Despite storms, hail, and flash flood warnings, San Francisco hosted the JP Morgan Healthcare Conference live and in person last week — and it was back and forth, rushing from one meeting to another as per usual.
To kick off the week, our team at Creative Ventures hosted our healthcare portfolio founders in Jack London Square. We truly enjoyed grabbing an evening of their time, giving them a brief reprieve from the tireless efforts they’re putting into reducing the costs of healthcare while reflecting on the privilege it is to work with such wonderful minds.
Later in the week, I went on to partake in two panels; the “Finance Panel: Investment and Partnership Trends in Digital Technologies” hosted by Biotech Showcase, and the “Investor Panel” hosted by Israel Economic Mission.
Between on- and off-panel discussions, lunches with fellow investors, and reception chats with old and new acquaintances, as well as overhearing talks from other tables in hotel lobbies, here are my top takeaways from JPM 2023:
Early-stage investments have slowed down, but the best deals are still oversubscribed
Keeping exposure bias in mind, the funding environment for seed and series A health tech companies is still quite active. Valuations have been recalibrated given the market condition, but VC firms are taking advantage of a slower deployment pace to dig into the diligence and get to know the companies. This is largely in line with the various reports that show early stage investments are more sheltered than those focusing on late stage companies.
That said, for early-stage pre-revenue companies with less than six months of runway, it doesn’t matter what the market climate is. If you need to raise, you need to raise. There’s no waiting out the storm.
The pressure to align stakeholder incentives is stronger during tough times
During the JPM conference, there were a lot of talks about digitizing the healthcare system. While it’s hardly a new topic, it is one example of solutions that get put on hold during a time when financial and resource budgets are tight. Providers just came out of a brutal year where 50 – 70% of the hospitals were operating at a loss in 2022.
Our stance remains that unless the solutions fit into the workflow for operators, provide positive economic incentives for providers and payors, and result in improved patient outcomes, adoption is a roadblock that can make or break a solution’s viability.
While we don’t specialize in direct-to-consumer opportunities, we’re inclined to believe that its closely related business model of targeting employer-sponsored programs will prove rather volatile in 2023. Sure, things were going well when tech companies were at their peaks, showering their workers with perks, but things are bound to change after multiple high-volume layoffs at the end of last year. This path to market relies so heavily on how well the rest of the market performs, rather than macro trends observed in the areas of an aging population and rising healthcare costs.
A looming healthcare system failure due to labor shortages
The global pandemic gave us a front-row seat to the strain our current healthcare systems are subject to under human resource pressures. And the fact remains, those problems are not going away. In fact, they’ve been exacerbated.
Anyone with a remote sense of self-interest witnessing what healthcare professionals went through wouldn’t wish that upon themselves.
This is the exact intersection of two of our investment theses: labor automation and reducing healthcare costs. We see it as a particularly pressing and growing market so, perhaps biasedly, it was surprising to see a lack of discussions centered around how we as a society will be tackling the issues. We can only surmise it’s because the topic falls so far outside of pharmaceutical companies’ businesses — and that’s where the money is.
Having actively searched for companies working in the space, scattered workflow and integration are two key hurdles most solutions fail to address. Hopefully, for the sake of our sustainable access to healthcare, that does not mean it cannot be done. Our prediction is that the pressure from labor costs and availability will only aggravate in the immediate future, while the need for healthcare in an aging population will skyrocket, making it a prime market for startups to tackle.