In celebration of the launch of Heidi Health and our investment in Quickclaim below is an extract of an article on the HealthTech industry in Australia that contains some highlights of what we see in the sector and lessons learnt from healthcare investing. The full article contains additional information including barriers for HealthTech companies and other sources of information on HealthTech information.
HealthTech Market and Investing
Health is a key concern for all of us and approximately US$10T is spent on healthcare worldwide each year. During our lifetime we might experience an injury or have an accident, deal with a chronic condition, require tests or vaccinations, seek to improve our general wellbeing (weight, mood or energy), our appearance or even extend our longevity.
Healthcare is one of the biggest consumer categories, and with an ageing population, and a complex interdependent system, there is ample opportunity for digital transformation of healthcare. Currently ~5% of health spending is on digital health according to McKinsey.
The health market has always been a passion of mine and I’ve had a broad range of experience: from helping set up medical businesses, to assisting with marketing, due diligence and acquisitions in healthcare, to developing digital health strategy, looking at hundreds of healthcare investment opportunities, making 20+ healthcare related investments, and sitting on healthcare company boards.
Those experences have taught me a lot of lessons from attempts to introduce digital technology to the healthcare market. It has also given me hope for a better future where scarce resources are deployed to greater effect, practitioners can focus more on care and less on administration, less mistakes are made, and patients are more informed and happier. I am lucky enough to spend most of my days interacting with entrepreneurs who share this vision for a better future and have concrete plans to change the status quo.
Global Venture Capital investment in Healthcare
VCs invested US$57B+ in healthcare in the US in 2021 (up 79% YoY), creating dozens of new unicorns to bring the count in the space close to 100. US$10B+ was invested in Asia and $US7B+ in Europe, the other major VC healthcare markets. Australia currently doesn’t rank in the top 10 healthtech markets. Sources: Dealroom, Techcrunch, SVB, CB Insights.
The graphs below from Dealroom.co show the significant activity in the sector over time. It draws a distinction between life sciences and biotechnology investment, which are more focused on drug discovery, novel compounds and new treatments, from the broader category of healthtech which includes medical devices but also subscription based businesses and software based systems and tools. This distinction is not clear cut and there are many blurred lines for example as artificial intelligence increasingly plays a part in drug discovery.
There are now 80+ privately held health technology unicorns globally. The largest eight (Samumed, Caris Life Sciences, GuaHao, Hinge Health, Cityblock Health, United Imaging Group, Outcome Health, Ro) are all based in the US and China and are believed to have US$5B+ valuations (Sources: HolonIQ, CB Insights).
Australian HealthTech market and investment
In Australia there are over 16 listed healthcare companies with market capitalisations over $1B. CSL, Cochlear, Sonic Healthcare, Fisher & Paykel, Ramsay Health and ResMed are each valued at $10B+. There are also five Australian healthtech businesses that are believed to be valued at over $100M: HealthEngine, HotDoc, Eucalyptus, Harrison.ai and Seer Medical.
Most Australian VCs have made local investments in healthtech including:
- Archangel (Atelier, Bare, Bodyguide, CoTreat, Heidi, Lasertrade, Preventure, Quickclaim, Vively)
- Giant Leap (Seer Medical, Perx, Mindset Health, Driven, Loop+, Like Family, Coviu)
- Main Sequence (Coviu, Cylite, Indee Labs, Prospection, Pending AI, MaxwellPlus),
- Airtree (HotDoc, Chemist2U, Eucalyptus, Perx, Arli),
- Blackbird (Harrison.ai, Heidi, Eucalyptus, Vexev, See-mode),
- Brenteca (SiSU Health, HelloHealth, myBrainCo, Andi, vitable),
- One Ventures (Lumary, Bivacor, Madorra),
- Flying Fox (Mass Dynamics, Eugene, Vitruvian)
- Folklore (Arli, Healthmatch, Swoop Aero),
- OIF (Atelier, Lasertrade, Quickclaim),
- RightClick (Swoop Aero, Clinivid),
- Other investors including SquarePeg (Healthmatch), Carthona (Medius Health), Bailador (InstantScripts), Athletic Ventures and EVP.
There are also angel groups and non VC entities (eg PE firms, companies, Government funds and health funds) who have invested in healthcare. The most prolific angel group in the healthtech space is the suitably named Medical Angels with investments in Coviu, Eugene, Biorithm, Smileyscope, Medtasker, Mobio, uPaged and AllergyPal.
