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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

As digital health enjoys its Shopify moment, primary care-focused tech developer Fold Health raises $6 million in seed funding from former athenahealth CEO Jonathan Bush and others, Fold CEO Abhi Gupta tells Erin exclusively.

Why it matters: Gone are the days when digital health entrepreneurs were forced to cobble together a series of tenuous point solutions to enable their tools — or at least that's the reality Gupta and a series of other founders hope to create.

But for now, "the holes in health care are so huge you can see them from space," Gupta tells Erin.

Details: Other participants in Fold's seed round include Skyflow CEO Anshu Sharma, Saama Technologies CEO Vivek Sharma, and VC partners Anand Chandrasekaran of General Catalyst, Mohanjit Jolly of Iron Pillar and Gokul Rajaram of Firebolt Ventures.

Gupta and co-founder Ram Sahasranam also put $1 million each into the company.

Context: The era of digital health enablement has begun — and several emerging startups are vying to be the technological infrastructure for health care companies offering primary and specialty care and health plan administration.

Capable Health, developer of a software platform for virtual care startups, raised $6 million in seed funding in May.

Flume Health, which helps organizations build personalized member health plans, raised $30 million in March.

Tebra, a clinic-facing medical software provider whose tools are the most similar in nature to Fold's, raised $72 million earlier this month.

How it works: Fold charges primary care clinics a per-member per-month fee and offers tools for patient onboarding, marketing, messaging and billing.

Its operating system can be layered atop existing medical record systems, member management tools and billing platforms.

Current customers include Zócalo Health, a primary care startup for the Latino community founded by former Amazon Care leader Erik Cardenas.

Flashback: Years ago, Gupta and Bush had a fateful meeting at a health care conference in Bangalore that would set the stage for a series of future deals.

At the time, Bush was leading medical IT giant athenahealth; Gupta was building electronic health record startup Praxify Technologies, which Bush's company would acquire in 2017 for $63 million.

"He took my iPad, started showing it to other people, and said, 'This is what should be happening at athenahealth!'" Gupta recalls.

Fast-forward to now, and Bush is developing his own digital health enablement startup called Zus Health, while Gupta builds Fold. (Each is an investor in the other's company.)

What they're saying: Investors and entrepreneurs tell Erin companies such as Fold and Capable have a chance to become the dominant enablers of their industry as health care catches up to more mature sectors like fintech.

Such businesses "have the opportunity to become the Stripe, AWS, Shopify, etc. for digital health," Lux Capital partner Deena Shakir told Erin earlier this summer.

What's next: As the competition among infrastructure companies heats up, rivalries could begin to form. But for now, investors say there's plenty of white space for new and existing companies to build.

"This is not a winner-take-all category," Jolly tells Erin. "The market is absolutely massive, and people are clamoring for these solutions."

💭 Our thought bubble: As more investor dollars funnel into digital health enablement, the sector could soon find itself consolidating. (Fold competitor Tebra told Erin last week it plans to use recently raised funding for deals.)

1 big thing: Fold Health tucks in $6M for primary care tech

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Riding a wave of recent regulatory changes, patient data sharing startup Particle Health collected $25 million in Series B funding, CEO Troy Bannister tells Erin exclusively.

Why it's the BFD: Tech giants and startups have been striving to shake up the electronic health record industry for decades, and companies such as Particle Health are finally starting to gain traction.

Driving the news: Recent anti-data-blocking legislation — which allows patients to access their health information with apps — has reinvigorated those efforts.

"We’re now at the precipice of the rules turning into penalties," Bannister tells Erin. "So finally there’s some teeth that should start allowing people to share their records."

Deal details: Canvas Ventures led the round with support from Menlo Ventures, Story Ventures and Pruven Capital. 

The deal brings Particle's total capital raised to $39.3 million.

It more than triples Particle's valuation, which was last pegged at $52 million according to PitchBook.

Context: A handful of patient data-sharing startups have gained investor attention in recent months, such as...

PicnicHealth, which helps people gain access to medical records and partners with drugmakers to match patients with clinical trials, in June raised $60 million in Series C funding.

PocketHealth focuses on helping patients share medical images from their records and in March raised $16 million in Series A funding.

Flexpa lets patients share health information with the health apps of their choosing and in June raised $8.5 million in seed funding.

2. The BFD: Particle collects $25M for data sharing

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Posterity Health, a digital health startup dedicated to male fertility care, collected $6 million in seed funding led by Distributed Ventures, the parties tell Sarah exclusively. 

Why it matters: Male fertility needs are often overlooked when couples struggle to become pregnant. Parker, Colo.-based Posterity empowers couples through education and increases access to care. 

The result? A greater likelihood of natural conception or via IVF following early intervention and treatment of a male diagnosis, the company says. 

Details: Digital health executives joining the funding included Merative CEO Gerry McCarthy, Laurie McGraw, former SVP of Health Solutions at the AMA, and Don Holzworth, entrepreneur and chairman of the Advisory Board at the UNC Gillings School of Public Health.

