Contrasting B2B and B2C business models in digital health, with a deeper look at funding for both models, potential opportunities and investor perspectives
Contrasting B2B and B2C business models in digital health, with a deeper look at funding for both models, potential opportunities and investor perspectives
Rock Report: Business Models in Digital Health by @Rock_HealthPresentation Transcript
B U S I N E S Si M O D E L SDigital nHealthcon su m er & e n terp rise A ROCK REPORT BY
About We wanted to know more about promising business models in digital health.this This report sources data and feedback from interviews conducted withREPORT entrepreneurs and investors working in the space as well as industry research. Caveat: we are not professional white-paperistas, just curious advocates who like to share knowledge and further the discussion around the evolving digital health space. Produced by Christina Chang M. Jackson Wilkinson @changcsc @whafro Leslie Ziegler Halle Tecco @lesliejz @halletecco Rock Health is a nonprofit foundation focused on the intersection of healthcare and technology. We support the next generation of health entrepreneurs through a startup accelerator, open-source research and public events. Rock Health partners include Aberdare Ventures, Accel Partners, Fenwick & West, Genetech, Harvard Medical School, Mayo Clinic, Merck, Microsoft, Mohr Davidow Ventures, NEA, Nike, P&G, Qualcomm, Quest Diagnostics, Silicon Valley Bank, United Health and UCSF. For more information, visit rockhealth.com
20%15%10%5%0% 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 b 2020: healthcare spending will be 20 PERCENT of the United States GDP
nearly HALF of national health care spending isNON-VALUE ADDED(aka waste and inefficiency)
Because of all this inefficient spending,REIMBURSEMENT policies are shifting... from being based on to VOLUME OUTCOMES per dollar spent
NEW BUSINESSESare forming in digital healthtoADDRESS these CHANGES B2CDirect to consumer product B2BEnterprise product
WHAT ABOUT INCUMBENTS?the 76% of Fortune 50 companies are now in healthcare.24% have no health division. 24% are traditional health care companies.22% 14% 14%are Retailers: are Connectors: are Fixers:using deep customer using data to tighten attacking dysfunctionalaccess to serve new the patient-doctor parts of the system tohealth care markets. relationship. reduce waste. are Implementers: working across 2% traditional sectors to integrate healthcare.
B2C
CONSUMER PAIN POINTS 32% have had to fill out the same forms or information multiple times. 15% have had difficulty obtaining their own health information (such as labs or records). 11% have had a test or procedure repeated due to inaccessible information during a visit. 11% have registered for a program or purchased a product that did not meet their needs. 8% have required medical treatment because they could not access preventative care. 8% have received an incorrect prescription or one that reacted with a current medication.
20% HALF of consumers say they would BUY mobile health tech 18% they’d like to: monitor fitness & wellbeing11% allow a physician to remotely monitor a condition continue to monitor a previous condition
Analysts say consumers are willing to spend $14 billion dollars on certain digital health technology products $700 Million: $4 Billion: $8.9 Billion: mobile health health-related resources rating applications video games MDs & hospitalsWillingness by age group:50% 50% 50%25% 25% 25%Age 18 25 35 45 55 65+ + Age 18 25 35 45 55 65 Age 18 25 35 45 55 65 +
CASE STUDY 5 problem: Monitoring and prevention of chronic conditions. B2C 5 solution: Consumers purchase Your real-time activity stats directly and use. so you know how close you are to your goals.
CASE STUDY 5 problem: Remote monitoring and personal/family data tracking. B2C 5 solution: Consumers purchase The first WiFi body scale, directly and use. blood pressure, and smart baby monitor connected to iOS devices.
