Healthcare Software Deep Dive – Education Market Themes, Players, & Investors
We at Bowery Capital released the 2016 edition of Opportunities In Vertical Software in November, which laid out our point of view on ten specific verticals and the potential for various software solutions to dominate each of these ten verticals in the coming years. For ten weeks, we are releasing content focused around the impact of software on these ten industries. We covered the Education Vertical last week, and have also covered the Legal , Restaurant, Insurance, and Construction verticals in weeks prior. This Healthcare Software Deep Dive post is intended to provide an analysis of Healthcare market themes, players, & investors.
Healthcare Market Themes:
(1) Increase in Tech Spending – Healthcare is the fastest growing software vertical and is expected to accelerate in the upcoming years, as developing nations began to change systems to react to newer capabilities in new technologies. According to an IDC study 40% of U.S. Healthcare providers reported that their IT budgets are growing. While most of the budget spending (50%) is still invested towards on premise solutions, the study reported 18% of new software spending is going into Cloud base solutions. The same study cites comfort levels with the switch over to the cloud are growing; 41.5% of respondents said they were more comfortable with cloud in 2015, than in 2014.
(2) Analytics spending continues to grow, and big data is here to stay – Analytics will continue to be one of the fastest-growing segments in the healthcare industry. A report by IDC shows an increase of over 50% in big data and business analytic revenues over a 5 year period, with healthcare as one of the main drivers in analytics growth. Behavioral health issues (substances abuse, mental health conditions), will benefit greatly from this growth.
(3) Sub-markets & New Verticals provide Big Opportunities for Software – In the health management space, the rise of connected devices/wearables is creating opportunities for software founders to provide companion software. Opportunities also exist in upgrading patient monitoring, risk management and drug discovery by leveraging AI/machine learning/big data.
(4) Data security will be an area for innovation – Health apps and IoT connected devices are high-value targets of cyber attacks. This opens an opportunity for software founders building secure databases and those offering database security as a service. For example MedCrypt, a healthcare cybersecurity startup is focused on developing technology that will prevent connected devices, such as pace-makers, from being hacked.
Healthcare Industry Major Players:
McKesson continues to be one of the largest player in the healthcare software space, with 50% of health systems in their customer base. While originally a pharmaceutical provider, the company has begun moving towards providing healthcare software over the last decade. Cerner and QSI have also been leaders in their own verticals in healthcare software, with QSI focusing on dental technology, and Cerner focusing on laboratory clinics.
Healthcare Industry Emerging Players:
We’ve seen emerging software players in the healthcare space gain the most momentum. Some interesting players include AiCure, a company that uses artificial intelligence on mobile devices to confirm medication ingestion in clinical trials and high-risk populations. Atomwise uses Deep Learning Neural Networks to discover new medicines. Another noteworthy player is Fruit Street, which provides a platform that helps patients improve their lifestyle while enabling healthcare providers to connect with them.
Most Active Investors Focused On Healthcare Technology:
The most active firm historically through 2016 was New Enterprise Associates (MORE Health, Welltok, BetterDoctor) which recently closed a healthcare focused fund. Venrock (athenahealth, Castlight Health,RelayHealth), and healthcare focused incubator DreamIT (aircare, Redox, Lia Diagnostics) have also been active in this space. Many corporations are also spinning out their own venture arms to focus on strategic investments in startups, such as Blue Cross Blue Shield Venture Partners and Northwell Health.
Healthcare Market Themes Link Roundup For Emerging Software Founders:
CB Insights: https://www.cbinsights.com/blog/category/industry/digital-health-it/
Lean Startup: http://www.leanblog.org/podcasts/audio-podcast/
A16Z Blog/Podcast: https://a16z.com/tag/healthcare/
Thank you for reading our analysis on Healthcare Market Themes, Players, & Investors. Make sure to check out the 2016 edition of Opportunities In Vertical Software for the full report and we will be back next week with our next series of industry deep dives.