After an introductory drought on several years in digital health, two companies – Hinge Health, focused on musculoskeletal care, and Omada Health, specializing in the management of chronic diseases – have become public this year. The renewed activity follows an increase of 2021 of IPOs on the Digital Health Stock Exchange which failed to meet expectations.
So, what have the venture capital learned during this period on health technology on public procurement? This question was asked during a recent round table at the AHIP 2025 conference held in Las Vegas. The session was moderate by Bill Evans, founder and general partner of Rock Health Capital, a seed fund.
One of the panelists noted that it was great to review public procurement interested in digital health. However, enthusiasm is temperate.
“You must always go out with a solid company and [profit and loss]And there is always this kind of compromise between the growth and profitability that public procurement examines, “said Kurt Sheline, partner of Echo Health Ventures.” If you are not profitable, you better grow quickly. And if you don’t grow up quickly, you’d better be a fairly high margin business. And everything that is between the two is in a way in this strange and non-basic land.
“Speaking for our portfolio, there are large companies which are always deprived on a large scale, increasing quickly, solid margins and trying to face this compromise, and the moment when this compromise strikes the [profit and loss] To be able to become public, ”he added.
Another investor noted that the “doors were too open” a few years ago when there was a peak of digital health companies in public. Many of these companies have since underperformed. It made it difficult for other companies to become public in the following years.
“I think it’s extremely positive now that we have the hinge and Omada who has just been released,” said Siobhan Nolan Mangini, Venrock partner. “That being said, the bar is super high. And I think it’s growth and profitability. If you have heard of the 40 rule, you want to make sure that your growth and your EBITDA margins are basically 40%north. And if you look at a business like the hinge, they were almost $ 400 million in income last year.
Amy Belt Raimundo, vice-president and general manager of Kaiser Permanente Ventures, said that health technology enterprises are returning to fundamental principles. In 2021, digital health became very exciting after the case and there was a lot of “exuberance”, but the “fundamentals were not there,” said Raimundo. She noted that Kaiser Permanent has been an investor in Omada Health since 2014.
“Having to go out with good fundamentals is, I think, the next wave,” she said. “That there is an exit market here, which will then generate more investment.”
Photo: Chununu, Getty Images
