Last June 2024, we hosted a series of 4 masterclasses to dive into the sector of Healthcare. Each weekly session, the focus was on one of four core sub-themes for this industry: 🩺Digital Health, 💊Therapeutics, 🔬TechBio, and 🏥MedTech. 120+ participants regrouped with VCs, Founders and the baby vc team to discuss:
What are the critical points to scale and invest in ventures within each theme?
🔎 The insights shared by speakers were so valuable that we felt compelled to present them in this Newsletter format. Our goal is to go beyond simply restating widely accepted ideas and instead, delve into their honest thoughts and fresh perspectives. We've carefully structured these takeaways to offer a diverse range of viewpoints on various topics, rather than reiterating concepts that have already been widely discussed.
We hope we've succeeded in this effort and invite you to explore these unique insights in our special 4-part newsletter series. Each edition will be published every Sunday morning, for the next four weeks. We hope you enjoy the read!
We start with the exciting topic of 🩺Digital Health (DH). To ease your reading, please find the sections on which we expand below:
Speakers presentation
Defining Digital Health and the example of Patients Know Best (PKB)
Drivers of Digital Health investments: global market perspective and Covid-19 impact
Current trends and evolution of the DH investment landscape
Business models and other considerations when investing in DH startups
Public Sector influence and regulatory impact on DH investments
Building bridges: ensuring Public/Private partnerships (PPPs)
Key takeaways
Next week: Therapeutics 💊
1. Speakers presentation
We had the pleasure to welcome these three stars, each with a proven type of expertise in DH.
Maxime Huerre is the Vice President at Eurazeo, where he plays a key role in the board and investment activities of companies like SurgeCare (high-dimensional immune system analysis using AI), and Withings (designs connected health products to help users monitor and improve their wellness). With extensive experience in strategic roles within life sciences consulting and digital health startups such as Doctolib(digital healthcare platform offering online appointment booking, teleconsultation, and practice management tools), and Synapse Medicine, (AI-driven medication management platform), he has developed a deep industry understanding. He is also a member of the Orientation and Dialogue Committee at Santé Publique France, under the French Ministry of Health, where he contributes to advising on critical public health issues.
Susanne K. Schorsch is a Partner at Amadeus Capital Partners, where she has co-led more than 20 investments in deeptech health and biotech, including two IPOs and two M&A exits. Prior to this, she was a Partner at Verve Ventures from 2017 to 2022, where she served as a board member or observer for portfolio companies like Memo Therapeutics, (antibody discovery platform), Medimaps (AI-assisted diagnostics provider), and Earlysight (retinal biomarker company). With 15 years of experience leading BASF’s Global Additives Business and overseeing strategy and innovation for *BASF’*s Performance Chemical Division, Susanne’s expertise spans business development, innovation, and strategic planning across various industries and applications.
Mohammad Al-Ubaydli is the CEO and founder of Patients Know Best (PKB), a Personal Health Record platform aimed at delivering more data to more people more quickly. A graduate of the University of Cambridge with an M.D. in Medical Sciences, Mohammad became a fully qualified doctor in the UK and spent several years working at the National Center for Biotechnology Information, Blueprint Health, and UCL as an Honorary Senior Research Associate. His diverse experiences as a physician, programmer, and author of eight books on Personal Health Records and Patient Connectivity led him to establish PKB in 2008. Since the onset of the COVID-19 pandemic, PKB has integrated with the NHS and now boasts over 4.3 million registered users. The platform continues to grow, registering 100,000 new patients each month and releasing 20 million test results monthly.
2. Defining Digital Health and the example of Patients Know Best (PKB)
The conversation began by segmenting the health sector into distinct categories to understand where DH would sit:
🧪 Biotech: Drug development and innovation.
🩻 MedTech: Medical devices and hardware.
🏥 Service Provider: Patient care and diagnostic centers.
🩺 Digital Health (DH): Technology-driven healthcare solutions.
👉 This domain encompasses a variety of technologies and solutions aimed at improving healthcare outcomes and delivery.
Focusing on DH, speakers mentioned it can be further broken down into sub-segments which would include:
🔬 TechBio: Innovation-supporting digital tools.
