Healthcare Venture Funding Takes a Nosedive in 2023
Healthcare venture funding experienced a steep decline in 2023, and later-stage startups were particularly affected. Many companies at the Series B or later stage struggled to justify their high valuations and had limited options for exits. As a result, some healthcare firms that traditionally backed growth-stage startups have switched their focus to seed and Series A deals. However, Dr. Galym Imanbayev, a partner at Lightspeed Venture Partners, plans to take advantage of this opportunity by targeting more growth-stage investments this year. He believes that there are still plenty of opportunities for later-stage healthcare startups to grow and succeed.
Dr. Galym Imanbayev Plans to Focus on Growth-stage Deals
Dr. Galym Imanbayev, a partner at Lightspeed Venture Partners, sees the current market dynamics as an opportunity to invest in growth-stage healthcare startups. While other investors may be hesitant to support later-stage companies, Imanbayev believes that these startups still have significant potential for growth. He points out that the first one to three years are typically slow-moving for healthcare startups as they establish partnerships with payers and providers. This slower pace is not usually seen in sectors like consumer tech, where startups can quickly gain traction. Imanbayev’s multi-stage VC fund, Lightspeed, has the advantage of exposure to both early-stage and later-stage healthcare markets, allowing him to take calculated risks and seek substantial rewards.
Four Healthcare Areas to Consider for Growth-stage Investments
Imanbayev has identified four key areas in healthcare where he plans to make growth-stage investments this year. These areas offer promising opportunities for startups to make a significant impact and generate high returns.
1. Potential Returns in the Value-based Care Market
The move towards outcomes-based reimbursement models in healthcare is gaining traction, and Imanbayev sees tremendous potential for growth and returns in this area. He highlights the transformation of healthcare providers as one of the biggest markets for value-based care. The application of value-based care models to various healthcare sectors, from primary care to specialty care, creates numerous investment prospects. Moreover, successful exits by players in the value-based care market, such as Oak Street Health and One Medical, indicate the possibility of more lucrative deals in the future.
2. Opportunities in AI for Clinical Documentation
While many applications of AI in healthcare face regulatory barriers and may not live up to the hype, Imanbayev believes that AI for clinical documentation holds significant promise. Automating doctors’ notes and prior authorization forms can provide a quick return on investment for healthcare businesses. Despite the broader slump in healthcare funding, venture capitalists have continued to support startups in this field. Imanbayev is particularly interested in backing startups that collaborate closely with clinicians and health systems to apply generative AI models to their businesses.
3. Potential in Health Data Sharing
Data interoperability and price transparency have been significant challenges in healthcare for years. Startups addressing these issues have emerged, offering solutions to improve patient outcomes and reduce costs. Imanbayev is closely monitoring these maturing companies and waiting for specific benchmarks, such as patient engagement, before considering investment. The level of engagement with a startup’s pricing data can help determine its future economic rent.
4. Opportunities in Pharma Tech
The increasing prevalence of specialty drugs in the healthcare market presents a significant opportunity for innovation. Specialty drugs accounted for about half of all drug spending in the US in 2021, and their prominence has only grown since then. Imanbayev recognizes the need to bridge the gap between pharma companies and patients, particularly in terms of data sharing and value-based treatment models. Solutions that incentivize clinicians to share real-world data with pharma companies for improved patient treatments are particularly appealing.
In conclusion, while healthcare venture funding took a hit in 2023, Dr. Galym Imanbayev of Lightspeed Venture Partners sees this as an opportunity to invest in growth-stage healthcare startups. He believes that there are still significant opportunities for later-stage companies to grow and succeed. Imanbayev has identified four key areas in healthcare – value-based care, AI for clinical documentation, health data sharing, and pharma tech – where growth-stage investments could yield substantial returns. By backing startups in these areas, Lightspeed Venture Partners aims to contribute to the transformation and advancement of the healthcare industry.
Analyst comment
Positive news: Dr. Galym Imanbayev plans to focus on growth-stage deals in the healthcare sector despite the decline in venture funding. This indicates optimism and belief in the potential of later-stage startups to succeed.
As an analyst, the market for growth-stage healthcare startups is still viable. Driven by opportunities in value-based care, AI for clinical documentation, health data sharing, and pharma tech, the market has potential for substantial returns. Lightspeed Venture Partners can take calculated risks and seek rewards by investing in startups in these areas.
