Digital health funding is on the rise — for example, MobiHealthNews tracked $689 million in deals this quarter, spread across 49 deals, compared to $392 million in Q3 of last year. But investors at a Health 2.0 panel this week said that dollar amounts don’t tell the whole story.
“There are a lot of different sources of capital than there used to be before,” Ankur Luther, an executive director at Morgan Stanley said. “Mutual funds, sovereign wealth funds, strategic investors, and a lot of that has driven up competition, driven up valuations for sure. I think we all know that valuations have been very frothy. [But] I think it’s more because people have been smart. You want to take advantage of the market while you can finance bigger because there will be a time when you can’t do that.”
Abhas Gupta, a partner at Mohr Davidow Ventures, added that healthcare investments in particular can look inflated because everything in healthcare is so expensive.
“All the dollars in healthcare have multiple zeros behind them, that’s just how it works,” he said. “The average revenue per user in Facebook is $4. For eBay it’s $89 dollars, for Amazon it’s $189 dollars. For Medicare it’s $12,000. … So you have to get wrapped around this idea that a company may only be doing tens of millions of dollars of revenue, but it’s worth a half a billion dollars, even though it’s literally in the first 16 months of its inception.” Keep reading>>