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Healthcare stakeholders are generally upbeat about the future growth of digital health. But stakeholders’ underlying skepticism could point at the market’s overvaluation, per a new survey of 250 respondents from health IT startups, insurers, providers, and investors conducted by venture capital firm Venrock.
Business Insider Intelligence
Signs of optimism unfurled in the wake of dwindling digital health funding in Q1 2019: After a chart-busting year for industry funding in 2018, investments in digital health startups slipped to $986 million in Q1 2019 — down nearly 50% from Q1 2018.
Here’s what it means: Healthcare stakeholders predict that digital health startups will continue to advance.
- New digital health startups are projected to crop up in the near future. Nearly 80% of respondents think that the creation of new healthcare IT companies will increase somewhat or significantly over the next two years. And the share of respondents who predicted a significant increase (30%) nearly doubled since 2018 (17%).
- And most stakeholders think that funding will continue to pour into health IT companies. US digital health companies raked in over $8 billion in 2018, and most healthcare stakeholders aren’t worried that investments will peter out. For example, only 7% of respondents are "very" concerned about funding as a barrier to health IT innovation in the next year.
The bigger picture: Underlying pessimism about the value of healthcare startups points toward anxiety about an overvalued digital health market — an industry view that contradicts our earlier conclusion that digital health is not overvalued.
- Stakeholders don’t see the value of some of the hottest technologies sweeping the healthcare industry. Artificial intelligence (AI) healthcare startups raked in over $2 billion last year, making AI the most well-funded healthcare tech in 2018, according to Rock Health. But only 7% of survey respondents think AI’s had a "meaningful" impact on healthcare. Respondents were also skeptical of the value proposition of blockchain, another buzzytech in healthcare. For example, 75% of stakeholders say blockchain will "struggle to find its place in healthcare" in 2019. It’s unlikely that startups will measure up to the potential boasted by large funding rounds if the technologies that enable them aren’t considered impactful to the healthcare industry.
- And most respondents think digital health’s unicorns don’t live up to their valuation. When polled on which digital health unicorns have a valuation in line with their potential, no startup earned more than a 50% vote. For example, more than half agree that valuations for 23andMe, Devoted Health, and One Medical aren’t in line with their market potentials. If industry leaders consider these unicorns to be overvalued, the industry may find itself stuck in a bubble.
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