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As health tech evolves, where do the investment opportunities lie?



Historically healthcare has been one of the more relatively slow-moving industries when it has come to the pace of its technology adoption and digital transformation.

Covid-19, however, has forced the sector to react to new demands and ways of working, leading to big strides in the acceleration of tech adoption and digital usage as businesses try to find ways to solve old as well as new issues created by Covid-19.

One example of this has been the progress of adoption and implementation of technology within the NHS, resulting in some areas of the service being transformed in a matter of weeks following years of trying.

One barrier historically has been GDPR restrictions and the reluctance to share patient data between providers but now, with the need for technology like Track and Trace, barriers like this have had to be removed, opening the door for technology to really demonstrate its value in healthcare.

The health tech landscape

In response to problems such as enforced remote working, resource constrained medical facilities and a need for private and public sector collaboration, businesses that offer tech enabled services and software have helped provide solutions for these issues and reduce the friction that was often found in traditional processes.

Teleradiology company, 4Ways, is a good example of this –  it offered NHS Trusts the opportunity for their own radiologists to report Covid-19 activity for their own Trust, from home and for free, using 4Ways’ remote platform and in-home equipment allowing safe day-to-day remote working for NHS staff who provide a critical reporting service.

There have been opportunities for businesses in the direct to consumer side of health tech too, given the priority focus from the global population on personal health. Wearable devices, for example, have seen a rapid increase in demand as consumers look to be able to track and monitor data patterns, as they increasingly focus on their personal health, fitness and sleeping patterns.

Additionally, mental health has been a key concern for many, resulting in the adoption and subscription of apps and online platforms aiming to help provide support for mental health problems. With a variety of short and long-term opportunities out there, this sector continues to be one to watch.

The investor’s point of view

Covid-19 has pushed healthcare to the forefront of everyone’s minds including those in the business world, leading to an upsurge in investor interest. Many funds are now looking to invest in the sector, particularly the tech side.

From an investment perspective, health tech has clear attractions from both a growth, but also resilience, perspective.

Strong market demand and tailwinds provide growth opportunities. Resilience is found in a number of forms – typically subscription based or long term contracts, and tech is often embedded within customer and client workflows, meaning high levels of recurring revenue and low client churn, as well as macro resilience across the economic cycle.

There are two different types of investors – those who want to invest from the early stages, and those who will be investing in more mature business models that have reached a certain level of scale and profitability.

In terms of VC and early stage funding, investors will be looking for disruptive business models, with a focus on innovation and top line growth – there will be no shortage of these opportunities in the current environment.

Meanwhile, investors seeking more mature assets may have more of a watching brief on this space to see which emerging, new businesses are able to scale successfully, and which have tapped into the more longer term, sustainable trends.

Although, that’s not to say there isn’t interesting opportunities out there for larger investors too.

The crisis has exposed outdated processes and operations that have resulted in inefficiencies in the sector. The use of tech enabled services and software in recent months has demonstrated the unquestionable value it can bring. This, coupled with the ongoing focus on healthcare throughout the winter, means that health tech businesses are going to remain high on investors’ agendas for the foreseeable future.

Laura Morrill, is investment Manager at ECI Partners, a growth-focused mid-market private equity firm.

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