Digital Health Startups Racing to 5G Wireless Rendezvous
It’s hard to define fifth-generation mobile technology, when 5G is not officially expected to launch until 2020. Few people nowadays can describe what the next-generation wireless networks are going to look like.
In the meantime, the digital health sector is racing to connect with a wireless infrastructure that has yet to be revealed.
According to the people who gathered Wednesday at UC San Diego for a 5G Connected Health Workshop, though, 5G technology will bring increased bandwidth and faster data rates, lead to significantly decreased latency, and provide coverage for lots and lots of devices.
The event, organized by UCSD’s Center for Wireless Communications, brought scientists and industry experts together to help lay out the 5G technology roadmap for digital health. “The goal is to collectively figure out where the gaps are,” said Dimitri Arges, a conference organizer.
According to venture fund Rock Health, investments in digital health startups hit a record $4.5 billon last year, with 267 companies raising $2 million or more. Nearly a quarter of these “connected health” deals involved healthcare consumer engagement and personal health tools, reflecting a growing investment focus on technologies and services that enable consumers to access health information, track their health data, and help consumers understand what their data means and how it can impact their care. This record funding pace has continued into 2016, with $981.3 million invested through the first three months of the year.
In an overview of digital health investment activity, Donna Fedor of Palo Alto, CA-based Mavericks Capital—not to be confused with Maverick Capital, the hedge fund based in Dallas and New York—said the next generation of digital health is about integrating platforms, data, and the Internet of (medical) Things. Patients may have access to their lab results, but they don’t know what the data means.
“It’s not just about the data,” said Fedor. “It’s not about what the data says. It’s the ‘why.’ It’s the context of what the data says.”
In other highlights from the workshop:
—Out of all of the digital health deals that Rock Health counted in 2015, a majority were seed and Series A deals. But Series C and later stage deals accounted for 23 percent of the dollars invested. Of the 348 investors that Rock Health counted in digital health deals, only 62 invested in two or more deals. According to Fedor, there is a scarcity of institutional investors focused on early stage deals in digital health.
—M&A activity in digital health remains high. Rock Health counted 187 buyouts in 2015, with a total of $6 billion in deals that were disclosed. The number of deals was almost double the volume in 2014. “Some companies don’t even move to B Round financings. They just get acquired,” Fedor said.
—IPOs remain a viable option. Five companies went public in 2015, raising $1.4 billion and creating $8 billion in market capitalization. There were no digital health IPOs in the first quarter of 2016.
—Technologies that enable consumer engagement are changing the way healthcare is delivered, but strategic investors remain focused on chronic care management. Healthcare systems remain focused on chronic patient care because of payer reimbursements.
—According to Fedor, about 60 percent of all employers in the U.S. are now self-insured, which provides employers more flexibility in terms of experimenting with innovative digital health technologies.