Multiple sessions and conversations touched upon the challenging economic realities facing digital health companies. With interest rates sky high, the “free money” era of digital health investment is over.
In one panel, “Doom or Boom? Digital Health’s Financial Future,” experts harped on uncertainty in private and public markets. Cheri Mowrey, head of U.S. investment banking at Morgan Stanley, said she expects the companies to resume going public in 2024. “If they attempt to go public in 2023, they will have to be profitable, lower-growth companies that have stability in their business models from management responding to economics,” she said.
Michael Yang, managing partner at OMERS Ventures, a venture capital firm in Palo Alto, California, said the market will get worse before it gets better. He said founders should do whatever it takes to get to the other side of this economic downturn.
“That could mean losing coworkers or taking financing you never would want to, but you have to swallow your pride,” Yang said. “It’s ‘Survivor’ at this point. There were a lot of great businesses that were in the middle of being birthed, created and scaled, and now you have to recalibrate.”
Some of the companies that exhibited at HLTH have laid off employees in the past few months, including Calm, Noom and TruePill.
Jonathan Bush, CEO of digital health company Zus Health, said that 2021 was the “land of milk and honey.” Zus closed a Series A funding round in July 2021 for $34 million. “Now I’m relieved to be getting 20% down from that round,” he said.
Scott Barclay, managing director of venture capital firm Insight Partners, said that while a lot of excitement marked the atmosphere at HLTH, the economic realities were hard to avoid.
“It feels like people are showing up to the party when the [Federal Reserve] has already removed the punchbowl,” Barclay said. “The production quality of this conference is great. Next year it will be great too, but there may be fewer people here.”