A look at the past and a dive into the future of HealthTech

The evolution of healthcare delivery over the past decade has been noteworthy, and the pandemic has, in many cases, accelerated digital healthcare and signaled its importance in the ecosystem. With this, it is important (and we shall discuss) to provide a view on current trends and what components in the health-tech ecosystem we believe have shown long term moats, as well as the regional clusters which have shown prior traction re health-tech development. We believe that telemedicine is at the bedrock of the digital healthcare transformation, and this would be key in defining the way in which healthcare is delivered.

  1. First, we analyze key Industry trends and point towards what models we believe will be winners ;
  2. Then, we drill down to explain our thesis on telemedicine;
  3. And conclude by giving a brief overview of locational influences in Europe.

Let’s go!

Industry trends

An understanding of the current state of HealthTech in Europe would be driven by a deep — dive into the macro — economic underpinnings inherent in the ecosystem, and we would begin by examining the current trends we see;

Public sector weighted funding on healthcare and robust company valuations

There is an ageing population in Europe which makes public welfare essential for health delivery, and most successful startups in this space (specifically targeting the retail and marketplace structures) have an element of government involvement and support.

We see that the bulk of spending goes to human capital (physicians and other providers), and this drives the importance of building products and services with them in mind (which either enables these players or makes them dependent on it).

This essentially drives business models, as the question of reimbursement comes to the fore and essentially determines the revenue model of most startups.

With this underlying phenomenon, we can map out the general value trends across segments in the health-tech space;

Source: Deal Room and Google Finance
1. Health-tech excludes biotechnology and pharmaceutical companies. Using estimated valuations based on most recent VC rounds, public markets and publicly disclosed valuations as of Feb 10, 2021. Source: Deal Room and Google Finance

Before this, we find that the combined enterprise value of Europe based health — techs have risen by almost 6x to $41billion in 2021 (50% CAGR), and this is driven by digital healthcare and online pharmacy players (42%) with health insurance and remote monitoring / wearables (29%) combining to form over 71% of total enterprise value in 2021. This shows that investors believe in the ability of these sectors to drive further growth on one hand, while establishing real value to the ecosystem on the other. It is of no news, however, that the Covid pandemic has shifted investors’ perception in the markets and there would be a greater movement towards virtual forms of care, with digital care and remote functionalities seeing consolidations and drive towards institutionalization.

There is a shift to prevention & well — being

Prevention is key to lower healthcare spending. Deloitte report projects a vision for healthcare shifting from care and treatments dominated (83%) to health and well-being dominated (63%). On top of prevention, another part is faster diagnosis and treatment with the help of AI (e.g. Babylon). New forms of enablement, data, platforms and delivery will drive 85% of revenue, Deloitte says.

Venture Capital investment activity has a new focus

Venture Capital investment activity has moved beyond telehealth to remote monitoring, AI — first products, digital therapeutics and many more, as investors seek avenues for growth outside telemedicine and they find ways to incorporate technology in their decisioning systems.

Source: Deal Room

What does this mean for the future?

In the long run, we are dead (JM Keynes, 1938). This is why we need to understand what problems startups are focused on and how this would affect the future. There are a few key pointers;

  1. The patient journey has become sacrosanct as startups try to monetize the value chain while focusing on specific facets:
    Prevention; Lifestyle Change (OVIVA, Second Nature), Health tracking (Withings, Huma), Home testing (Thriva, Binx),
    Symptoms and Diagnosis Checking; ( Kry , Babylon, Biloba, Mindler, Melio),
    Treatment & Recovery; Digital therapeutics (Koa Health, Bold Health), Remote Treatment (Atlantic, feetme), Continuous monitoring & patient engagement (coreology, Lumeon, current health)
  2. Three main business models are evident, and underscore the importance of healthcare providers:

SaaS — First; These models provide tools for the doctor first then add a telemedicine marketplace model on to it ( Doctolib , doctorlinkPhysitrack, · accuRxmediQuoKarify, doctena), Two sided marketplace; Without own doctors, they serve both the demand and supply ( peppy, mediktor, zoomdoc, Hellobettertopdoctors), Direct to consumer; AI based or own doctors ( OVIVA, quitGeniusPushDoctor , Kry , Babylon, Min doctor , Medicspot , Infermedica)

C. There are other solutions transforming and streamlining the healthcare providers’ tech stack, with Electronic health records (Doctrin, Lifen), Diagnostic decision support (Touchsurgery, Simedis, Biomodex, Sophia), Intervention (CMR Robotics, Robocath, ACTIV Surgical, Sensome) and Recovery and monitoring (careology, CeQur)

Essentially, the drive and collaboration which we have seen between these startups is to become the go to platform for healthcare through all the ecosystems.