Example: AI-driven drug discovery platforms, Machine learning algorithms for genomics research, CRISPR-based gene-editing software tools.
🧩 Digital Medicine: Technology-enhanced therapeutic solutions.
Example: Mobile apps for personalized mental health therapy, Wearable devices that deliver real-time pain management, Digital platforms for managing chronic disease treatment plans.
📲 Digital Diagnosis: Technology-based medical diagnostics, clinical decision support systems.
Examples: Machine learning algorithms for early disease detection, Clinical decision support systems that provide diagnostic recommendations based on patient data.
📂 Personal health records: Digital records of a patient’s health information.
It is in this latest category that the company Patients Know Best (PKB) belongs. It is centred around providing patients with access to their medical records/field wherever they go, throughout their lives.
What: The app allows patients to access and manage their medical records, ensuring continuity of care across various healthcare providers.
How: PKB generates revenue from healthcare providers, such as NHS hospitals or regional governments, who see value in the collaboration.
Why: When patients and relevant healthcare actors access to medical records, it improves patient experience and reduces healthcare costs by improving efficiency of data sharing and patient care management.
💡Mohammad believes that the in order for a healthcare system or government to cover everyone with healthcare in the 21st century and maintain the dimension of fair access to health and care for all, it is crucial that people are equipped with these personal health record system to know best what to do next.
❓As seen in the infographic bellow, some actors break down the sector into a number of sub-themes. While Pitchbook as 4 (Telehealth, Digital Therapeutics and Digital Treatments, Health Coaching and Wellness, Digital Care Management), Galen Growth uses 16 clusters.
Galen Growth’s 16 clusters of Digital Health
3. Drivers of DH investments: global market perspective and Covid-19 impact
Where are we now?
From Maxime’s perspective, while COVID-19 didn’t fundamentally alter the dynamics of DH investments, it significantly accelerated the adoption and awareness of DH technologies among healthcare professionals and patients alike.
💡 Interestingly, when examining the total investments in DH during 2021 and 2022, the amounts invested were comparable to those in other digital markets. This suggests that COVID-19 demonstrated the viability of digital models across various industries, including healthcare. In 2023 and 2024, global investment levels stabilised, reflecting a return to reality. This highlighted the constraints of DH technologies—not only from a funding availability perspective but also in terms of regulatory challenges and adoption barriers.
𖧝 Despite a noticeable decline in Series A and later-stage funding rounds, he noted that seed round investments have stayedrelatively steady. This indicates that the sector remains dynamic, and the growing awareness of how to adapt DH technologies will likely sustain its momentum.
According to Susanne, the scarcity of scale-up funding has prompted companies to adopt more sustainable business models. Rather than pursuing rapid growth at all costs, these companies are now focusing on achieving profitable growth and improving their unit economics.
An illustrative example is Babylon Health, which collapsed last year despite raising hundreds of millions and valued at 4bn. This failure underscores the importance of a sustainable business model in the DH sector.
Additionally, a significant portion of 2023 investments targeted AI-driven technologies, which have generated substantial hype. Both investors agree it will be interesting to observe how investments in this area evolve once the initial excitement subsides.
Where is this going?
VCs remain enthusiastic about the DH market, driven by the fact that healthcare is a universal need. Susanne cited the example of the Drug Discovery sector, where substantial funding rounds are still occurring, despite a broader slowdown last year and in Q1.
Another positive indicator is the number of exits seen recently, suggesting that the sector continues to offer promising opportunities.
👉 According to Maxime, the DH landscape is inherently dynamic. Different stakeholders have varying definitions and views on what constitutes DH and how it fits within the broader healthcare landscape. He emphasised that the DH market’s evolution is closely tied to the emergence of new business models. For instance, the recent introduction of digital therapeutics has led to new reimbursement schemes, making this sector increasingly relevant for investors and healthcare providers.
The journey of PKB
Small-Scale Impact and Bottom-Up Approach:
Initial Struggles: PKB initially faced challenges in fundraising. Due to the fragmented nature of healthcare systems and how their data is stored / shared, particularly in the UK, there was no single platform universally accepted / used. Therefore, investors and a majority of members of the healthcare system struggled to see the value of this DH technology.
