Lowering Healthcare Costs and Improving Outcomes: Healthtech Investment Trends through Q3 2019


In 2019, the U.S. healthcare industry alone is projected to reach $3.5 trillion in annual spending. Aging population around the globe and the vibrant transformation into the digital age, this market has created enormous opportunities for talented professionals, innovators, and investors to enter. Simultaneously, various stakeholders in the healthcare industry – consumers, payers, providers, governments, and other related companies, are fighting against clinical, operational, and financial challenges brought by the traditional treatment paradigm. Looking into the future, we predict that Healthtech will be one of the critical solutions to these challenges and an important driving force behind the enhancements to the healthcare market.

Introduction to Healthtech

Healthtech is mostly defined as “technology-enabled healthcare products and services that are primarily delivered and/or consumed outside of the hospital or physician’s office,” and one exception being hospital and practice management software.

A key initiative in the Healthtech sector is the goal of transforming the traditional treatment paradigm to lower the cost of healthcare and satisfy the evolving demands for health services. Building on this initiative, the trend of consumer healthcare is rapidly transforming the healthcare space. Consumers are starting to actively acquire healthcare services and evaluate the services in terms of quality, experience, and costs. Furthermore, large companies in other industries, such as convenience stores like Walmart, Walgreens and Target, and tech giants like Amazon, Apple, and AT&T, are actively seeking opportunities in the Healthtech sector, creating more possibilities for this dynamic industry.

Venture Capitalists are very optimistic about the Healthtech segment. After three years of drought for Healthtech IPOs, here come the bright days! In 2019, 12 Healthtech companies were going public. The total amount of their IPOs was a surprising $14.4 billion, given that the cumulative Healthtech exit value was only $21.2 billion.

Healthtech VC Exits ($B) By Type

Through our research on Healthtech, we spotted some interesting verticals with astonishing potential including:

  1. Virtual Health

  2. Biometrics & Wearables

  3. “Omics” & Personalized Medicine

  4. Mobile & Digital Health

  5. Operations & Care Management

  6. Marketing, Communications & Information

Market Overview:

Virtual Health enables continuous, connected care via digital and telecommunication technologies, revolutionizing the delivery of healthcare services. It complements or, as appropriate, substitutes for in-person care. With current applications including video visits, remote monitoring, medication adherence and virtual consulting, Virtual Health establishes a competitive edge in providing more accessible and cost-effective healthcare. According to a market survey conducted by Deloitte in 2018, although 77% of the consumers had not tried a virtual visit, near 60% of the respondents would be willing to try. Among those who have tried, the satisfaction rate was 77%.

This is consistent with the analysis performed by Parks Associates, a medical research firm, which showed that 60% of U.S. broadband households are interested in remote care that would take place online or by telephone. These statistics suggest Virtual Health is an emerging sector with high growth potential. Looking into the future, the growth of Virtual Health will be constantly fueled by the demand for accessible and convenient healthcare services in non-acute settings, especially by the virtue of the rapidly expanding aging population.

The market size for Virtual Health was approximately $5 billion in 2016 and is predicted to reach approximately $20 billion in 2019, expanding at a CAGR of 14%. Currently, Virtual Health companies are actively seeking solutions that connect consumers with healthcare providers. These solutions could be delivered by either software or hardware to either health providers or directly to consumers, software is currently the focus of most companies.

Healthtech VC Exits ($B) By Type

Virtual Health can be further segmented into Telehealth and Remote Patient Monitoring (RPM). Telehealth connects patients and providers via software to help deliver healthcare services remotely, while RPM utilizes digital technology to remotely collect and transmit health data to healthcare providers for assessments and recommendations. Active players in these sub-categories are presented in the figure below:

Souce: PitchBook

Market Map of the Virtual Health Sector

Market Potential:

Since Telehealth directly connects consumers to healthcare providers, it is significantly cheaper as the intermediate links are saved and fewer resources are drawn. Due to this advantage, Telehealth services are being rapidly adopted by companies and included in the employee benefits packages to effectively control the burden brought by the rapidly rising healthcare costs.

