Digital Health Year-in-Review

When COVID-19 first made landfall in the US, everyone speculated about when life would go back to “normal.” Two years later, it’s clear that some parts of our lives will never be the same, particularly what we expect of and how we consume health care. Telehealth utilization has stabilized at levels 38x higher than pre-pandemic levels with utilization of 13–17% across most specialties, according to McKinsey. Employers also faced a reckoning this year, as nearly 18 million Americans quit their job from July to November — all-time highs in the metric’s 20-year history. These culture-redefining moments are reshaping healthcare and accelerating the pace of innovation.

At Greycroft, we’ve witnessed the decades-long overnight success of digital health firsthand, as early investors in Bright Health, Thirty Madison, HealthVerity, Medly, Eden Health, Sapphire Digital, and many others. Over the years, we’ve invested in one overarching thesis: the future of healthcare will be more consumer-driven. As we reflect on 2021, it’s clear that this theme continues to play out in new and interesting ways. In this piece, we’ve attempted to summarize a few of these trends in what has been a banner year for digital health.

We’re more excited than ever about digital health and believe there’s so much more to be done. As always, we believe the best ideas start with a conversation. And we want to be part of yours, no matter how early. If the themes below resonate with what you’re building, or if you’re just looking for a thought partner to riff on an idea with, please reach out!

It’s time for custom built digital Health infrastructure

The first generation of breakout digital health companies typically built their tech stack from scratch, slowly hacking together their own EMRs, care coordination platforms, credentialing management, and billing software. Today, the digital health ecosystem is large enough to be a buyer of custom-built software. As a result, we expect digital health companies to opt to buy tough-to-build, mission-critical pieces of their tech stack and go to market more quickly as a result.

We’ve met several low-code / no-code or API-first platforms tackling different pieces of the care stack, from clinician coordination to patient billing. While many early-stage businesses are building in stealth, several growth-stage companies have emerged as well: Medallion (credentialing), Ribbon and Redox (provider and payor data APIs), and Wheel (staffing), to name a few. We can’t wait to watch this market mature and to continue to invest in this area.

The Great Resignation highlights importance of employer benefits

Labor market shifts and increased competition for talent reinforces the importance of comprehensive employee health offerings. While many employers would be willing to spend more to retain talent, we continue to see solutions that dually save employers money and increase productivity: a win-win for all stakeholders.

We’ve made several investments in this space: ianacare (caregiving), Eden Health (primary care & navigation), and Elevate (consumer-directed benefits platform), among others. We expect this category to continue expanding as employee expectations shift.

Data solutions are beginning to unlock the future

Between the rapid response that COVID required and the continued proliferation of value-based care, the need for tooling that quickly digests data and unlocks actionable insights has never been bigger.

We’re proud to be an early investor in HealthVerity, a data infrastructure platform that’s playing a critical role in the CDC’s COVID-19 response. Another Greycroft portfolio company, ClosedLoop, was selected this year as the winner of the Centers for Medicare and Medicaid Services (CMS) Artificial Intelligence Health Outcomes Challenge. Solutions like these — software that digests data and provides actionable insights to improve outcomes and reduce costs — will be a key building block in transitioning to value-based care.

Everything is fintech (including healthcare!)

While this certainly won’t be the only Year-in-Review to point out that “everything is Fintech,” we see many opportunities within healthcare: payments, payor billing, employer benefits, federated identity, and affordability, among others.

At Greycroft, we were excited to partner this year with Elevate, a platform that enables employees to make the most of their benefits. While category defining API platforms like Ribbon and Particle stand out today, we’ve seen nascent API-first companies attempt to tackle the federated identity layer (Flexpa and Hygrid Health). We’ve also been excited by businesses in the payments and payor billing space, like Candid Health, Ness and Nirvana.

Banner year for behavioral health

The pandemic accentuated the need for mental health and addiction services in the US. First generation businesses like Ginger, Lyra, and Modern Health have destigmatized and redefined access to therapy. As more Americans seek care while the supply of clinicians remains the same, we expect models targeting verticals within behavioral health to gain traction.

