Lisa Suennen is Managing Director at GE Ventures and Managing Partner at Venture Valkyrie consulting, which provides investing and digital health strategy services to venture firms and for-profit and non-profit healthcare companies. Here, Lisa sheds light on where the health investment landscape is headed in 2017.
1. What does the 2017 investment landscape look like? Do you see an emerging trend? Big winners? Sleepers?
In healthcare generally I think we will see a lot of mergers and acquisitions this year; big companies will buy small ones and small ones will merge. Thus we will see more investment to support these efforts and perhaps fewer new companies than in the past five years. There is clearly a big trend towards the integration of pharma and digital as well as medtech and digital. These “beyond the product” offerings are finally beginning to show clinical and cost outcomes and those will be key to finding investment. There is also a great deal of activity around infrastructure to support more personalized and precision medicine. Healthcare services has always been an also-ran in the VC world but I think we are going to see more and more of this.
2. How might the repeal of the Affordable Care Act impact healthcare investments, and how might innovators and investors respond to repeal and replace?
It’s impossible to guess on this one right now. There are too many variables. What we know is that no matter what the law of the land, we need to find our way to better value in healthcare – lower cost and better clinical outcome and more satisfying, positive experiences for both patients and providers.
3. We’re coming off of several years of record investment in digital health. Is this the year the digital dollars will dry up? Or will the industry sustain this pace?
I don’t think they will dry up but I think they will drop as compared to prior years. You can already see the trending to fewer deals and even though the dollars are somewhat flat, they are bigger rounds into fewer, growth stage companies. This trend is likely to continue. We are seeing a lot of M&A that isn’t producing positive returns for investors so we will likely see a lot of clearing of the underbrush of companies that are really just products or ideas (not really companies capable of being self-sustaining). We are at that part of the Gartner Hype Cycle where we are in the Trough of Disillusionment and heading for the Slope of Enlightenment. In other words, we are going to see some bad and ugly before we see some good. I think that companies seeking Series A financing are going to have it worst – they are often too early to show results in a world where VC’s really want that evidence before committing.
4. Over the past few years, we’ve seen both record investment and a large number of exits from the digital health space. When do you think we will finally reach the tipping point for consumer adoption of these technologies?
Consumer adoption of healthcare technologies is likely to be the same as consumer adoption of most other healthcare products and services – when physicians strongly endorse and prescribe them they will get used more often. Remember that even life-saving pharmaceuticals prescribed by physicians don’t get used by consumers about 50% of the time. Consumers don’t typically feel they should have to pay for anything healthcare and they do not like associating themselves with illness and there are a myriad of other issues that stop consumers from using healthcare products and services. Just because someone has a phone doesn’t mean they want to use it as a medical device. We need to be careful to distinguish between real consumer products (fitness/wellness) and real healthcare technologies, which are really not driven by the normal push and pull of consumer behavior.
5. Finally, if you could name the theme for 2017 health investments, what would it be?
Show me the evidence it works, I’ll show you the money!