Additionally, the constraints regarding Telehealth regulations and reimbursement are loosening. In 2018, multiple bills were issued at both the state and federal levels, signaling that the potential of Telehealth, in part in its ability to mitigate the burden and improve the efficiency of the healthcare system, is recognized by the government. Telehealth is expected to continue to benefit from evolving policies in the future.


Telehealth is disruptive in that it revolutionizes the entrenched regulations, laws and delivery paradigms associated with traditional healthcare, which inevitably brings challenges to its adoption. Therefore, the wide adoption of Telehealth will require joint efforts from the stakeholders at all levels including patients and consumers, payers, service providers and policymakers to reinvent the rules and practices of healthcare delivery.

Since Telehealth relies on digital technology and software platforms, it may take time before the technology becomes fully accepted by some consumers, and especially by the aged population. According to the research conducted by Deloitte, older consumers tend to be less interested in using technology for healthcare than younger consumers, while Millennials are more likely than other age groups to have had a virtual visit. It should be noted that some of the relatively common applications of Healthtech are well-adopted - consumers of all ages use digital assistants to receive medication alerts (75%). We expect the younger tech-savvy generation to be the first to undertake the initiative to accommodate the emerging applications of the Telehealth technology.

Intense competition in the Digital Health space also poses a threat to companies in the Telehealth space.

Telehealth service companies are going to face the competition from the fully digitized mobile self-care space, such as behavioral health apps including Lumosity and Calm, which primarily involves consumer self-interaction. Besides, traditional healthcare providers are also recognizing its deficiency and taking moves by collecting patient feedbacks and improving operational management.


Expand Addressable Markets by M&A and Service Integration: there have been 20 M&A deals in the Telehealth space since 2018 as service providers aim to gain a competitive edge in the market through providing more integrative services and attracting a broader range of consumers. We expect this trend to continue as the Telehealth space remains fragmented as of today.

Development of Novel Business Models: The majority of the players in the Telehealth space today adopts a business model in which services are either delivered directly to consumers in the forms of mobile and web platforms or through the employee benefits plans.

Recently, novel business models are being developed with partnerships. For instance, MDLive expanded its distribution network by joining a partnership with Walgreens and deliver its service through the Walgreens mobile app. We expect Telehealth startups to continue the effort of developing novel applications of the technology to drive deeper market penetration.

Rapid Growth Driven by Evolving Consumer Demands: Although Virtual Health has been in the market for decades, the rapid adoption of mobile technology in recent years has been serving as a strong driving force for its growth. Given the continued focus on consumer-led healthcare services, accessibility, convenience, experience, and cost will gain increasing importance in driving market adoption.

As the healthcare demands for the aging population and chronic disease management continue to expand, Telehealth will play an increasingly important role in complementing or even substituting traditional healthcare with its advantages in all aforementioned aspects. We expect the industry will continue to grow at a rapid rate into the future.

Case Study - American Well

Business Overview:

Founded in 2006 and based in Boston, Massachusetts, American Well is a Telehealth service provider that connects patients to board-certified healthcare professionals in the forms of mobile and web doctor visits. The company is staffed by physicians with an average of 10-15 years of clinical experience and who are licensed and credentialed in multiple states. In 2013, American Well launched its mobile health application Amwell, which passed the 1 million download mark in 2014. Aside from using the Amwell app to provide direct-to-consumer services, the company also utilizes B2B and B2B2C models to provide patient-to-doctor solutions in a variety of markets. It also offers a “provider-to-provider” model that improve access to health specialists.

Financing History:

Raised to date: $485.9M over six deals Most recent round: $290.6M from Philips and Allianz X (June 2018) Post-money valuation: $971.8M First institutional round: $31.8M (February 2007)