Proving Value at a Small Scale: Starting in 2009 with just one hospital and 35 patients, PKB focused on small-scale pilots to demonstrate its value step by step. By facilitating better coordination of information, PKB provided hospitals with a cost-effective solution for managing patient data, improving the efficiency of care delivery. This approach allowed them to operate at a low burn rate while gradually proving the platform's effectiveness.
Expansion to Regional Level: In 2015, PKB was selected by North West London to unify its healthcare system, covering 2.4 million patients across 16 Hospital Trusts and 400 General Practitioner surgeries. This provided healthcare providers with a streamlined way to share data across the network while respecting patient data privacy, improving operational efficiency for data sharing. They also improved the experience of patient that would have been registered in more than one hospital to be able to see all of their data into one single platform for example. The success of this large-scale pilot led to rapid adoption by other regions, proving PKB's value on a broader scale.
Large-Scale Impact and Top-Down Approach:
COVID-19 Pandemic as a Catalyst: In 2020, the integration of PKB with the NHS app, which became the Covid passport, marked a turning point. For patients, this meant continuous access to their personal health records and test results during a critical time when hospital visits were limited.
Collaboration with Government: Following this success, PKB began working closely with the government and NHS staff of various UK regions to continuously add new functionalities, further enhancing its utility for healthcare providers and policymakers alike where PKB was implemented.
Proof of Value and Top-Down Expansion: With the successful UK use case as proof of the value of a national-scale record system, PKB is now positioned to approach other governments with a top-down strategy. This aims to collaborate on national healthcare systems from the outset, improving data sharing and coordination, which benefits healthcare providers, patients, and the broader public health infrastructure.
Conclusion: PKB's journey from small-scale pilots to becoming a critical component of the several regions’ healthcare system in the UK demonstrates the platform's adaptability and scalability 🚀. By proving its value through a bottom-up approach and then leveraging this success to adopt a top-down strategy, PKB has shown that it can provide tangible benefits to hospitals, governments, and patients alike.
4. Current trends in the DH investment landscape
Where are we now?
The drivers mentioned above represent both challenges and opportunities for DH startups. These lead to some trends we currently observe in the market.
📱 1. Consumer-Focused Apps:
Susanne highlighted the growing importance of consumer-focused apps, particularly in telehealth and remote monitoring. These apps are becoming crucial for patient engagement, chronic condition management, and preventive care, reflecting a significant shift in healthcare’s digital transformation.
Challenges and Opportunities: Similar to other consumer-oriented industries, unit economics are key. The challenge lies in ensuring that users not only adopt these solutions but also remain consistently engaged, making the business model sustainable.
🧠 2. Defensible Intellectual Property (IP):
Digital Therapeutics, Treatments, and Diagnostics represent areas where IP is most defensible, particularly against competitors seeking, at various levels, to replicate solutions. This is because these areas often involve proprietary algorithms, clinical data, or regulatory approvals, making them harder to imitate. These sectors benefit from the integration of AI and digital technologies into diagnostics, therapeutics, and discovery. Providing protection in these areas ensures that innovations maintain their competitive edge in the market.
Challenges and Opportunities: Simply digitising a therapeutic or diagnostic process doesn’t automatically qualify it for reimbursement by healthcare payers for the patients. Consequently, the company could struggle to sell its product and generate revenues if the patients are reluctant to pay for it themselves. Specific standards assess the accuracy, cost-efficiency of solutions to ensure that what is approved is better than existing ones, in which case, these can be prescribed and reimbursed at a higher rate. The elements that make a difference in how an innovation compares with the market, often the IP, represent the company’s USP.
❓ Example: Medimaps employs AI supported read-out of bone imaging to support bone structure diagnostics and it is a value add service that has received FDA approval. This regulatory approval allows the solution to be prescribed, qualifying it for higher reimbursement rates than competitors standard of care (bone density).
🧐 3. Digital Screening:
Susanne highlighted that screening patients using digital solutions can be valuable if the unit economics are viable, especially as a first step in facilitating diagnostics.
