Global health tech investment trends—Israel and China are countries to watch
Silicon Valley still has a significant gravitational pull for many investors and innovators, but it is no longer the center of the universe. Not only are investors and innovators spreading out to other areas of the United States, but talent and good ideas can be found around the globe. Global markets grew in 2020, despite the pandemic.9 Of note, Israel has been and continues to be a major hub of health tech innovation, with several innovators focused solely on exporting their intellectual property to the US market. While there are challenges to trying to sell solutions into a different health care market, interviewees noted that key success factors for innovators include capital efficiency, talent quality, and a supportive local infrastructure. Specifically, partnering and strong relationships with local organizations are key.
China stands out among emerging markets, having invested US$7 billion in health tech in 2020, while the number of Chinese investors participating in US deals has increased.10 Chinese big tech companies (e.g., Baidu, Tencent) are active investors in US health tech. In India, several innovators with a focus on consumer health and preventive care are emerging, but lack international investments so far, according to interviewees.
European investment activity continues to be robust, and health tech activity has mirrored US trends. However, interviewees noted a few challenges: different reimbursement models across countries, innovators preferring local VCs with local knowledge, and some investors taking more of a wait-and-see approach.
What’s next for innovators in the Future of Health?
Health tech innovators have a key place in the Future of Health, but they aren’t without their challenges. They need to overcome a few hurdles to sustain and thrive in this future:
- As technologies rapidly evolve and simultaneously become table-stakes, innovators will succeed if they have agile business models and the ability to scale. A winning value proposition today may be a me-too tomorrow. Innovators should be ready to rapidly steer and drive technology changes and show value to customers.
- Innovators selling to incumbents will often encounter long sales cycles and cash flow challenges. Sales leadership, channel partnerships, and creation of a marketplace ecosystem can help shorten sales cycles and alleviate investor and market concerns over cash flow. Innovators should also be mindful of how they price their solutions, even with an initial anchor client. Undercutting their value early on can make it difficult to be profitable in the long term.
- While the current regulatory environment is encouraging, with the relaxation of regulations to encourage virtual health and guidance on interoperability rules, shorter- and longer-term uncertainties may remain as situations around the pandemic and other market activities may still evolve. Innovators should remain aware of and be able to adapt to changes.
As the health tech market continues to grow, successful innovators should move beyond pilots to demonstrate market opportunity to their customers through improved quality, decreased costs, and/or a better experience. According to investors, scalability and key return on investment metrics will separate the winners and losers.
Investors, especially CVCs,will have important responsibilities toward innovators as well as the industry in general. In addition to providing capital, they should assume the role of a coach and bring their industry and regulatory expertise to innovators to move the industry as a whole toward the future of health.