Health IT investments: Proven winners or scrappy startups?

Experts agree that healthcare transformation is underway and the markets for healthcare technology are full of promise, but there’s less agreement on whether small startups or big corporations are the best investment bet.

Just as technology that radically altered the way we shop, communicate and book travel came from small companies, some started in dorm rooms, garages or basements, healthcare innovation will likely have similar roots, argues Robert Graboyes, a senior research fellow with the Mercatus Center at George Mason University.

Sure, large, established organizations such as governments, hospitals, insurers and pharmaceutical companies play a role, he writes for, but truly transformative ideas come from tech-savvy people applying their skills to healthcare problems they’ve faced personally.

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The behavioral health startup myStrength, for example, grew out of Scott Cousino’s struggle with depression. His co-founder, Matt Sopcich, lost his brother to suicide. They applied their experience with online learning and web technology to create the myStrength app, which recommends e-learning tools and activities to address individual behavioral health problems. It becomes more precise the more the user interacts with it, they say.

Meanwhile, Casper de Clercq, general partner at Norwest Venture Partners, believes some folks are naive about how quickly healthcare disruption will happen. So he recommends investment in more proven technologies.

He and his colleagues expect projects to show return on investment within a year, he says in an interview at SearchHealthIT.

“We look for good clinical evidence. We look for outcomes. We don't look for pilots," he said.

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Nevertheless, investment in early-stage digital health was the strongest on record in the first half of 2016, with $3.9 billion invested in 155 seed and Series A deals, according to Startup Health. Rock Health reported $12 billion total investment for the first half of the year, the bulk going to seed and Series A rounds.