Challenges and Opportunities:
Some companies aim to reduce diagnostic costs, making them affordable for patients to pay out-of-pocket, aligning this with consumer-facing solutions. This approach, though challenging due to the complexities of reimbursement through payer systems, presents a significant opportunity for preventive care. By making diagnostics more accessible and affordable, there is potential to catch health issues early, shifting the focus from treatment to prevention.
Other healthcare stakeholders like governments or even private companies leverage patient records for screening at a larger scale, but the viability of this approach varies. The main issue is the lack of interoperability between different healthcare systems, which use various patient record systems. This fragmentation makes it difficult to implement a unified screening process, and the challenge persists even at smaller scales, such as between regions or hospitals with different systems.
What additional open problems remain?
👩⚕️ 4. Prevention Health Solutions
Maxime underscored the need for more prevention-focused health solutions in line with global public health goals. However, he acknowledged the significant challenge of developing viable business models in this sector.
Why It's Challenging: Unlike treatment-focused sectors, which have clear financial incentives tied to outcomes, prevention often lacks direct revenue streams. This makes it difficult to attract investment, leaving the development of prevention health solutions as an open problem.
🤝 5. Data-intermediation
Susanne suggested that making sense of diverse patient data (e.g., genomics, proteomics - study of proteins and their functions, socio-economic information) presents a major opportunity for developing better drugs, stratifying patients for clinical trials, and improving healthcare delivery. However, accessing this type of data remains a complex challenge for healthcare providers, pharmaceutical companies, and startups.
Why It's Challenging: Certain healthcare stakeholders may have access to proprietary datasets (or IP) containing subsets of comprehensive patient information. This data can serve as a USP if it’s of high quality and properly utilised. However, despite the potential, it’s unrealistic to expect any single company to access all the data needed to maximise their impact in drug discovery or healthcare delivery. This creates opportunities for developing secure and curated data-intermediation markets among healthcare stakeholders, including patients. This concept ties back to the broader goal of “democratising healthcare”.
5. Business models and other considerations when investing in DH startups
Key Concepts for Investing in Digital Health Startups
Unit Economics: The financial performance and sustainability of a business model, focusing on profitability at a per-unit level.
Reimbursement Schemes: Systems in which healthcare costs are covered by payers like insurance companies or government programs, crucial for the long-term sustainability of most healthcare startups.
Criteria for Reimbursement
To qualify for reimbursement, DH solutions must meet one or more of the below criteria:
🤕 Clinical Benefit: Demonstrating a positive impact on the patient's medical condition.
💰 Systemic Benefit: Showing a cost-saving impact on the healthcare system, creating an incentive for payers to adopt the solution.
👮 Regulatory Compliance: Ensuring the solution meets all necessary regulations to be eligible for reimbursement.
👉 As we’ll see below, Susanne emphasised that finding the right business model is often complicated and sometimes you need to move from the obvious to make it work.
She highlighted that USPs that were cutting edge a few years ago might be outdated. For example, an AI-enabled diagnosis application that was able to improve diagnosis by analysing medical images a specific way might be completely obsolete today if another model does it better. In this case, this sole differentiation factor is not sustainable and more defensibility (i.e., like proprietary data for a specific disease, etc.) is required to remain competitive.
Business Models and Unit Economics in Digital Health
Investing in digital health startups requires a careful examination of the business model and unit economics, as the viability of these factors is critical to success. One of the main challenges for healthcare companies is securing a reliable payer for their solutions, making the business model a primary focus for potential investors.
Maxime identified four key business models in digital health:
→ Direct to Patients:
Prevalence: Common in the U.S., where patients often bear a significant portion of healthcare costs. Less common in Europe, where national payers or insurance plans cover most expenses except for specific applications.
Applications: Wellness, fertility, pregnancy, and obesity-related products.
↠ B2B2C (Business to Business to Consumer):
Prevalence: More common in anglophone countries. This model involves companies (often employers) or health insurance providers covering healthcare costs, easing the burden on patients.
Applications: Mental health and reproductive health solutions.
