During the COVID-19 pandemic, health technology (healthtech) investments surged as market activity skyrocketed. However, over the past 18 months, investment volumes have trended downward due to inflation, high interest rates, and growing market uncertainty. Investors are now rethinking their strategies, moving from a focus on high-growth startups to prioritizing more established companies with proven revenue and profitability.
This shift is evident among a broad range of investors, from venture capitalists (VCs) and private equity (PE) firms to large healthcare companies and non-traditional investors like tech firms. Healthtech offers distinct value propositions for each type of investor, including opportunities to reduce costs, drive sustainable growth, and uncover new efficiencies. Deloitte’s analysis of Pitchbook data suggests that investors are now focusing on the durability and quality of their healthtech investments rather than sheer growth potential.
Six Key Areas of Focus for HealthTech Investors
Healthtech encompasses a wide range of technologies and software solutions that serve the healthcare industry. This includes electronic medical record (EMR) systems, telehealth platforms, decentralized clinical trials, and more. Based on Pitchbook data and market trends from 2018 to the present, six primary segments are emerging as focal points for healthtech investors:
- Revenue-Cycle Management:
The increased use of artificial intelligence (AI) by payers has led to more claim denials for providers. In response, healthcare providers are turning to AI and automation to streamline revenue-cycle processes and reduce denials. This has created a growing interest in AI-driven revenue-cycle management solutions. - Next-Generation Discovery and Treatment:
The cost and time required to bring new drugs or therapies to market are high, with pharmaceutical companies spending an average of $2.3 billion per drug. New technologies, such as AI, machine learning, and data platforms, are helping reduce costs, speed up drug discovery, and advance personalized medicine and decentralized trials. - Fitness and Wellness:
Wearable health technologies, including smartwatches and rings, are opening up new patient-clinician conversations. Real-time health tracking through these devices enables predictive analytics and personalized feedback, broadening the scope of health management beyond the traditional doctor’s office. - Smart Devices:
Physicians are increasingly recommending smart devices as diagnostic and monitoring tools. These devices, often developed by medtech companies, must meet strict regulatory standards. While the barriers to entry are higher compared to consumer-focused fitness devices, smart devices fit seamlessly into clinical workflows, offering enhanced connectivity and data integration. - Virtual Health and Care Coordination:
Virtual health saw a sharp rise during the pandemic and, while its use has declined since then, it remains a valuable healthcare solution. Remote patient monitoring and home health services are growing, allowing patients to receive care in the comfort of their homes. Virtual health is also becoming more integrated into the broader healthcare ecosystem, enhancing personalized care. - Next-Generation Healthcare IT:
Healthcare IT systems are shifting from legacy, on-premise solutions to cloud-based systems. Investors are particularly interested in tools that enhance cybersecurity and improve the resilience of healthcare data systems. Additionally, AI-enabled solutions that drive data interoperability and connectivity are gaining traction as they improve patient outcomes.
Investment Trends: From Growth to Value
Investors who entered the healthtech space during the 2020-2021 market boom may now be re-evaluating their portfolios, with some looking to offload assets that no longer fit their broader strategies. Financial and strategic investors are increasingly focused on mature companies with proven business models, rather than high-risk startups. This trend from growth to value is particularly evident in segments like life sciences, medtech, and next-generation discovery, which are receiving more investment dollars.
As investors assess their portfolios, opportunities may arise for those looking to align their investments with long-term sustainability, operational goals, and the latest healthcare innovations.
Conclusion
Technology continues to play a pivotal role in the healthcare industry, driving innovation across various healthtech segments. For investors, understanding the market through the lens of these six key areas—and recognizing the shift toward value and quality—can help identify successful, impactful opportunities in healthtech.
