The world of healthcare has notoriously been described as “broken” — plagued with high-friction workflows, sky-high costs and convoluted business models.

Over the past several years, a long list of innovative startups and salivating venture investors have pinned their focus on repairing the healthcare industry, but its digital transformation still appears to be in the very early innings. After a record-setting 2018, however, digital health investing continued to reach meteoric heights in 2019.

Mammoth pools of capital have flooded into various sub-verticals and business models, backing collections of new B2B and B2C companies focused on optimizing healthcare workflows, improving healthcare access and offering lower-cost distribution models. Over the past two years, digital health startups have raised well over $10 billion in funding across nearly 1,000 deals, according to data from Pitchbook and Crunchbase.

As we close out another strong year for innovation and venture investing in the sector, we asked nine leading VCs who work at firms spanning early to growth stages to share what’s exciting them most and where they see opportunity in the sector:

• Annie Case, Kleiner Perkins
• Zavain Dar, Lux Capital
• Adam Goulburn, Lux Capital
• Kristin Baker Spohn, CRV
• Raju Rishi, RRE Ventures
• Olivia Lew, General Catalyst
• Bill Liao, SOSV
• Jennifer Hartt, Ben Franklin Technology Partners
• John Prendergass, Ben Franklin Technology Partners

Participants discuss trends in digital therapeutics, telehealth, mental health and the latest in biotech and medical devices, while also diving into startups improving medical practitioner efficiency, evaluating the evolving regulatory environment and debating valuations and offering a ‘temp check’ on the market for digital health startups leveraging ML.

Annie Case, Kleiner Perkins

Although Kleiner Perkins has a long history of investing in iconic health companies, we believe it is still the early innings of digital health as a category today.

When I evaluate new opportunities in the space, I often start by thinking through how the company will move the needle on cost, quality, and access to care — the “iron triangle” of health care systems. Conventional wisdom has been that it’s impossible to improve all three dimensions simultaneously, but we are seeing companies leverage technology to shift this paradigm in meaningful ways.

It’s no longer just a promise. For example, Viz.ai is using artificial intelligence to detect and alert stroke teams to suspected large vessel occlusion strokes, enabling patients to get treatment faster. Their workflows improve access to life-saving care, deliver higher quality through reduced time to treatment (every minute counts as ‘time is brain’ in stroke care), and dramatically reduce the costs associated with long-term disability.

We are also seeing companies provide this type of tech-enabled care outside of the hospital setting. Modern Health is a mental health benefits platform that employers are making available to their employees. The platform triages individual employees to the right level of care, providing clinical care to those with diagnosable depression or anxiety, and making self-guided or preventative care available to everyone else. Their solution improves quality and access by offering mental health services to every employee and reduces the cost associated with untreated mental illness, lost productivity, or employee churn.

Heading into 2020, we’re eager to back digital health companies in new areas that leverage technology to impact cost, quality, and access. A few spaces that I’m excited about are behavioral health (mental health, substance abuse, addiction, etc), care navigation, digital therapeutics, and new models integrating telehealth, remote care and AI to better leverage medical professionals’ time.

Zavain Dar and Adam Goulburn, Lux Capital

Below are some thoughts and coming predictions on health tech broadly:

1. Digital therapeutics continue to pick up steam — on the back of Pear and Akili, more companies push to FDA and enter the market. In addition, broader consumer platforms like Calm and Headspace look to broaden their offerings by investigating clinical approvals.
2. At least one major pharma looks to expand its consumer surface area by acquiring one of the new digital, consumer-facing generics platform (ex Hims, Ro, NuRx).
3. Venture funding for biotech continues to boom with at least three Series A’s of $100M or more in size.
4. Drug discovery for neurodegeneration sees a renaissance. High-profile failings of Biogen and the beta-amyloid hypothesis sees a shift of innovation to early-stage biotech and venture creation.
5. Big pharma has its DeepMind moment acquiring at least one machine-learning (AI) enabled drug discovery company.
6. Clinical trial tech investments heat up; new companies and technologies emerge to make trials patients first and systems get smarter at finding the right patients at their point of care; large incumbents like IQVIA, LabCorp and PPD get acquisitive.
7. At least three traditional Sand Hill Road tech venture firms open life science practices or raise dedicated funds.
8. Machine learning targets chemistry driven by large advancements in transformer (NLP) models; has the time for computational chemistry finally come?
9. HCIT sees a renaissance driven by increased CIO responsibility towards data interoperability. Companies either working on federated ML to allow systems to speak to each other or lightweight edge applications enabling rapid clinical deployment will see quick uptake and traction, until now impossible in HC.

Kristin Baker Spohn, CRV

In the last 10 years, digital health has exploded. Over $16B has been invested in the sector by VCs and we’ve seen IPOs from Livongo, Progyny and Health Catalyst, just in the last year alone. That said, there’s still a lot that mystifies people about the sector — there are spots that are overheated and models that will struggle to deliver venture scale outcomes. I’ve seen digital health evolve first hand as both an operator and investor, and I’m more excited than ever about the future of the space.

A few areas and trends that I’ve been following recently include:

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