Middle Children Advantages

  • Smaller healthcare goals are big enough for middle children to pursue for growth, whereas much larger companies need loftier projects to warrant market expansion.
  • Loyal customer bases can be activated by middle children to establish initial users while avoiding the regulatory attention quickly drawn by larger competitors.
  • Specialized assets from middle children, such as logistics expertise or data analytics, can provide a competitive edge in healthcare. 

Potential Middle Children Plays

  • Blizzard could passively monitor behavioral health conditions for children playing its games
  • Paypal could integrate Health Savings Accounts to help users manage healthcare spending
  • Hello Fresh could offer health insights and recommend food products for delivery

The Takeaway

Gaining share within the $3.5t US healthcare market is a powerful motivator for any company looking to pursue a strategy shift, but even consumer-favorite brands will need humility to navigate the complex and quickly evolving environment.

Although middle children don’t specialize in the sector, Rock Health makes a solid case that they might be some of the best-positioned companies for healthcare disruption, and I wouldn’t be surprised if we’re reading about some of the plays listed in this blog post in next year’s business news.

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