↩ Reimbursement-Based Models:
Sustainability: The most common and stable model in healthcare, relying on reimbursement schemes from insurers or government programs. However, there is a risk of pricing pressures as competition grows and more cost-effective or outcome-improving solutions enter the market.
Applications: Medical devices, diagnostic tools, digital therapeutics, and remote patient monitoring.
→ B2B (Business to Business):
Prevalence: Healthcare professionals (hospitals, GPs) pay for solutions that enhance productivity, efficiency, and reliability of healthcare delivery. While these solutions don't directly increase cash flow for providers, they contribute to long-term gains by optimising operations.
Applications:
Doctolib: Platforms like Doctolib optimise doctor time, reduce no-shows, and streamline patient appointment bookings therefore providing more comfort to them. The low price to entry of the platform contributed to its attractiveness and therefore the profitability of the company is based on the volume of doctors registered.
SurgeCare: The company specialises in analysing the immune system and they developed a test to predict the risk of developing surgical site infection after a surgery. With a simple blood sample, doctors can identify relevant risks for each patient to develop the infection and can treat them the according way across the healthcare pathway. This doesn’t qualify for reimbursement models because it doesn’t directly provide better care, however, the value for hospitals is clear. For example, they can easily identify low risk patients and know that they need to send them home before medium or higher risk patients. This enables them to optimise hospital beds, nurses planning and associated financial costs.
Medimaps: Their bone scoring system adds value by improving diagnostic accuracy and securing higher reimbursement rates, offering a new revenue stream for doctors.
The Business Model of PKB:
PKB operates primarily by receiving payments from healthcare providers (e.g., hospitals) or healthcare payers (e.g., regional governments) to provide patients with access to their personal health record data. The reasons for this can vary, such as improving patient care or enhancing customer service. However, the common thread among these customers is the recognition that a patient who has access to their data is less costly to care for, as they don’t need to frequently contact doctors for test results or care plans. In the UK, PKB initially collaborates with individual hospitals, and if successful, regional governments may decide to implement the system across all hospitals in the region.
PKB’s model
💡 Competitors to PKB can often be hospitals, or payers like governments trying to build their own platform. A differentiation point that made PKB stand out and become attractive for them is their skills and execution capacity in software development. For example, potential new hospital customers for PKB were resistant because they imagined the NHS would build a similar solution itself. Instead, they integrated PKB to the platform directly, recognising its value if implemented at this scale.
Today, these hospital providers are working collaboratively with PKB as they recognise not only their technical expertise but also their ability to connect with a network of institutions using the same solutions. This means that trusts across various regions can share their data together smoothly. To date, the size of the patient healthcare dataset available via the PKB platform via their network effect is significantly greater than any individual actor can try to replicate because they would not have enough scale and infrastructure.
How do VC funds react?
🫵 Many funds that traditionally invested in Life Sciences or MedTech are now shifting their focus to later-stage investments, demanding more proof and validation of products than they did previously. These funds specifically target experts with robust scientific backgrounds.
For broader Health-tech funds, the expertise required to analyse companies is diverse. These funds often draw on talent from other industries, including technology, regulatory affairs, and public services.
For example, some VCs who initially concentrated on SaaS are now transitioning into TechBio and Health-tech, as they believe their skills and experience are well-suited to the business models in these areas. Strategic investors are also evolving their approaches, contributing to the dynamic nature of the investment landscape and its stakeholders, as noted by Susanne.
6. Public Sector Influence and Regulatory Impact on DH Investments
🫸 The Covid period significantly raised awareness of DH within public institutions. While it created new opportunities for private initiatives, it also posed challenges for existing stakeholders. For instance, the French government, as Maxime highlighted, has heavily invested in interoperability and introduced new related regulations. This has become a competitive advantage for companies that anticipated these changes years ago, but it also pressures those for whom these changes are more of a constraint.
In the context of DH, the European Union is a highly regulated market, with an approach to implementing regulations that generally favours prevention. The EU AI Act, for example, is expected to have a significant impact on the market, similar to the Medical Device Regulation introduced in 2016. This contrasts with the United States, which tends to adopt a more reactive stance.
