2024 is just two months away. It’s time when health tech companies are strategizing for the year ahead. But after a bumpy 2023 with lower funding, valuation cuts and economic ups and downs, does 2024 look optimistic?
We’re here to explore market predictions for 2024 and how health tech companies can win investor’s trust in turbulent markets discussed in Bessemer Venture Partners’ recent report.
Let’s dive in.
Bessemer Venture Partners State of Health Tech Report 2023
Healthtech market’s performance has been underwhelming since 2022. While 2021 saw all-time high capital funding, in 2022, it slowed down. Investors started taking a wait-and-watch approach, resulting in lower funding rounds, valuation cuts, difficulty raising funds, bankruptcy and lower merger and acquisition count.
While the current market overview looks grim, we mustn’t mistake cyclical market correction and performance of a cohort of companies as a sign of the industry’s long-term potential, says Bessemer Venture Partners State of Health Tech Report 2023.
Unveiled at HLTH 2023, the report also gives an overview of the health tech sector’s 2023 performance, what traits investors are looking for in health tech startups and emerging trends we can witness in 2024.
Five Must-Have Traits for Healthtech Startups to Secure Funding in 2024
According to the report, here are some traits which companies succeeding in 2024 will have in common:
#1 Hair on fire problem
Companies solving mission-critical problems in healthtech are bound to grow by leaps and bounds. The problem that keeps your customer up at night. The problem they are desperately looking to solve.
If the healthtech company can address those pressing needs and become the go-to solution, they’ll make it in 2024.
#2 Hard ROI and clinical outcomes
Investors are now looking for tangible results. The turbulent market has made them look for companies that can show them clear and fast returns on investments.
Healthtech companies demonstrating tangible benefits and clinical outcomes will attract more funding in 2024 when compared to those who don’t. Whether it’s saving time, reducing costs or improving efficiency, showcasing the real-world impact of your product is the way ahead.
#3 Large and growing markets
Companies need to ride the wave of market trends and keep an eye out for the largely changing and growing shifts. The shifts in adoption and regulations can act as tailwinds to propel the company forward.
They need to take advantage of these systemic shifts to articulate a strong ‘why now’ for their opportunity.
#4 Attractive unit economics
It’s not about just making money. Investors are increasingly interested in startups with high margins and recurring revenues. These are the signs of a robust and enduring business model that can weather any storm.
#5 Strong multidisciplinary team
Building a diverse team is paramount in health tech. It helps in developing strong health tech solutions that address customer pain points while taking advantage of market opportunities.
A multidisciplinary team of engineers, physicians, and scientists can marry medical expertise with technical knowledge, accelerate distribution and build best-in-class products.
Emerging health tech market predictions for 2024
Looking at 2024, the report makes a few predictions for 2024 health tech trends:
#1 AI will give rise to services as software
Advancements in generative AI and large language models (LLMs) have flipped the traditional SaaS model. The new generation of software applications are offering service as the final product, creating a new Service-as-Software approach.
The shift has presented healthtech founders and CEOs with an opportunity to reimagine how they can provide solutions that weren’t previously possible.
For instance, AI-powered voice companies offer services to transcribe patient-doctor conversations and generate clinical notes.
#2 Healthcare payments companies will win by aligning incentives
Healthcare payments, also known as revenue cycle management, is filled with inefficiencies and misaligned incentives. As a result, there’s a big opportunity for software to become the connecting tissue between payers and providers. This will help create more transparent and efficient healthcare payment systems.
To do that, health tech companies will need business models that can align incentives between various industry stakeholders.
For instance, companies that can simplify and streamline systems like prior authorizations and utilisation management, claims adjudication, payment integrity, and quality audits.
#3 Health tech businesses leverage indirect monetization for a distribution advantage
With the healthtech space becoming crowded, traditional sales channels have become saturated. Therefore, companies are looking for ways to shorten their sales cycle by providing cheap and free software. There’s a rise in companies offering freemium products to earn a distribution advantage.
Such companies are better placed to leverage indirect monetisation strategies.
#4 Making the biopharma value chain more efficient
The Biopharma value chain is plagued by high R&D costs, lengthy drug discovery timelines and regulatory changes, intensifying pressure on executive teams.
There’s a need for companies that can streamline the biopharma value chain with transformative software and AI solutions. From drug discovery to clinical trials and supply chain efficiency to procurement optimisation, companies focusing on the biopharma sector are bound to see a rise in 2024.
To conclude
At Bessemer, we are optimistic that the health tech industry has the necessary elements for a successful future: resilient founders, patient capital (in venture, private equity, strategic and public markets), and a $4 trillion market opportunity with unsustainable cost trends that requires business model innovation and application of technology.
– Bessemer Venture Partners State of Health Tech Report 2023
