What digital health sectors are hot and which are overhyped?

Steven Loeb · March 29, 2017 · Short URL: https://vator.tv/n/493f

VCs from Sequoia, 500 Startups, Canvas and McKesson weighed in at Vator Splash Health

At Vator Splash Health last week, we assembled a group of top healthcare venture capitalists to give us their take on the current market. Specifically: what is overhyped, and what's up and coming in the space. 

Panelists included Rebecca Lynn, Partner at Canvas Ventures; Dave Schulte, Partner at McKesson Ventures; Michael Dixon, Partner at Sequoia Capital, and Rebecca Woodcock, Entrepreneur in Residence at 500 Startups.

"What sectors do you guys think are the most interesting for your funds at this moment in time?," asked moderator Patrick Chung, General Partner Xfund. ""What are the types of things that you're jazzed about, and not jazzed about, today?"

Schulte spoke first, mentioning AI and machine learning as two spaces he thinks are overhyped, at least currently. 

"It's easy for me to be critic when I actually don't understand what those things mean. I do notice that, in just about half of the pitches that we sit in on, those are required terms in the presentation. I think I'm skeptical that, in the near term, AI and machine learning are going transform how we get healthcare," he said.

"In the long term, those will probably fit nicely into specific use cases that lend themselves to rules, or inclusion exclusion, where you can automate decisions, but I think, where we are today in the healthcare industry, I think you have to think more about a service layer on top of software automation. I think a lot of pitches that we see, where people just start using the word 'AI,' they forget there's an interface between the service layer in healthcare. To me, the hype is a little bit ahead of where we actually are today."

Dixon took the other side of that argument, saying that AI and machine learning will happen, "it's just a question of, when?"

"AI and machine learning will find their way into healthcare and change the way that medicine is practiced. However, that isn't the thing that we pay the most attention to, because we believe in that, but how you're going to get into the workflow of how the people deliver care. I would say that we're paying a lot of attention to that," he said.

What he doesn't like are what he calls "buzzwords," especially "population health."

"I think there's a lot of companies that play into that tailwind. You're telling me that providers are taking on risk. I get it, but you don't solve all the world's problems with that solution. To me, it's somebody that's found something that's delivering real ROI and people are using it. That's what gets me excited, not some term."

For Woodcock, what gets her excited are, "businesses that have traction and repeatable, predictable incomes."

"If they're showing that, even if it's in a market that I thought I would hate, I suddenly become interested," she said.

Hot vs overhyped

Later, Chung asked the panelists to say what they think is hot and what is overhyped in healthcare. These were their responses:

Shulte: "Medication adherence. I can give that answer for both of those categories. I would say it's been overhyped, in the sense that the outcomes, to date, have not lived up to the expectations, in general. But, I would say I don't think anyone is underestimating the opportunity, commercial, clinically, otherwise, if we can find a way to make people more compliant with their medications. I think it's a problem worth solving, I hope more entrepreneurs try and work on this problem, but, I think, the efforts to date have been overhyped in terms of the efficacy."

Dixon: "Personalized medicine is hot, because pharma companies are going to be able to target 5 percent of the population, or 2 percent of the population, or 1 percent of the population, and still be able to make money. That's happening and we have data about that part of the population, so that's a good thing. My overhyped is what I said earlier, it's population health. Maybe it's because we're an investor in a great analytics business, and I'm tired of everybody saying that they sell analytics. Also because I'm not sure most providers in the country are ever going to be be able to manage risk."

Woodcock: "I don't know if this is really hot but I hope it becomes hot soon. I just have a passion for that intersection of health and finances, not only because of my background but because it's a major problem in an underserved part of the healthcare system. So, I'd like to see more companies tackling different pieces of that. I agree with the analytics piece. I think we'll get there, but we're still far from it, and I can't wait for the day."

Lynn: "I like marketplace transparency. Overhyped are insurance startups that are trying to go out there and acquire the hardest to acquire section of the entire population and the hardest section of the population to actually help. I think that's completely overhyped and those are bleeding cash."

Thanks to Splash Health 2017 sponsors: AdvsrAARPAvison Young, Bread and Butter WineSurf AirStratpoint and Scrubbed.

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Michael Dixon

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Michael works with growth stage companies in healthcare and enterprise software at Sequoia. Michael has a BS in Finance and Accounting from Boston College.

Rebecca Lynn

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Rebecca Woodcock

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David Schulte

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Patrick Chung

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