OneVentures

Sarah Meibusch

It hasn’t been the easiest 12 months for the health tech sector. Like the technology sector more broadly, the ability to raise capital and fuel growth at all costs came under closer scrutiny from investors, with many later-stage companies having to review their plans and streamline their enterprise.

Globally, however, there is still a significant amount of available capital for new and innovative health tech companies, and early-stage companies in this sector received record levels of investment in 2022, which is expected to continue.

Meanwhile, there was a decline in later-stage raises compared to the highs of 2021, similar to the rest of the venture capital industry. According to SVB, Series B activity in the health tech sector steadily declined in 2022, with a lower percentage of companies raising a Series B after a Series A. Later-stage deal sizes were also down, with US$200M+ financings dropping by 65% from 2021, and unicorn formation decreased by more than half from 44 in 2021 to 18 in 2022. From what I have seen the trend appears to be continuing in 2023, with no significant changes expected until the latter part of the year. However, early-stage investing is less affected by the global financial challenges impacting latter-stage investing and this is particularly the case for Australian companies.

Health tech companies seeking to raise later rounds are facing mounting pressure from global investors to demonstrate successful conversion from pilot programs to commercial contracts, along with well-defined unit economics and profitability plans. Investors are also seeking concrete evidence of improved clinical outcomes or cost-effectiveness and evidence that early companies understand the complexities of the US market especially, and the extent of competition in that market, and have clear go to market strategies with sustainable competitive advantages. In response, some companies are opting for Series A extensions or convertible insider bridges to buy more time to achieve these critical milestones and this we believe will continue in 2023.

Whilst we wait to see whether IPOs open back up, or if there is more money available in the market for late-stage private market acquisitions, we believe that pre-clinical companies are starting to climb. Which is good news, as the healthcare industry is undergoing a transformation which will enable both patients and physicians’ access to more personalised data from multiple sources - presented as a whole person profile.

As OneVentures is a multi-strategy investor, we have been paying close attention to the emerging trends in the tech space, and we are seeing increasing crossover between technological innovation and personalised healthcare. The continued growth of genomics, selftracking devices and a focus towards patient centricity and improvement to patient access from all treating professionals are being aided and abetted by improved technology and data capture.

Companies that are focused on tackling large global markets with truly competitive and disruptive technologies will continue to be those that are at the top of the list for funding locally and globally. It requires deep understanding of the healthcare system in the larger markets such as the US combined with innovative digital solutions and business models. We get excited when we see a large unmet market need, and a company with a creative solution getting traction for example with a creative customer acquisition strategy with a disruptive technology that is difficult to replicate or a digital device or therapeutic that has a robust clinical data and regulatory and reimbursement strategy.

In terms of an outlook towards digital transformation for better health outcomes, one of the biggest issues facing the industry as a whole is the adoption of individual tech platforms or devices which may not necessarily link or connect with other providers. Synergy for a patient will be paramount, and the concept of treating patient symptoms independently without taking a full patient overview will be unthinkable. Of course, this makes health tech innovation highly complex and fraught with potential teething problems – the stakes are high and trying to disrupt the vertically integrated systems already in place will take time, money, effort and commitment.

Therefore, it is very interesting to look at how some new devices in development are actually taking existing treatments and moving them forward – making them more user friendly, more readily accessible through the supply chain or through reduced cost. The democratisation of healthcare is critical for global wellness, a learning made clear through the COVID pandemic.

OneVentures’ invested in Vaxxas for exactly this reason. Vaxxas is commercialising a needle free vaccine patch-like delivery system (HD-MAP) that dramatically enhances the performance of existing and next-generation vaccines. By removing the need for cold storage and refrigeration in transit, the HD-MAP overcomes the challenge of getting life-saving vaccines to vulnerable populations across the world. This could enable a future where people could receive vaccines in homes, workplaces and schools across the globe.

So whilst the world is looking towards digital transformation to revolutionise healthcare, which it inevitably will do, there is also technology enablement that modernises proven treatments and streamlines patient experiences in the near term. We ultimately believe that technology should serve to make the healthcare experience easier, more precise, and more accessible – and we understand the complexity that goes into that.