The 2010s brought serious reality checks to once-favored technology startups in healthcare. But despite some major blowups, health system and venture-capital leaders say they generally aren’t spooked about the startup scene.
A major reason why is that startups, while often new entrants to a field, have in the past disrupted industries—something healthcare needs—making investors a lot of money in the process. That’s part of the incentive for Partners HealthCare in Boston, which since 2008 has opened multiple investment funds that have attracted millions of dollars. Partners’ most recent effort, launched last October, is a $30 million fund dedicated to artificial intelligence and digital technologies.
“There’s an ability to do more, to accelerate these collaborations and the adoption of this technology, and we believe being able to invest is part of that,” said Chris Coburn, chief innovation officer at Partners, of the new fund.
Partners is in good company, as digital healthcare tech has been a growing area for investment in the past decade. Digital health startups have raised $39.5 billion since 2011, with 40% of that raised in 2018 and 2019 alone, according to a report from Rock Health, an early-stage digital health venture fund that also compiles research on the sector. In 2019, more than 600 investors poured $7.4 billion into 359 digital health startups.
Those dollars can serve as food for thought for innovative health systems. “The flow of those dollars typically represent the recognition by the investment market that there’s opportunity,” Coburn said, noting that Partners’ new fund will be watching patterns of investment into healthcare tech startups to help inform its work, as well as conducting “rigorous” assessments of the startups.
Chasing other people’s money should not be a singular strategy. Seeing interest from venture-capital firms can’t serve as the only cue regarding which startups are worth paying attention to. “It’s always nice if there’s a market signal,” said Dr. Thomas Maddox, executive director of the Healthcare Innovation Lab at BJC HealthCare and Washington University School of Medicine in St. Louis. The lab aims to identify new ways to use data, analytics and technology to improve care delivery, which can involve working with startups.
“But more and more I’ve started to not put a lot of faith in the number of investors or the dollars involved—part of it is just because of some the blowups we’ve seen,” Maddox said.