We’ve invested in Octave, an evidence-based and outcome-driven mental health practice. We’ve also seen businesses like Therify and Violet begin to address underserved populations in a culturally-responsive, personalized way. Meanwhile, others like Brightline, Charlie Health and Mantra have focused on pediatric and young adult populations, where the need for personalized mental health services has too often gone unmet. We also expect entrepreneurs to target various levels of acuity, ranging from preventative, wellness applications like Yoni Circles and Breathwrk to businesses addressing serious mental illness, like Valera Health and NOCD.

We’d be remiss not to mention the addiction epidemic as well, where several digital health companies have begun to tackle opioid and other addictions via innovative, tech-enabled models. In this space, we are proud to have partnered with Boulder Care, a telehealth addiction clinic grounded in science and empathetic care.

All chronic conditions are on the table

While companies like Livongo and Hinge Health / Sword Health have become category defining businesses in the diabetes and musculoskeletal (MSK) space, there’s both room to continue building in these high spend areas and numerous other chronic care areas ripe for digital-first solutions. In addition to diabetes and MSK, we’ve seen a proliferation of businesses in cardiology, oncology, and Gastroenterology (GI), among others.

This year we made an unannounced seed stage investment in the cardiology space focused on preventing high-cost cardiac events by managing blood pressure levels. Other businesses like Recora and Ucardia are modernizing cardiac rehab, which only has ~33% adherence on average despite dramatically improving outcomes. In other instances, we’ve seen several virtual care clinics that combine clinicians and consumer-centric virtual platforms to holistically manage chronic conditions. In GI for instance, we’ve seen this theme across businesses like Oshi Health, Bold Health, Agora Health, and Aila.

New payors go public, traditional payors modernize

While it still feels like the early innings for digital health, this year’s IPOs of Bright Health (a Greycroft portfolio company) and Oscar Health demonstrate that consumer-driven healthcare extends beyond just care delivery.

In response, payors are pursuing partnerships to modernize their offerings and provide more personalized, consumer-centric experiences. Eden Health, a business we’ve been fortunate to partner with from the beginning, recently signed a partnership with a large health plan to offer their members a digital-first primary care offering. Similarly, we’ve seen category defining businesses like CityBlock partner with health plans across the East Coast.

We expect payors new and old to continue partnering with digital health businesses, both to better meet consumers’ needs and to improve outcomes.

Direct-to-Consumer brands expand their purview

Many early movers in consumer-driven digital health built businesses on a direct-to-consumer (DTC) model and targeted relatively low acuity needs, like hair loss and birth control. As these businesses mature, some have become more clinical and expanded into traditional distribution channels. For instance, our portfolio company, Thirty Madison now boasts an array of offerings to address migraines, gut health, and allergies in addition to hair loss. As a part of the company’s $140mm Series C, they announced their intention to reach patients through employers and healthcare payor networks via partnerships, expanding their go-to-market beyond the DTC model.

While DTC cash pay models quickly proved out product-market fit, we expect these businesses to expand into more clinical areas and incorporate payor reimbursements to address a larger swath of the population.

At Greycroft, we’re incredibly excited for the future of digital health. If you’re building in the space, we’d love to hear from you no matter the stage — leave us a comment, engage with us on social (Ellie Wheeler, Sharla Grass, and Tyler Olkowski) or reach out directly at tyler.olkowski@greycroft.com!

Disclaimers: The portfolio companies identified and described herein do not represent all of the portfolio companies purchased, sold or recommended. The reader should not assume that an investment in the portfolio companies identified was or will be profitable. A full listing of investments can be provided upon request. Past performance is not indicative of future results. This is not a solicitation of an offer to purchase securities and may not be relied upon in connection with the purchase or sale of any security.

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Greycroft

Greycroft

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A seed-to-growth venture capital firm that partners with exceptional entrepreneurs to build the world’s most transformative companies.