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BFD Expert Voices - Health Tech Deals

BFD Expert Voices

After a lackluster 2022, health care information technology funding is creeping upward, according to a new PitchBook report.

Why it matters: The market may finally be approaching that elusive "new normal," after the feast and famine that characterized the last three years of health tech funding, Axios' Claire Rychlewski reports. 

Of note: The report defines HCIT as software used by providers and payers.

By the numbers: There were 70 VC rounds closed in HCIT in Q1 for a total of $1.3 billion — slightly up from Q4’s low point but down considerably compared with 2021 and 2020.

Q1 saw 27 private equity deals, roughly flat from Q4 of 2022.

Zoom in: While the market is still mid-thaw, generative artificial intelligence and technology enabling interoperability have been two bright spots, the report says.

A federal regulatory push toward data interoperability is propelling interest in the space, the report says, citing Zus Health's $40 million Series A extension and Clearsense's $50 million Series D.

What they're saying: Alongside solving patient pain points, interoperability-focused technology "should provide a lot more clarity and a much more robust dataset around population-level clinical data," Jordan Nof, managing partner at Tusk Ventures, tells Claire. 

The ongoing transition to value-based care is predicated on building that long-term patient data, the report notes.

Between the lines: With leverage still being hard to come by for private equity-led buyouts, some sponsors are investing in late-stage startups, the report notes.

Axios reported Enhanced Healthcare's $45 million investment into Janus Health in February.

"Compared with buying out a mature company, this strategy is less capital intensive and requires no leverage; lately, it has also begun to look more attractive from a valuation standpoint," the report says.

1 big thing: HCIT funding inches up 

Illustration of a health/ hospital plus with an upwards arrow

Georgia health system Wellstar Health's Catalyst fund has a "full slate" of direct investments for the coming fiscal year, says Hank Capps, president of Catalyst by Wellstar.

Why it's the BFD: Funds like Catalyst are helping fill the financing chasm caused by the collapse of Silicon Valley Bank, Aaron writes.

Driving the news: Wellstar launched a $100 million dollar fund last month, to be invested across digital health, customer experience, data, future of work, supply chain and logistics, and sustainability.

The first four direct investments announced were with med-tech company 410 Medical; pre-natal and postpartum digital health company Marani Health; antimicrobial tech company Vyv; and patient data company MetaCX.

"We anticipate having numerous more direct investments this fiscal year and a full slate for the coming fiscal year," Capps tells Axios.

What they're saying:  "Now more than ever before, there is a real gap in funding innovation from early stage of concept and commercialization and high adoption of innovative ideas," says Kyle Chenet, CEO of 410 Medical.

"There is a lack of funding, especially in the Southeast, as fewer of these funds have positive impact in the state of Georgia," he adds.

Zoom in: 410 Medical, known for its handheld rapid infusion device Lifeflow, has raised $20 million including a $7.5 million Series B from Catalyst.

"We will leverage this capital, plus cash flow from revenue will fund the company through profitability and to be cash flow positive," Chenet says. "Then we will maybe pursue a growth equity investment in two to three years."

Meanwhile, Marani Health CEO Ann Holder says access to quality pre-natal and birthing care is more limited in Georgia, noting the state will be the first Marani deploys to.

The company is currently submitting its remote fetal-monitoring device for regulatory approval to the FDA and is eyeing a Series A fundraise now, the CEO says.

"We are selling into large hospital systems who understand how to make care delivery more efficient and provide better outcomes and help hospital profitability," she says.

By the numbers: Wellstar plans to make 50 direct investments, to create a portfolio of funds that will have 150 indirect investments, Capps says.

Those 200 companies will see investments made at the pre-seed, seed and Series A level, he says.

2. The BFD: Wellstar Catalyst has full roster of investments

Illustration of a first aid bag filled with cash.   

• Sami, a Brazilian health insurance startup, raised $18m in Series B funding. Redpoint eventures and Mundi Ventures co-led, and were joined by Alumni Ventures, Endeavor Catalyst, Digital Horizon, Tau Ventures and insiders Monashees and Valor Capital. www.samisaude.com/br 

• BJC HealthCare of St. Louis-based and Saint Luke’s Health System of Kansas City are exploring a merger that could create a $10b academic health system. https://axios.link/3WLMK46

• Johnson Matthey (LSE: JMAT) hired Goldman Sachs to find a buyer for its medical device business, which could fetch "several hundred million pounds," per Bloomberg. https://axios.link/3qnUUDr

• Selva Ventures, Los Angeles-based VC firm focused on consumer wellness, raised $34m for its second fund. https://axios.link/45xveVj 

3. Deals o' the day

• Bicycle Health named former One Medical VP of operations Amy Finney chief operating officer.

• Found named former Aetna chief medical officer Kyu Rhee to its medical advisory board.

• Annexus Health named former Olive AI EVP and general manager Aaron Kull chief product officer.

• Carallel named former Onlife Health VP Glenn Leary chief revenue officer.

• Upstream USA named former Pill Club head of public affairs Margy Levinson director of external affairs.

• Limitless Minds named co-founder DJ Eidson president.

4. It's Personnel

🤖 Eating disorder helpline disables chatbot for "harmful" responses after firing human staff — Vice

⬇️ Opinion: American life expectancy is dropping — and it’s not all COVID’s fault — the Washington Post

✨ Researchers and startup leaders present new way to evaluate digital health companies' evidence — Nature

5. Your daily dose

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It's Thursday already, Health Techies, and the first day of June. 

📺 Erin watched the latest episode of "Ultimatum: Queer Love" and is hooked.

🙌 Thanks for reading, and extra thanks to newsletter editor Claire Rychlewski and copy editor Mickey Meece. Please ask your colleagues, friends and family to sign up.

June 01, 2023

1 big thing: HCIT funding inches up