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Overheard at HLTH: Market reset haunts digital health

Erin Brodwin
Panelists discuss virtual-first primary care at the 2022 HLTH conference in Las Vegas, Nevada.

Panelists discuss virtual-first primary care at the 2022 HLTH conference in Las Vegas. Credit: Erin Brodwin, Axios

Shimmering disco balls and a fluffy unicorn mascot adorn the halls of HLTH this year — but as attendees talked to Axios about harsh market realities, day one of the Las Vegas conference felt more as if someone had turned on the lights at the club.

Why it matters: After years of enthusiasm marked by soaring valuations, bloated late-stage rounds and unchecked growth, the digital health world is coming back to Earth.

  • "I think we'll see a reckoning where big bets don't happen, or happen a lot less," Steven Wardell, a digital health consultant with the growth consulting firm Wardell Advisors, told Axios on Sunday. "The question is: How deep will it be and how long will it last?"

🎲 The backstory: It would be ironic if it weren't so clever: Digital health builders, backers and industry observers have been gathering in the world's gambling capital to discuss health IT since 2018.

  • HLTH, the company behind the 9,000-person event, collected $5 million in VC funding led by Primary Venture Partners and LaunchCapital in 2017.

🦄 What they're saying: Investors, executives, founders and consultants told Erin that market stopgaps like tighter capital budgets, supply chain difficulties and a lack of substantial federal support have made it harder to disrupt and innovate in the way envisioned several years ago.

  • "What happens when a unicorn has a down-round?" Wardell asks. "Is it now a horse? Does it have its horn removed?"
  • "Things have obviously changed. We've prioritized: I had 50 things I was going to work on this year. We're now focused on five to seven things that are revenue-generating," says Cohere Health CEO Siva Namasivayam.
  • Since about six months ago, "we have a totally new focus: How do we get as close as possible to profitability?" Namasivayam says.

Yes, and: The market shift is reflected in valuation expectations.

  • "There were assets we thought we could buy that are now more expensive," says Availity CEO Russ Thomas.
  • Ro CEO Zach Reitano says investors are baking more contingencies in to deal terms and recommending three years of capital runway instead of the typical 18 months.

The bottom line: Despite the Vegas razzle-dazzle, the funding outlook for health tech felt decidedly dim on day two.

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