on investing in B2C companies: “ If you’re designing for a VP of Engagement at some insurance company, his or her needs will be very idiosyncratic and designed for corporate policy, not for the end user. If you get a better product that’s well-designed, you’ll get better health outcomes. Going direct to consumer is difficult too...but at least there isn’t this overlay of nonmarket complexity. “ [B2C companies] do have much faster iteration cycles, and you get a better product at the end of the day. “ The benefits of being B2C are that you bypass this huge, antiquated, enterprise-like sales cycle... Why do that when you could actually just go to the market and get really fast data, tailor your product, and let the market speak? “ There has never been an opportunity like now to sell healthcare services directly to consumers. Patrick Chung NEA – Partner
on business models: “ Monetization isn’t what’s most important to where we are today. We’re very focused on growth and engagement – growing our user base, our engagement levels, our menu of different applications.on fundraising: “ It’s much harder to get massive scale than it is to figure out how to make money. We had to show traction and sell our vision and convince investors that we’re the team to do it.on the future: “ We think there are interesting opportunities with brands, wellness platforms, insurance companies, doctors. Ultimately, these worlds are going to converge, but it will take a while, and right now we’re not concerned about the ‘how.’ Jason Jacobs RunKeeper – CEO & Founder
on choosing the right investors: “ The worlds of consumer products/services and healthcare are colliding, and each feature different sets of product requirements, potential partners, operational imperatives and personal networks. Seek complimentary strengths on your board and investor base, just as you do your team.on the product: “ Its not good enough to produce a solution that is better than the status quo in healthcare. Thats easy. Aim to deliver a product that delights the user with an engaging experience on par with the best consumer companies on the web. “ While the ultimate vision of a horizontal play that aggregates consumer health-related data is compelling, the reality is that we are in early days for readily available data sources. Today, Im looking for products that deliver a very specific value proposition to the user, on day one. Jason Krikorian DCM - Partner
B2B
Most doctors Access electronicW I couldthey SH medical records Prescribewirelessly: medication Monitor inpatients Initiate & track referrals Communicate with patients Monitor outpatients
ht Weig ga r s u d it y loo s tiv B ign c ita l s e &A V s e rci Ex ve l te rns le t ain p pa m P e th Sle r hy ac a rdi C ol o ntr c der ux h lad refl e alt B i d e h Ac s tiv Dige65% 61% 57% 54% 36% 35% 28% 17% 16% 13% 12% no 88% of surveyed physicians would like patients to be able to track or monitor their health at home.
Accessing info when needed Increasing face time with patients Increasing patient compliance Improving physician communication Communicating with patients moreSPECIALISTS efficiently PRIMARY CARE Doctors’ biggest obstacles HAVE TECHNOLOGY SOLUTIONS
CASE STUDY 5 problem: Implementation of “meaningful use” of technology. 5 solution: B2B Doctors use for free, The fastest-growing supported by advertisements. free electronic medical records community.
CASE STUDY 5 problem: Rising healthcare costs and insurance premiums for employees and employers. 5 solution: B2B Employees use, An employee wellness program employers pay. that combines the best of social media & online games.
CASE STUDY 5 problem: Rising healthcare costs and insurance premiums for employees and employers. 5 solution: B2B Employees use, Personalized, unbiased views employers pay. of healthcare price and quality.
on B2B investing due diligence: “ Do you have a pilot? Is the pilot paid? What kinds of engagement are you getting? How many more pilots do you have set up? What’s in the pipeline? If you’ve been piloting for six months, can you show uptake, engagement, and early results?on B2B investing: “ It’s less about monetization early on and more about downloads, engagement, and retention... that’s what we’re really interested in as far as proving the utility of the product.on investing in digital health: “ Sometimes it’s revenue and sometimes it’s usage, with the belief that revenue can come. Rebecca Lynn Missy Krasner Morgenthaler Ventures – Partner Morgenthaler Ventures – EIR
on investing in B2B companies: “ Sales cycles are obviously a big concern. It could take eighteen to twenty-four months to convert a new customer, and that’s funding that isn’t generating value quickly.on consumers’ willingness to pay: “ Consumers are financially on the hook for healthcare costs more than in the past, so I imagine consumers will be willing to pay more going forward.on what matters: “ We don’t know if consumers or payers or anyone else will pay, but if we know that it’s engaging consumers, that’s what matters. “ ...to be able to reduce costs, get sustained engagement, and ideally to demonstrate improved outcomes. That’s the winning combination. Abhas Gupta Mohr Davidow Ventures – Associate
B2CvsB2B
Business Consumers use insurance/pharma pays Organizations use & purchase Consumers use, ad supported Consumers use, Doctors use for free, Who physicians pay ad-supported pays? Consumers use & purchaseConsumer Who uses? Business
$600M 77% of 2011 digital health venture funding went$450M to B2B models.$300M$150M Average funding: Consumer: $9M $0 Business: $11M
5 tradeoffs B2B B2CHigher willingness to pay Lower willingness to payGreater lifetime value Quicker product iterationsof customers and user feedbackLonger sales cycles Shorter sales cycleRequires gatekeeper Crowded landscapeapproval or systemsintegration
5 opportunities B2B B2CWith a move to pay-for- Consumers are moreperformance, incentives willing than ever to pay outare in place for hospitals to of pocket for health tech,adopt new technologies. to the tune of $14B.
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