Venture capitalists (VCs) have lavished billions on digital health firms in the past ten years, hoping to transform healthcare via wearable, telemedicine, and artificial intelligence. Many of these businesses, however, are suffering today with layoffs, closings, and unsatisfactory exits. Did VC bros then ruin digital health?
The Hype Cycle
The VC playbook usually runs in a recognizable pattern:
1. Overpromise is bold assertions about changing healthcare, lowering costs, and raising patient outcomes.
2. Overspend: Large expenditures in development, usually giving user acquisition top priority over sustainable business models.
3. Under-deliver: Complicated reimbursement systems, provider reluctance, and regulatory obstacles slow down development.
We’ve seen this play out with companies like Babylon Health, Pear Therapeutics, and others that once had sky-high valuations but eventually collapsed.
What Went Wrong?
1. Aligned Incentives: While healthcare is a slow-moving sector needing long-term commitment, investors hunt quick profits.
2. Digital health: firms must negotiate FDA approvals, HIPAA compliance, and insurance reimbursements unlike consumer tech.
3. Lack of Clinical Integration: Many solutions were developed for consumers instead of being easily included into medical processes.
Is There Hope?
Not all that is lost disappears. Companies that concentrate on actual clinical impact, create sustainable business models, and operate inside the system—instead than trying to change it over night—still have a chance. Drawing lessons from past mistakes, the next wave of digital health will probably be slower but stronger.
