Bessemer Venture Partners Unveils State of Health Tech Report at HLTH 2023
Explore the future of health tech with insights and predictions from Bessemer Venture Partners' report at HLTH 2023.
In HealthTech, the journey is often punctuated with peaks of innovation and troughs of challenges, a narrative eloquently unfolded by Bessemer Venture Partners in their State of Health Tech report, presented at HLTH 2023. The report that maps the health tech sector's current position in the innovation hype cycle, not only delineates the resilience of various business models but also casts a hopeful light on how the industry can gracefully navigate out of the trough of disillusionment. Moreover, it generously offers predictions for health tech trends in 2024, providing a compass for stakeholders navigating the intricate landscape of healthcare technology.
The report, presented by Sofia Guerra, Vice President with Bessemer Venture Partners, and discussed by Steve Kraus, a partner with the firm, reveals a candid yet optimistic perspective on the current state of health tech. Despite the market downturn coinciding with a trough in the health tech innovation life cycle, creating what some might describe as a “perfect storm”, the report encourages stakeholders by highlighting the significant strides technology companies are making in healthcare. The narrative is not one of despair, but rather a reminder that, in the words of Kraus, "We’ve got a long way to run."
The report underscores the importance of recognising and valuing companies that are genuinely contributing to reducing costs and enhancing patient outcomes in healthcare. Noteworthy mentions include Hinge Health, a physical therapy business, and mental health support apps like Headspace and Calm, which have carved out spaces in the market by providing tangible value and support to their users.
In an industry where the path to success is often nebulous, the report identifies five pivotal characteristics that companies navigating out of the trough of disillusionment commonly share. Firstly, solving a mission-critical problem for customers is paramount, followed by demonstrating a clear and rapid return on investment. Furthermore, capitalising on large and growing markets, focusing on attractive unit economics, and building strong multi-disciplinary teams that amalgamate industry and technical knowledge, are identified as key to accelerating distribution and developing top-tier products.
Peering into the future, the report anticipates several health tech trends for 2024, one of which is the emergence of Services as Software. This paradigm, propelled by advancements in generative AI and large language models (LLMs), flips the traditional SaaS model on its head, offering a new generation of software applications that provide a service as the final product. This innovative approach allows founders to reimagine solutions, such as payments workflow automation, where AI/machine learning products assist buyers in driving revenue growth and making informed decisions based on clinical and financial data.
Another pivotal point in the report is the alignment of incentives in revenue cycle management, which is currently characterised by inefficiencies and misaligned incentives. The report sees a significant opportunity for software to become the connective tissue between payers and providers, facilitating a more transparent and efficient payment system. It emphasises the importance of business models intricately following the money and aligning incentives between stakeholders, and expresses excitement about companies that can harmonise and deduplicate antagonistic systems.
Moreover, the report highlights the potential in companies that facilitate the transition to more risk-based payment models and those that leverage indirect monetisation for a distribution advantage, such as Verse Medical, Rupa Health, HouseRx, and Doximity. It also underscores the transformative potential of software and AI in making the biopharma value chain more efficient, with companies like Peptone, Seismic Therapeutic, Generate Biomedicines, Evozyne, and Profluent exemplifying these trends.