When Mark Bakken formed the healthcare technology investment firm HealthX Ventures nearly five years ago, he says hospitals, insurers, and other potential buyers of digital health products were less open to conversations with the kinds of early-stage healthtech startups Bakken’s firm wanted to back.
At the time, healthcare organizations’ top priority was installing electronic medical records systems and getting the most out of the technology, Bakken says. That’s still important to them today, but “that’s been kind of stabilized,” he says.
“They’re realizing [electronic health records software] doesn’t solve all their problems, so they’re looking to augment that” with additional technologies, Bakken (pictured) says. “In general, I would say the customer is more open to taking meetings or exploring digital health solutions.”
Another sign that the digital health market is maturing? Many hospital networks, insurers, and self-insured employers have created a digital innovation officer role in their organizations, Bakken says. That person has “basically become the champion” of digital health tools in many healthcare-related businesses and organizations, he says, whether they’re looking for products that can streamline or automate a process, improve patient care, or help them better understand the health data they’re working with “so they can make better and smarter business decisions.”
The maturation of the digital health industry comes as Bakken’s Madison, WI-based venture firm has made progress as well. He says HealthX has invested in 13 companies from its first fund, which totaled $20 million. None of those companies have shut down, and one has achieved an “exit,” he says. That was Pacifica, which developed a mobile app for managing stress and anxiety. Sanvello Health acquired the startup this year for an undisclosed price.
As of this writing, HealthX is out raising capital for its second fund, which could reach $75 million, according to a document the firm filed with securities regulators in April. Bakken, HealthX’s managing partner, says he can’t talk about the fundraising effort. But he says HealthX has made one investment so far from the second pot of money. In September, the firm led a $10 million Series A investment in InsightRX, a San Francisco-based startup that uses machine learning-enabled software to help caregivers improve medication dosing regimens.
Xconomy recently caught up with Bakken to get an update on HealthX and hear his thoughts on the digital health sector, which picked up momentum in recent months, thanks to a series of IPOs, increasing venture investments, federal policy changes that could spell opportunity for the industry, and other factors.
Bakken’s perspective is informed not only by leading a healthtech-focused venture firm, but also from the serial entrepreneur’s prior experience running Nordic, a Madison-based healthcare consulting firm best-known for its expertise in electronic health records software from vendors such as Epic Systems, based near Madison. Bakken helped grow Nordic, founded in 2010, to more than 400 employees before he left at the end of 2014.
Looking ahead to next year, Bakken predicts that the overarching theme in digital health will be the next evolution of the electronic health record. “It’s leveraging that data to make better recommendations of how to cure somebody faster, whether you call it AI or machine learning,” Bakken says.
He says the biggest barrier to achieving that vision remains access to quality data, which is necessary for successfully training and operating AI software.
“It’s still not as easy as some people think it should be for getting access to [health] data, but it’s getting better,” Bakken says.
There are efforts by companies, industry groups, and the federal government to improve how doctors and patients can get access to data, and move the information from one system to another. “It’s still going to take some time,” Bakken says. “But at least there’s a light at the end of the tunnel,” he adds.
Despite healthcare organizations’ growing interest in AI, mobile apps, telemedicine, and other advanced technologies, Bakken still finds promising investment opportunities in simpler products from companies that he says are doing a lot of “blocking and tackling” in healthcare. Take Medable, a HealthX portfolio company in Palo Alto, CA, that is helping companies that conduct clinical trials digitize and automate processes that are still mostly paper-based, he says.
Or consider ImageMoverMD, another HealthX investment. That Madison-based company developed software to make it easier to capture and manage medical images, which to this day are often shared among doctors and caregivers using thumb drives or burning images to a CD, Bakken says.
“You would think that would’ve been solved a while ago, but unfortunately that’s still there,” he says. Moreover, “there’s still a lot of faxing happening today in healthcare, which is just ludicrous.”