Why 1 investor thinks digital health is 'dead'

Entrepreneurs and investors should give the digital health sector time to evolve before funneling more money into it, wrote Rob Coppedge, CEO of Portland, Ore.-based Echo Health Ventures, in an op-ed for CNBC.

 

Since 2014, roughly $16 billion in venture capital funding has been directed toward digital health startups. This influx in funds means these companies would need to triple the public market capitalization of the health IT industry by 2021 if they want their investors to seen strong returns, Mr. Coppedge wrote.

"Healthcare services and IT have not historically bred unicorns … Still, many digital health companies raised capital at exceedingly high valuations, expecting technology-like exits," he wrote. "With a few exceptions, realizations have lagged and many companies are facing tough decisions made even more difficult by valuation overhang from their last rounds."

Mr. Coppedge argued many entrepreneurs in the healthcare space lack expertise, underappreciate healthcare-specific workflows and misunderstand patient journeys. Instead of simply throwing money at digital health startups, Mr. Coppedge believes these companies need help building, running and sustainably growing their ventures for the complex healthcare market.

"Entrepreneurs and investors need to take a step back and focus on how they can survive and thrive, driving the industry transformation that will play out over the coming decade," he wrote.

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