Even this imperfect listing and classification of healthtech investments by Australian VCs shows a significant interest in healthtech and an increased rate of investment. Australian healthtech companies are attracting overseas investors who have led later stage rounds in Eugene (ALIAVIA Ventures, $3.5m Series A), Harrison.AI (Horizon Ventures, $129M series B investment), Mable (General Atlantic, $100M growth equity round), and Eucalyptus (NewView Capital, $23M Series B and Bond, $60M Series C respectively).
While Australia is not yet known internationally for the success of its VC backed healthtech companies, with the scale of some of these businesses, recognition is not far away. I would go further and suggest that in the next few years it is likely that Australia has a handful of healthtech unicorns (and exits) that have been supported by venture capital. Not only will this be a success for the founders, their staff and the local VC industry, but it will also be a positive for the broader Australian community through improved healthcare, more local high tech jobs and export success.
Some lessons I've learnt from healthtech investing
I’m constantly learning from my investments in the healthtech sector. Some lessons are general investing lessons but others are more specific to healthcare including:
- I’ve seen first hand the impact that effective treatments can have when marketed using modern digital techniques to build direct to consumer brands, bypassing traditional gatekeepers and systems;
- It’s very hard to achieve venture scale without servicing a market beyond Australia. As global barriers to competition break down, success requires being the best alternative people have access to in a global market;
- It’s easy to get carried away by the impact that a health innovation could have on people and society. Impact alone doesn’t determine whether your business can make a good return for an investor;
- The complexity of the health system and human behaviour requires business models to be carefully considered and tested. Rarely are entrepreneurs's first instincts about monetisation, sustainability and go to market strategy correct.
I’ve been inspired by entrepreneurs to invest in a range of very different businesses in the healthtech sector including in:
- Atelier - Atelier helps innovative health, beauty and lifestyle brands to bring new products to market more quickly while solving supply chain issues. Atelier is effectively an outsourced product sourcing and product management team for physical products.
- Bare - Bare provides end of life services including many non health related services (funerals, wills and estate planning) .
- Bodyguide - Bodyguide assists employers and individuals reduce musculoskeletal disorder and pain by teaching them about their body and correct movements through a guided program.
- CoTreat - CoTreat assists dental clinics communicate with patients about their treatment more effectively and at the same time monitor the effectiveness of their practice. It uses AI and a second opinion network to increase the reliability and quality of dental care.
- Eugene - Eugene is at the forefront of bringing diagnostic testing to the people - allowing you to conduct tests in the comfort of your own home while providing better, more intuitive, results for consumers. Eugene provides cancer risk testing and also genetic testing (and counselling) for couples, helping identify ~300 potential conditions.
- Heidi - Heidi supports GP decision making by collecting data from patients in advance of a visit and using its AI trained clinical reasoning platform to support diagnosis and treatment. Heidi is a service from Oscer, which builds on the experience built up through supporting students learn appropriate clinical treatments.
- Lasertrade - Lasertrade assists medical practitioners, medical clinics and hospitals sell and buy second hand medical equipment. This results in more money back in the hands of the practitioner, more recycling and less wastage.
- Oscer AI - Oscer assists with the training of medical students to handle clinical scenarios. It uses a conversational AI interface to deliver repeatable, scalable individualised assessment.
- Ovira - Ovira offers drug free pain relief for period pain and endometriosis sufferers. It has built a support community for tens of thousands of women in Australia and North America.
- Quickclaim - Quickclaim helps NDIS providers and others claim and reconcile payments received by Government. Quickclaim is one of a handful of providers that connect directly with the Government API.
- Vively - Vively is unlocking the powers of lifestyle medicine to improve health outcomes for people with chronic conditions initially focused on helping women with Polycystic Ovary Syndrome (PCOS). Through the platform, patients get access to a personalised lifestyle medicine plan that includes evidence-based therapeutic programs and a multi-disciplinary team that supports them via text at any time.
I've also invested in areas that interest me outside of Australia where they have a much larger and more complicated/dysfunctional health system or even solve problems that don’t exist here. For example, I’ve learnt a lot from what works in countries with less developed healthcare systems and lower GDP per capita (eg Mexico, Ecuador and Sri Lanka) where lower cost solutions are necessary. From the US market, I’ve learnt it is quite possible to have a sizable business that couldn't exist in a smaller market like Australia.