Digital Care is at a focal point and Telemedicine is its bedrock

There have been changing regulatory policies and government strategy towards going digital.

In Europe, the pandemic has accelerated the call to have a digitally enabled process to healthcare delivery, with the government in the driving sit of this . This is evidenced in major economies;

Germany, for example, has two health apps have officially become available for prescription and all statutory insured 72 million German citizens have been legally entitled to a national electronic patient record (ePA);

In France, health minister Olivier Véran announced a decree to ease the conditions for the practice of telemedicine, and this coupled with the push towards eHealth platforms also drives this thesis;

In Norway, the directorate for e-health, led by the government, is working on a national digital platform.

Telehealth reimbursement laws across Europe are also improving , and since telemedicine forms part of the wider e-health approach, countries with more mature digital health or e-Health readiness generally offer more favorable conditions.

Successful players in the space have also driven investor appetite as business model operability has been proven

This has spurred the scale of B2B2C (Doctolib, Babylon Health, Telemedico) and D2C players (Kry, Docplanner), as the ease of planning / consultations and regulatory leeway (accelerated by Covid — 19) has provided a tailwind for this ecosystem.

This appetite is evident in valuations as the top Digital companies in Europe are telehealth providers.

We have also seen more capital efficiencies in companies which have geographical presence in developed markets (as seen in the valuation / equity funding mix of these top telehealth companies)

Continuous scale, however, would be driven by regional consolidations and buy — vs — organically scale

Given that these players have proven this business model, what is vital for them is scale and they have tried to do this by building a strong network and upselling in their existing geographies (Doctolib) or branching out to fast growing, but less developed markets (Kry). This is also coupled with consolidations and acquisitions in the ecosystem (Doctolib acquired Mondocteur in 2018), with more onus being on a buy — or — organically scale into new markets.

This is why a strong regional footprint is necessary for uptake by these large players, or to scale in general. Telemedico for example, has a strong footprint in Poland with growing presence across Eastern Europe, this and others would eventually either be acquisition targets for larger players, or would go on and compete given their unique value proposition and large provider network. This would eventually lead to a consolidation across platforms in order to form a central telehealth ecosystem for the region.

So what do we believe?

Telehealth is core to the digital health landscape given regulatory tailwinds and investor appetite, and its growth is hinged on regional scale and consolidation. Exciting!

For a better perspective; 

Dominik Esen writes an interesting report on B2B Telehealth in Europe.

Locational influence driven by research is also key to HealthTech

We believe that there is a locational influence in the success of startups in the health-tech space, as specific hubs are known for their contribution to health-tech in Europe;

  1. Tuttlingen, Germany, Medical Valley Nurnberg, Germany– with top universities like University of Tübingen, Hahn Schickard Society for Applied Research, fraunhofer’s Medical Technology Test and Demonstration Center (METEAN) and the Imaging Science Institute of Siemens .
  2. The Grand Est Area of France (Alsace Biovalley & Franche — Comte)
  3. The Golden Triangle, United Kingdom — The triangle between London, Cambridge and Oxford is a hub for world-class academic medical research.
  4. Eindhoven, Netherlands — has 150 companies and institutes, and some 10,000 researchers, developers and entrepreneurs working on developing future technologies and products with players like Startupbootcamp HighTechXL and High Tech Campus Eindhoven.
  5. Tallinn Estonia — Focus on digital (especially relating to prescriptions). home of Connected Health and University of Tartu, Tallinn University of Technology.

For a deeper dive into these locations, see here, and here are some interesting companies (Crunchbase) from these locations

Research has also become critical as Covid — 19 has shown the relevance of this functionality for the future. Though capital intensive, we believe that there are future benefits and this is underscored by the sheer number of health-tech companies supported by the continents’ leading Research institutions (we see that over $1.5bn in VC funding has gone to university research institutions in the UK).

In Conclusion, the problem is scale. The answer is Technology,

Healthcare is obviously going to be delivered somehow, some time and to someone (or a group of people). This is probably the most predictable fact we know. Though the core importance of offline healthcare provision cannot be underestimated, we believe a collaboration between online and offline functionalities would enable healthcare provision to scale faster, and telehealth is the key catalyst to enable this. This is because:

  1. As always, change has to begin from the top and there has been changing regulatory and policy moves towards going digital, as new reimbursement models are being postulated ;
  2. Health tech is at a steep learning curve (as shown in fundraising and valuations across sectors, as well as investor appetite for the asset class). The uptake of health-tech products by end users and healthcare providers alike also show that some parts of the market is health tech educated, and thus more follow — on products can be introduced, for a chance to upsell;
  3. Locational influences persist, and they can be key to understanding where the next health-tech unicorn emerges from, with strong focus on research and venture development.

Exciting times for the health-tech ecosystem!

NB: Dealroom’s future of digital health care report was most helpful in this research