Forecast: Health Care In 2021 Will Focus On ‘Digitization Of The Patient Experience’ – Crunchbase News

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Digital health startups are likely to see continued opportunity, investment and initial public offerings in the new year as people rethink the way health care is delivered.

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Investors in the space poured record investment dollars into digital health startups in 2020: $14.2 billion globally and $9.2 billion domestically, according to Crunchbase data. Investments in 2021 could rival 2020 as investors expect innovation to come from areas such as data interoperability, mental health and personalized care.

Last year’s global pandemic increased the public’s awareness and understanding of how interconnected the world is, a view that will mature in 2021, Ann DeWitt, a general partner at The Engine, which invests in health care companies, said in an interview.

“There is a renewal of interest in community health and an appreciation for vaccines,” DeWitt said. “Coming out of this will be innovation combining technology with artificial intelligence to address the next pandemic in record time, produce out-of-the-gate vaccines, and collaboration with other companies and the government.”

Connecting data

Expect health care in 2021 to be more like interacting with Netflix and Amazon, said Priyanka Mitra, a principal at M12, which invests in software-related companies, in an interview.

“We will see the digitization and consumerization of the patient experience,” Mitra said. “It will be on-demand, higher quality, priced competitively and the user interface and user experience will be watched heavily by Gen Z and millennial patients.”

She predicts the health care data infrastructure will be the backbone of the whole health system. The U.S. health care system produces 1 zettabyte of data annually, enough to fill up hundreds of thousands of data centers, and that is only expected to double every year from here on out, Mitra said.

As a result, data is being shifted in different directions and patients are suffering because they are not able to gain access or insights easily, she added. Any company that can make data collection and analysis more seamless, as well as loop the patient into the decision-making process, will be most useful, she added.

Indeed, enhancing patient care is one of the drivers of data interoperability, or working across all systems, a market within health care poised to reach $5.3 billion by 2027, according to Emergen Research.

Lerer Hippeau Partner Graham Brown also expects this area to be one to watch in 2021.

“It will open up different types of predictive analysis to be used to personalize care,” he said in an interview.

Data collected everywhere, from apps to electronic medical records to wearables, will enable more comprehensive, digital approaches to health care problems, as well as how we pay and fund health care, Brown added.

In November, one of Lerer Hippeau’s portfolio companies, K Health, a New York-based company developing a data-driven digital primary care system, announced $42 million in Series D funding, led by Valor Equity Partners. It is collaborating with Mayo Clinic to focus on improving and accelerating the deployment of virtual care models.

“K Health is using artificial intelligence to enable the patient to have a conversation with the company via a phone, and it functions as if you were talking to a doctor,” Brown said. “It results in more efficient triage. 2021 is going to be a big year for innovation like that and for organizations like the Mayo Clinic to get involved with startups in ways we have never seen before.”

Personalized care

Next year will likely also see increased funding to startups focused on personalizing care, especially in mental health and for certain populations.

“It’s an interesting time in the U.S. landscape,” Spora Health founder Dan Miller told Crunchbase News. The San Francisco-based company is a health care provider for people of color, linking health changes to life goals. It launched in November with $1.1 million in seed funding led by Human Ventures, and now operates in four states.

“We are focused on reframing health literacy and what health care should look like,” he added. “There are reasons why my population broadly holds a mistrust for the health care system, such as the Tuskegee experiment. Stories get passed down, leading to mistrust and utilization.”

Spora Health’s platform is increasing engagement in this underserved community and provides users with access to care teams–even for folks who aren’t members, Miller said. Anyone can text a question and get information such as finding physicians in a certain city, locating healthy food and making smarter food decisions.

Meanwhile, the global behavioral health market is expected to reach $240 billion by 2026, according to a 2019 report by Acumen Research and Consulting. Since the onset of the global pandemic, investors pumped approximately $600 million into mental health companies, according to M12’s Mitra. It’s a trend likely to continue as COVID erased the stigma mental health traditionally faced.

“People are seeking care that they never did before: COVID was the equalizer,” Mitra added. “There was an uptick in virtual visits from the Medicaid, as well as Medicare population. Millennial mental health is also on the decline, made worse by COVID.”

The future of funding, public markets

In 2021, both DeWitt and Mitra predict more digital companies will enter the public markets, following the lastest 2020 example of health care insurance provider Oscar.

DeWitt said any company that has raised a Series A round or later is ripe for an IPO. She has her eye on Pear Therapeutics, which is focused on drug discovery and announced an $80 million Series D round in December led by SoftBank Vision Fund. DeWitt is also looking at health care testing company Everlywell, which raised $175 million in a Series D, also in December.

M12 is largely focused on software, an area in which Mitra believes a number of companies are poised to go public due to their high valuations.

She said she’s watching companies like AI-based health care platform Babylon Health, which is valued at $2 billion post-money, and Devoted Health, also valued at $2 billion, providing seniors with health care plans.

“Once they get to this point, they are looking at the public market because they aren’t seeing much potential to get acquired at that price point, in my opinion, so by default, they would look to go public,” Mitra added.

More of Mitra’s potential IPO candidates include Zocdoc, Tempus, Grand Rounds, Cityblock Health, Renew Health and Honor.

They Mitra and DeWitt also expect to see more and bigger investments into the digital health space.

“There is a tremendous amount of capital looking for a good home,” DeWitt said. “If we get some of the bigger IPOs coming out, that will free up capital.”

Illustration: Dom Guzman

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