Are digital health startups overvalued?

are digital health companies overvalued

Rock Health has recently asked health tech investors whether they think digital health companies are overvalued right now. And guess what – 62% believe that to be the case, while 29% said no.

Nevertheless, the money keeps pouring in, although the rapid growth of 2014 has been slowed down this year. For what it matters, during 2014 digital health companies raised a record-breaking $4.1 billion, which is more than previous three years combined.

It’s worth noting that investments in this space are still small in the grand scheme of technology venture capital investment — during last year, VC firms invested more than $48 billion in tech companies.

digital health investing sentiment - Rock Health

According to VentureBeat, investors may be vary as many digital health companies are struggling to implement their solutions in the cumbersome healthcare system(s). For instance, wellness engagement platforms have started to lose their appeal due to the difficulty in tracking the ROI, and the length of time it takes to see real positive health effects in whole populations of people. Related to that, sales cycles in this business are notoriously long, requiring a ton of cash for startup to keep paying its bills on time.

There are exceptions, however, namely those companies that have what it takes to go neck-deep in the complexities of the business, the regulations, the clinical aspects, the old school workflows, and other minutia of the health care business.

digiital health challenges - Rock Health

Jack Young, a partner at dRx Capital, summed it up nicely: “It’s not about disruption, it’s about implementation.”