Where to look in digital health

The secret to success is looking beyond the device.

Or so says digital health entrepreneur Jeff Dachis.

“We’re not thinking we’re in the device business,” said Dachis, founder of One Drop, a diabetes management service that includes a mobile app, a monthly subscription for supplies and a Bluetooth glucose meter. “We’re thinking were in the diabetes management system (business).”

With his healthcare-as-a-service approach, Dachis is at the heart of a powerful movement in the medical industry: a shift toward the consumer brought on by the spread of smartphones, sensors and big data.

“You’re talking about a true revolution where people become empowered by their own information,” Dachis said. “You’re talking about an enormous shift toward self care.”

It is a shift that is unlocking opportunities for investors and built on the assumption that hospitals and providers will ultimately seek to improve care delivery and patient satisfaction by deploying consumer-facing services developed by young venture-backed companies.

The interest level is high.

One seasoned investor with a comprehensive approach to the space is Casper de Clercq, a general partner at Norwest Venture Partners.

De Clercq said his interests includes healthcare products and services for the employer market, where some companies have begun to offer employees products and services to improve choice and lower costs, and telemedicine services, which can cut down on unnecessary emergency room visits and increase convenience.

He also is focused on disease prevention services, patient-engagement companies and startups offering on-site and managed care, where one Norwest investment is Crossover Health.

Startups need to demonstrate that a technology-enable service can improve outcomes and efficiency, de Clercq said.

Another approach that has attracted Ian Sigalow, a partner at Greycroft Partners, is the technology-enabled data service offered by CareSync. The company focuses on chronic disease management.

“This is really the first mass-market version of a patient advocacy service,” said Sigalow, who considers digital health one of five or six top investment areas for the firm. “It’s starting with the chronically ill.”

Because the shift to value-based care will happen at a different pace in different medical practices, startups need to know not just how providers operate, but how to make patients a central part of their businesses.

At telemedicine company Zipnosis, which raised $17 million in January, it’s all about using data and devices to permit more efficient care delivery to patients and rapid diagnoses by clinicians.

“At the core of what we’re doing is taking an analog experience and making it a digital experience,” said chief executive Jonathan Pearce. “The opportunity for us in the future is to be an economically transformative company for our clients.”

An additional differentiation for startups is specialization. Instead of trying to be everything to everybody, young companies need a focused value proposition to sell the benefits of SaaS-based models to an industry not yet familiar with them.

In this case it is more about reasonable expectations than global dominance.

Photo of doctor using Google Glass courtesy of Augmedix