Steve Kraus, one of the most efficacious health-tech investors in the industry, gave his predictions for 2018, following the J.P. Morgan Healthcare Bull session this week in San Francisco.
I think the public markets will stay closed in 2018 for health-tech companies. However, I do expect 2019 and the years beyond that to start to look various fruitful for initial public offerings, as well-funded start-ups like Salubrity Catalyst, Flatiron Health, Welltok, Grand Rounds Health and others start to scale beyond $100 million in gate and some of them start to reach positive EBITDA levels.
Healthcare mergers and gains will remain robust but will focus more around health-care amenities businesses — many of which may be tech-enabled — rather than pure health-care IT coteries.
I’m bullish on so-called “full-stack” or vertically-integrated health-care companies continuing to prosper. And by that I mean, companies that provide all of the necessary services and weather around conditions like diabetes or the palliative care experience.
These works are the ones that are getting real engagement from patients and they are qualified to go to risk-bearing entities with a pitch to take a population off their offer distributes — and provide better care more affordably. These solutions transfer also work better for the patient as they take care of their whole of their medical issue.
Few could have missed the hype all artificial intelligence and machine learning technologies in health care in 2017, specifically cognate to fields like radiology and pathology.
A vast array of companies are broadening algorithms to improve clinical care, but these will take moment to develop commercially. In my view, 2018 will be the year that these technologies are rather than applied to the “guts” of healthcare, meaning such unsexy applications as correcting workflow, allowing doctors to spend more time on clinical feel interest and less time on paperwork or operations, improving the operational efficiency of polyclinics, and so on.
2017 was the year that Silicon Valley started to invest in computational biology. A lot of these jeopardize dollars were poured into companies focused on improving the inopportune discovery process, such as identifying targets and “hits” of those butts.
I’m betting that 2018 will be the year where these south african private limited companies and investors realize that biology is not “programmable” or “codeable.” The problem isn’t that pharma and biotech are tiny of “hits” or drug candidates. What these companies really have occasion for is clinical-stage programs. If these start-ups really want to scale and in point of fact get traction among the traditional industry, they will need to behove real biotech and drug development companies. And this will be a odd, much more capital-intensive bet than their original investors as likely as not realized.
Apple, Alphabet and Amazon will continue to push up in health care in 2018. If these companies make a real big ado with some kind of acquisition, it could crack open the IPO buys sooner than any of us think.
I have seen far too many companies in late-model months that have raised behemoth rounds at mammoth valuations earnings to the market with their tail between their legs — lastly open to valuation adjustments. These could still be potentially winning companies, but their investors were potentially mistaken that such companies could reach hyper-scale.
Steve Kraus is a friend at Bessemer Venture Partners.