Digital Health Is Dead, Says This Health-Tech Investor

Let me be clear: I believe strongly in the need for substantive, consumer-centric transformation of the health care system and have been a long-term proponent of the power of entrepreneurs to catalyze and drive these difficult changes. Despite this, I truly struggled to prepare for a recent presentation on the future of venture capital investing in the "digital health" space. The group I addressed expected another digital health pep rally – but, after much reflection, the best I could bring them was an explanation of why, despite the countless blog posts and questionable survey data to the contrary, I believe the digital health party is over and why those of us focused on long-term systemic transformation should be happy to put this hype cycle behind us.

Since 2014, roughly $16 billion in venture funding has been invested across 800-plus companies in the digital health space. If the investors of these companies were to generate the returns they are expecting, we would need to triple the public market cap of the health IT space by 2021. These are unrealistic expectations that have created an unhealthy environment for tech-enabled health care start-ups and the entrepreneurs that lead them. Only recently have the VC unicorn watchers across the blogosphere begun to question we aren't seeing the billion-dollar success stories from other industries replicated in HCIT (health care info tech), exposing underlying concerns that threaten the return profiles of overcapitalized digital health portfolios.

The only thing that has grown faster than dollars invested in digital health has been the hype surrounding it – with conferences, blogs, incubators and Twitter handles springing up everywhere. While primarily differentiated from stodgy HCIT by the average age of its practitioners, digital health has brought two important developments to the industry: a pervasive optimism that health care services problems could be solved with better technology and a keen proficiency at venture capital fundraising...