Zoom in: Male infertility is a contributing factor 50% of the time a couple has difficulty conceiving, but Posterity says males are tested for infertility in less than half of cases.  

On average, the male partner isn't evaluated until 15 to 18 months into a couple's journey to conceive, CEO Pam Pure tells Axios. "What needs to happen is simultaneous evaluation of both partners at the beginning of that process." 

3. For Posterity's sake

Illustration of a quarter surrounded by sperm.

Data: Rock Health; Chart: Nicki Camberg/Axios

With global digital health funding dipping to its lowest levels since 2020, some investors are spooked, a new Rock Health report finds.

Why it matters: The health tech bubble burst isn't just leading to fewer investments in the sector — it's also affecting the types of backers in the industry, Rock Health notes. 

Catch up quick: After years of over-investment and COVID-related exuberance around telehealth that peaked in 2021, the past six months have seen a severe market correction among digital health companies.

By the numbers: New investors dominated health tech deals from 2012 until 2016, when veteran backers began to edge them out, and that gap widened into a chasm in the first half of this year.

In 2012, the ratio was 109 to 51, with new investors clearly leading the charge. That trend held steady through 2015.

In 2016, veteran backers edged out new investors for the first time. 

From 2018 onwards, veteran backers began dominating sector deal-making.

And in the first half of 2022, roughly 70% of digital health investors were veteran backers — a sign that new investors aren't rushing the sector as they once did.

What they're saying is next: Rock Health report authors Ashwini Nagappan and Adriana Krasniansky think veteran backers will continue to lead dealmaking for the near term.

That dynamic could have implications for the types of companies that get backed, they add. 

"Because veteran digital health investors appear ready to stay the course ... we expect that this trend will disproportionately favor companies that already have committed veteran digital health investors on their cap table," note Nagappan and Krasniansky.

4. 👻 A burst bubble spooks investors

Accelus, a Palm Beach Gardens, Fla.-based medical technology company focused on minimally invasive surgery, closed a $12m lead investment in its Series D financing led by Concord Innovation Fund II.

Intellect, a Singapore-based telemental health startup, raised $10m in Series A funding led by Tiger Global with support from K3 Ventures, Jafco Asia, Singtel Innov8, Persol Holdings, and insiders Insignia Ventures Partners and HOF Capital. http://axios.link/WaVN 

Brightline, a Silicon Valley-based telemental health company, raised $10m in Series C extension funds from Northwell Health, bringing total Series C funding to $115m. http://axios.link/K9J0

Kins, a New York-based digital-first physical therapy practice, raised $4m in seed funding led by W Health Ventures with support from insider Redesign Health. http://axios.link/dN7o

Arise, a virtual eating disorder startup, raised $4m in seed funding co-led by BBG Ventures and Greycroft. http://axios.link/3Bzm

Trinity Hunt Partners launched Parallel ENT & Allergy Partners, a management services organization for ear, nose and throat and allergy practices. https://www.trinityhunt.com/

123Dentist is merging with Altima Dental and Lapointe Group to form a single dental support group in Canada. KKR and portfolio company Heartland Dental are supporting the merger as new investors and are joined by insiders Peloton Capital Management and Sentinel Capital Partners. www.123dentist.com

ArchiMed acquired Title21, a Pleasanton, Calif.-based provider of digitization software for cell and gene therapy labs. www.title21.com

CBC Group may take South Korean Botox maker Hugel private less than a year after buying a 47% stake for $1.5b, per Bloomberg. http://axios.link/0wbK

Argosy Healthcare Partners completed the recapitalization and merger of Hudson Robotics and Art Robbins Instruments, creating a combined life sciences tools company focused on automated liquid handling instruments. https://argosycapital.com

Francisco Partners closed on nearly $17b in capital commitments between its $13.5b flagship fund, Francisco Partners VII, and its $3.3b Francisco Partners Agility III fund.

5. Deals o' the day

Hims & Hers (NYSE: HIMS) named former Greenberg Traurig health associate Soraya Keskey regulatory counsel.

HealthJoy named former Optum SVP Jason Williams chief product officer.

Insight Partners named former Amazon director of delivery partnerships Jason Garfield EVP.

CVS Health promoted former VP of strategic planning Jake White to VP of consumer health care merchandising.

Hildred Capital Management promoted Kevin Regan to VP.

VSS Capital Partners named W. Preston Hutchings senior adviser. 

Joseph Swedish, Concord Health Partners co-founder and partner, joined the Accelus board of directors.

6. It's Personnel

Situational awareness: We recently saw the first and only health tech IPO of the year in Heart Test Laboratories (Nasdaq: HSCS), a Southlake, Texas-based medical device company using AI to boost ECGs. (There was also the Excelera SPAC.) 

Any we missed? Are any others coming? Tell us.

🛶 Sarah is still recovering from an epic weekend of river boating on the Snake River, followed by a part-casual, part-sporty float down Flat Creek in a tire tube.

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July 12, 2022

1 big thing: Fold Health tucks in $6M for primary care tech