🐢 Mohammad expressed frustration with how regulations can slow down innovation. Founders are often caught in a loop where they need user engagement to secure investment, but gaining traction requires compliance with stringent regulations. This makes it difficult to bring new solutions to market, even when there’s a clear need for them.
Both Maxime and Susanne agreed that due to the complexities of EU regulations, many companies choose to conduct their initial trials in the US, where the process is more transparent and less constrained. This often delays European access to the latest health innovations.
👉 From a VC perspective, the ability to navigate regulations, reimbursement schemes, and financing from private insurers is a critical differentiator. Maxime explained that mastering these elements is attractive to investors, especially in the healthcare sector. Considering regulations from day one is crucial for survival. Indeed, new regulations in healthcare often act as a filter, weeding out weaker players unable to comply.
7. Building Bridges: Ensuring Public/Private partnerships (PPPs)
Public/private partnerships (PPP) play a crucial role in driving innovation in Digital Health.
‼️ Many innovative solutions come from public institutions like universities and research centres, with a significant number of university spin-offs becoming private companies. However, Maxime noted that collaboration between public and private entities actually remains challenging due to differences in perspectives, timelines, resources and motivations.
While public financing remains significant, both Maxime and Mohammad suggest that direct collaboration is more effective at the hospital level than on a larger scale with high-level institutions to get early adoption, which proves value initially and influences wider adoption later. They advise portfolio companies to work locally to understand patients and the market, progressing at their own pace. Then, as scaling up with larger institutions can be risky and complex, it requires a step-by-step approach.
💡 Maxime suggested that VCs have a role to play in working with institutions and governance to anticipate future regulations and reimbursement schemes. For instance, at Santé Public France, he works with open data, which presents a significant opportunity for developers to build innovative solutions and enhance their validity. Open data is beneficial as it creates an accessible system that other hospitals and healthcare payers can also utilise, leading to more collaborative and efficient developments across the sector. Susanne stressed the importance of ensuring that data is used compliantly and always with the patient's best interests in mind.
8. Key takeaways
1️⃣ New Important Application in Prevention and Data Intermediation: Prevention is a critical part of large public health plans. However, it is an underdeveloped area in digital health solutions, which rather often focus on customer-focused apps or digital medicine and diagnostic tools. Monetizing prevention and finding the right business model remains an opportunity for innovation. Data intermediation—accessing patient data and leveraging it—also emerges as crucial but the challenge of better collaboration will need to be addressed to progress on the journey to democratise healthcare for all.
2️⃣ COVID-19's Impact on Digital Health Technologies Adoption: COVID-19 accelerated the adoption of digital health technologies. Taking PKB as an example, it scaled by integrating with the NHS App during the pandemic. This period normalized the use of digital health tools for all from patients to hospital providers and governments, driving their adoption and integration into healthcare systems more swiftly.
3️⃣ Cost-Effectiveness of Patient Data Access: PKB’s model allows patients to carry a single patient health record across different healthcare providers. Patients with access to their own data are less expensive to look after within a healthcare system. This approach also enhances patient engagement and care continuity, presenting a compelling business case for the economic benefits of digital health tools.
4️⃣ Successful Business Models: The challenge for startups in digital health solutions is finding cash-flow generating models for financial sustainability. Some business models appear more often than others: - B2C: The patient directly pays for the service or product (e.g., fitness apps). - B2B2C / B2B: Solutions paid by a third party and provided to users. This model can increases care delivery productivity and provides a good return on investment over time, such as Doctolib's success with reducing no-shows. - Reimbursement Models: These require proof of clinical and economic efficiency compared to existing products/services reimbursed by a payer, lowering the cost of care consumption for a healthcare system.
5️⃣ Role of Open Data in Future Innovation: Open data is pivotal for future innovation and collaboration in digital health. It can bridge the gap between the public and private sectors, fostering more effective collaborations and innovations. Open data enables new solutions by allowing various stakeholders to access and utilize data.
Join us next week for the second session of our series of written content dedicated to Investing and Scaling ventures in Healthcare. Our topic will be:
